Will IPO Lift Betfair's Kimono?

The British taxman is allegedly investigating Betfair high rollers. In what has to be one of the week's best quotes, Ralph Topping, the CEO of William Hill plc, observed that the upcoming launch of Betfair's IPO would demand more transparency and generate considerable interest. "We hope the fact that they are floating will force them to be more open about who is laying bets on their website. I'm looking forward to seeing them lift the kimono," Topping commented to The Daily Telegraph. He was responding to a report in the newspaper that the UK taxman is targeting high roller clients of Betfair, which has confirmed that it is about to lunch a GBP1.5 billion listing of ten percent of the company this year. The respected British newspaper reports that the taxman is understood to be investigating the use of the exchange by licensed bookmakers and in particular whether they are using it for personal bets or as part of their business – by "laying off" bets to balance their books. A number of licensed bookmakers are thought to be among Betfair's largest "high-rolling" customers, the Telegraph claims. Responding to the story, a Betfair spokesman said: "To avoid any potential confusion, licensed bookmakers should ensure proper segregation between their professional and personal use of Betfair – with separate Betfair accounts funded by different bank accounts." Disclosure of the probe is likely to re-ignite a row about the use of the site by licensed and unlicensed bookmakers to lay bets, says the Telegraph. Traditional bookmakers have long argued that clients of Betfair – which operates like a stock exchange, matching those who want to place and lay bets – avoid the 15 percent gross profits tax that they should pay when acting as bookies and fail to make any contribution to the levy that funds horseracing, which takes another 10percent of major bookmakers' gross profits. Paul Roy, the British Horseracing Authority chairman, has accused Betfair of disrupting British racing's finances with "severe consequences". He said: "It seems certain that some customers of Betfair and other exchanges that carry on the business of receiving or negotiating bets... should be paying levy." Topping believes that once Betfair is publicly listed it will be forced to reveal more about who lays bets on its site. Or, to put it another way, backing horses to lose. The big bookmakers – including Hills, Ladbrokes and Coral – have long complained that Betfair site is awash with professional bookies, who they claim avoid both the 15 percent gross profits tax and a further 10 percent of profits which goes to the levy that funds racing.