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Betfair`s Memoranda of Understanding is a Benefit to Bettors and Sports Leagues...By Hartley Henderson

In 2007 took the unprecedented step of voiding all wagers for a tennis match when it noticed unusual betting patterns and suspected that bets on a match lost by Nicolay Davydenko did not fairly reflect what was happening on the court. The controversy began when Betfair saw 10 times the expected volume for a second rate ATP event in Poland between Davydenko and Argentina's Martin Arguello, who was ranked 87th on the tour. The event may have generated $500,000 in wagering on a good day but for this particular event over $7 million was bet, almost all of it on Arguello. The Argentinean should have been a huge underdog but instead became favoured in the betting. Davydenko won the first set 6-2 and more money came in on the underdog. This is unprecedented and Betfair commented on it following the match. "If you are betting on a match to win money," Betfair's statement said, "this would appear to be the quickest way to go bankrupt." Arguello won the second set, but almost on cue Davydenko retired in the last set up 2-1, citing injury. Betfair became quite suspicious, called the ATP under the Memorandum of Understanding (MOU) they had with the tour and refused to pay out the winnings, suspecting there was something unfair in the betting. The ATP conducted an investigation and couldn't find sufficient evidence to suspend Davydenko, but Betfair voided all bets on the match anyway, stating that its fraud team determined the match was scripted.

The ATP is one of 42 sports organizations with which Betfair has the agreement, and without question the Memorandum of Understanding benefits both the player and the league. The main goals of the MOU are twofol: to identify unusual betting patterns in an effort to help the leagues catch cheaters and more importantly to convince bettors who wager on the events in good faith that the company is looking out for their interests. Betfair has employed an integrity and fraud team of over 40 people that monitors all bets that take place on the site, and upon suspecting something unusual the team immediately calls the league with which it has an MOU to help determine if there is anything unusual going on. Betfair also has the right to void wagers for events it deems suspicious. The MOU is free of charge to the leagues so they only have to cooperate with an investigation with no strings attached.

According to Betfair the MOU follows an audit trail whereby every phone call and click of the mouse by its players is traced. Betfair has the right to question any wagers that are out of the ordinary, and players consent to this when they agree to the terms and conditions. Betfair monitors both the overall betting on an event, as well as betting patterns by individuals. If the company notes something out of the ordinary it can call for an inquiry. For example, if a bettor always wagers $100 on a game and then all of a sudden wagers $5,000 it may be flagged by Betfair. If a person only wagers on auto racing and golf then all of a sudden wagers heavily on soccer it will be noted by Betfair. And of course if a match that usually would only get $200,000 or so wagered on it all of a sudden has several million wagered on it Betfair will look into it. The change in betting patters in itself isn't indication an of cheating, but if the integrity team spots a trend that raises concern using link analysis software they developed they will follow up on it.

The following is the 7 step investigative process:

Step 1: An activity concern is noted by integrity team or triggers
Step 2: A preview is conducted to determine if there is more reason for investigation
Step 3: Preliminary investigation: The regulator for the league requests or receives anonymous betting data
Step 4: Betfair provides further details and the league decides whether to proceed with a case
Step 5: Exhibits and statements are prepared and passed to the disciplinary panel
Step 6: A hearing or tribunal is conducted by the league's disciplinary panel and a decision is reached
Step 7: Betfair accounts are analyzed accordingly

Throughout the process Betfair can make a business decision to close or suspend accounts and bets can be voided even if the regulatory authority decides not to proceed, as was the case with Davydenko.

While the noted tennis match was the most famous case where an MOU helped catch suspicious activity, it wasn't the first or the only one. In 2008 UK horse trainer Paul Blockley and jockey Dean McKeown were suspended by the British Horse Racing Authority and an owner and six other unlicensed persons were charged after Betfair helped the BHA with an investigation into possible horse race fixing. The investigation, which included analyzing betting patterns at Betfair for races involving McKeown and Blockley, revealed that McKeown routinely passed on inside information to horse bettors indicating that he was going to stop horses on order (in better words he would lose on purpose). Bettors can wager directly on horses not to win at Betfair (laying the horse), so profiting from a loss was a worthwhile endeavour for the pair, probably more than the jockey or trainer could have made from the winner's purse alone. At traditional bookmakers, bettors would have to back all horses except the one they wanted to bet against to guarantee a win.

