Are Users of Betting Exchanges Liable to Pay the Levy?

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

In our June piece on reform of the Levy (see here), we pointed out that in his pre-consultation letter, the Minister responsible for gambling, John Penrose, mentioned creating a level playing field between betting exchanges and traditional bookmakers.

Mr. Penrose was referring to a long-running debate on whether certain users of betting exchanges may be liable to pay the Horserace Betting Levy. This is something which the Levy Board consulted on in the latter half of last year, with the Board members ultimately concluding at a meeting in June of this year, based on a plethora of conflicting opinions by leading QCs, that users of betting exchanges were not liable to pay the Levy. However, this decision was taken only on the exercise of the Chairman's casting vote and the British Horseracing Authority and William Hill (represented by Olswang) have now jointly commenced a judicial review of the Levy Board's decision on the basis that the Board has made an error of law.

For those readers who wish to study the legal analysis, all of the relevant opinions and advice have been published by the Levy Board and are available here. Underlying the mountain of correspondence, opinions and arguments is a question of interpretation of the Betting, Gaming and Lotteries Act 1963 (the "1963 Act") namely whether customers of betting exchanges "effect betting transactions" and "receive or negotiate bets" within the meaning of the 1963 Act. If the Court decides this in the affirmative then betting exchange users who are carrying on a business will, in principle, be liable to pay the Levy (and betting duty). Given this, one can see why the dominant betting exchange, Betfair, has been so determined to resist such a finding since, by definition, those of their customers who are in business are likely to represent a significant proportion of the exchange's transactions and were they to decide to move away from the exchange because of an obligation to pay the Levy and tax, that would be likely to have a significant impact on the exchange's liquidity.