Rigged Wheels

Glen Newey

In the early 1960s, the British state, having decided people could go to hell in their own way, legalised both suicide and off-course betting. Newly legal high-street bookies like my father, poshed up into ‘turf accountants’, still had to do their business behind frosted glass, lest passers-by be corrupted by glimpses of the depravities within. In a school-gate encounter with my mother, a fellow parent, Mr Crapp – a pillar of the local chartered accountants’ guild and man of God – voiced his surprise that she had the brass to show herself in public, given her husband’s job. My doubts about moralism surfaced around this time. Later, the parallel realisation dawned that bankers, mortgage lenders, insurers, even Mr Crapp – the plaster saints of market society – had feet of clay.

‘Casino capitalism’ has become a cliché. But it suggests that the proceeds are doled out fairly, if at random, when in fact punters are often gaming with a rigged wheel. Take the modern betting industry, including the Tote, the former state bookie, set up by Winston Churchill in 1928, and finally hawked off four years ago against industry opposition (privatisation was already New Labour policy before Cameron came in). The winner of the tendering auction was the Warrington-based company Betfred. It’s controlled by Peter and Fred Done, who in a £265 million deal – a big mark-down from the £400 million offered by a private equity consortium in 2007 – bagged a monopoly of totalisator or ‘pool’ horse-race betting in the UK which lasts till 2018.

In Tote betting, winners scoop a stake-proportional share of a pool, rather than betting directly against a bookmaker at fixed odds. You can be given a rough idea of how much you’re likely to win when you place your bet, but actual winnings can only be determined once the race is over, when the size of the pool, the number of punters and the amount they staked is known. For simplicity’s sake, say a dozen people bet a total of £100 on a race. Three of them backed the winner. Alice and Bertha staked £5 each; Clare bet £10. The organisers take their 20 per cent cut, leaving £80, of which Clare takes £40, and Alice and Bertha each get £20.

Betfred plucks a juicy 16.5 per cent commission from win pools, up from 13.5 per cent before privatisation. Also alluring to Betfred was the Tote’s chain of 500 high-street betting shops, and its phone, on-course and online outlets. Betfred realised that it could offer more attractive odds through its shops than those actually paid out by the Tote, without any pushback from its newly docile stable companion. A classic bait-and-switch followed, with punters being promised longer odds when placing their bets than they were paid out at.

Bait-and-switch has also figured in Betfred’s online casino games. Novices initiate themselves with pretend money in games whose software is engineered to run fairly. Evidence suggests that in real-money play, some casino games are weighted in the bank’s favour: in one case, a player who bet 19,196 times on a game that should have had odds of 50:50 won 9201 times and lost 9995. The probability of that happening by chance is less than 1 in 200 million.

The Tote privatisation cost 150 jobs. Betfred brought the wages of inherited staff ‘in line with’ the levels it paid its own shop workers. More recently, staff learned that their wages would be linked to the turnover on the in-shop fixed-odds betting machines that now account for most of many shops’ take and are widely seen as the ‘crack’ of the gaming biz. Online staff forums routinely complain of poor pay and long hours. Latterly the Dones have hit on a new wheeze to extract value from their staff, many of whom are on the minimum wage: ‘Golden Tree’, a loan firm targeted at betting-shop workers and extracting nearly 40 per cent APR.

The Dones’ current worth lies somewhere north of £850 million. As Mr Crapp, now tweaking the ledger for the choir invisible, might say, God doesn’t play dice – the odds aren’t good enough.


  • 6 August 2015 at 8:38pm
    cufflink says:
    Money is the root of all upheaval but sometimes such circumstance can be of human interest. We had a bookmaker family living in our flats during the 1940s and they provided an example of flagrant ostentation and with this much amusement. Coal was in short supply but they had a separate delivery each week. They drove two Chrysler Coupes in pastel colouring. The patriarch a short round man wore Harry Truman suits, two-tone shoes, and a W B Yeat's homburg. His son could play the piano like no one else, and on summer evenings would throw open the windows and serenade us all. The daughter was a dyed blond glamour girl and would wear her pan-chromatic make-up Hollywood style and flaunt a fur boa. They were connected to the Hoxton mafia and had the best of everything, but still lived in a three bedroom flat, on the first floor of course - couldn't manage the stairs to four floors up. We never knew the goings of them, they just went away. And as for Mr Crapp, could he be the Personnel Officer who said that a brown suit was not something one might wear to an Insurance Office in the City and that I should replace it. I borrowed £15 from my brother and began the Crappy life of a City gent.

  • 13 August 2015 at 12:05pm
    philip proust says:
    I may be wrong about this; however, it appears that Betfred is running two parallel betting platforms. There is first of all a tote whose dividends are determined, as explained, by a strict formula. There is also a fixed odds system. However, the "classic bait-and-switch" accusation appears improbable. If one bets using the second platform, fixed odds, Betfred must pay out the winnings stipulated on the ticket; it cannot pay out a lower dividend. If you have for example 5,000 pounds on a horse on the tote and the pool is relatively small, the dividend will be adversely affected by the size of your bet. On the other hand, a bet of 5,000 pounds at fixed odds will never alter the size of one's dividend.

    Totes all over the world - with the exception of Hong Kong - are experiencing declines in pool sizes; this explains why Betfred could pay 265 million instead of the 400 million the tote was worth eight years earlier. The tote is dying in the face of competition from fixed odds corporate bookmakers. Horse racing has also suffered a huge decline in patronage outside of the major carnivals. The long term prognosis is poor. Youth are not attracted to it.

    • 13 August 2015 at 12:07pm
      philip proust says: @ philip proust
      Youths are not attracted to it.

  • 14 August 2015 at 8:26pm
    streetsj says:
    Evidence suggests that in real-money play, some casino games are weighted in the bank’s favour


    All real money games are weighted in the banks favour. No one expects any different. In the case mentioned someone had copied over the rubric from the pretend game to the real one. Cock up rather than conspiracy.

    What is more dubious is that you can be playing a game of virtual blackjack, reasonably assuming the usual odds apply, but they don't. If the machine has recently paid out it is programmed to pay out less until the expected returns are in line.