After the finding the BHA commented:

"The real watershed for racing was the betting exchanges because they didn't cause the corruption, they brought it out into the open and exposed what was already there."

Indeed betting exchanges, particularly Betfair, are better at detecting unusual activity because of their transparency, as well as the fact that traditional bookmakers don't have the staff or the technology to track all wagers made. Furthermore, since all bets are in the open on the exchange, it is often the bettors who alert the betting exchange of suspicious activity. Traditional bookies don't post the bets they are receiving so it is totally up to them to flag the suspicious betting activity. In the meantime, it should be noted that even traditional bookmakers are now signing agreements with leagues to help track unusual activity where possible.

Cheating is nothing new and has occurred for decades on sports like boxing, horse racing and college sports. Years ago most betting occurred via the mob that either tried to cheat Las Vegas books or ran illegal bookmaking operations themselves and were looking for a way to swindle bettors who wagered with them. Needless to say any suspicious betting was not easily identified and the mob had no intentions of making public their schemes. As well, there was no software to track the suspicious activity. Today that concern still exists. Recently Tim Donaghy, an NBA referee was found guilty of point fixing. The New York Post determined that Donaghy placed tens of thousands of dollars in bets on NBA games in which he officiated between 2005 and 2007 hoping to get himself out of debt. The cheating was only discovered after the FBI began looking into an organized crime ring, and Donaghy's name was identified. Questions began to arise as to how this was possible in a league that monitors every call by its referees, but as was noted the mob tends to leave no audit trail. The truth was that Donaghy's calls only shaved points to cover point spreads, but didn't directly affect the game winner. The NBA naturally blamed gambling as the culprit, but almost everyone understood that gambling wasn't the issue. The issue was the integrity of a referee. Underground betting has occurred for almost a century and won't stop regardless of laws passed. To think otherwise is foolhardy. In fact the only thing that helped stop underground betting through the mob was legalization. In the UK in 1961 the country responded to mob activity as well as inconsistent laws on gambling by passing the Betting and Gaming Act. Immediately bookmakers started popping up left and right, with many of them being operated by the same underground culprits. The one rule that was demanded of the bookmakers is they couldn't operate on credit. In fact even the Archbishop of Canterbury agreed with the decision to initiate the law, stating that Brits are going to gamble anyway so they may as well do so in a responsible way. It's ironic that a world religious leader understands human nature, while the American government and sports leagues continue to live in a dream world. The result of the act was that the mob essentially got shut out in Britain and moved elsewhere. If they couldn't operate a legitimate bookmaking operation they couldn't compete and there was really no reason for Brits to bet underground anymore. So most of the mob moved their illegal activities to more "mob friendly" confines like the United States and Canada who refuse to acknowledge that legalized sports betting works to fight corruption. It hasn't gone unnoticed that Donaghy's cheating was done for the mob.

Would a system similar to Betfair's in the United States have caught Donaghy's cheating? "There's a very good chance," someone familiar with the inner workings of Betfair told me, "Betfair monitors not only the betting on a game but also betting by individuals. If certain individuals were winning games over and over only on games refereed by Donaghy it would likely have been caught. Furthermore the volume on those games would have been much higher than other games, raising alarm bells." If nothing else, should Betfair have had an MOU with the NBA and suspected anything they could have contacted the league and asked them to investigate the games long before the FBI had stumbled upon the information.

For that reason many sports leagues have signed the MOU with Betfair, realizing there is nothing to lose. Betfair charges them no fee for it and it can only help the integrity of the sports. If nothing is noticed then there is no concern. But certainly the ATP and BHA are happy they have the agreement in place. Until recently all the leagues which signed the agreement were from the other side of the Atlantic, but very recently the NHL signed on as well. This is a significant move considering that North American sports leagues have almost always viewed online gambling establishments as "the enemy." For the NHL to voluntarily sign an agreement with Betfair is a major step forward in relations between the books and leagues and also in having a league finally acknowledge that betting will happen anyway so why not take advantage of technology that could help weed out cheating. Betfair hopes to have more agreements signed with other North American leagues in the near future.

The leagues may not like sports betting, but they need to understand that betting exchanges can help identify cheating. If they are truly concerned about the league's integrity they need to come aboard and sign a MOU with Betfair.

Hartley Henderson

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