Sporting Options

Sporting Options was an English betting exchange, based in Sussex. The company was founded in 2000 by former City of London options traders Robert Byrne (businessman) and Kevin Griffiths. Sporting Options went into administration on 15 November, 2004 amid allegations of criminal wrongdoing, and betting on the site was halted. Leading exchange Betfair soon stepped in with a rescue package, and it appears highly unlikely that the exchange will resume operation.

Cause of collapse

Sporting Options appeared to be matching bets worth up to 15% of those matched at market leader Betfair. But it was alleged the turnover was being financed by the owners of Sporting Options using their own funds to create the liquidity.

By late 2004, it was alleged Sporting Options was in fact fraudulently financing its apparent liquidity by using funds from its clients' account. On 15 November, 2004 administrators were called in. By 8 December the administrators had determined that the company owed £3.6 million to its clients, but held only minimal funds in the clients' account.

Betfair rescue package

Soon after Sporting Options went into administration, Betfair announced a rescue package to compensate the 5,342 Sporting Options clients who had lost money. The clients affected must register as customers of Betfair's (if they are not already registered) to be eligible. Each qualifying client owed less than £1,000 will be compensated for the full amount owing (in the form of a credit to his or her Betfair account). Those owed more than £1,000 are to receive either £1,000 or 20 per cent of their Sporting Options account balance, whichever is greater. Any amount owing over and above this payout can be earned back though a commission rebate program which will last until 30 November 2006.

Some have speculated Betfair's apparent act of generosity is a bid to protect the reputation of the betting exchange industry, while simultaneously securing exclusive access to Sporting Options' userbase. Betfair and most other exchanges have stressed their clients' funds are ring-fenced to ensure the exchanges' financial integrity. One notable exception to this mantra, however, is BackAndLay, whose Chief Executive Ian Davies stated that no funds, whether in the hands of an operator or a trustee, are 100% safe, and that the customer simply has to make a judgement call about whether or not to trust the entity they are lodging funds with.

References

* [http://networks.silicon.com/webwatch/0,39024667,39125945,00.htm Silicon.com - WebWatch, November 16, 2004: Betfair to bail out Sporting Options punters - Rescue package launched after firm goes to the wall]
* [http://news.bbc.co.uk/1/hi/business/3047739.stm BBC news, 15 June, 2003 The gamble that paid off]
* [http://www.theregister.co.uk/2004/04/05/sporting_options_ddosed/ The Register, April 5, 2004: Extortionists take out UK gambling site]
* [http://news.bbc.co.uk/1/hi/business/2993100.stm BBC News, 16 June, 2003, Internet betting cleans up its act]
* [http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/11/17/cngamb17.xml Daily Telegraph, 17/11/2004: Punters face bet exchange 'black hole'. By James Moore]
* [http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/11/18/cngamb18.xml Daily Telegraph, 18/11/2004: Betting exchange owed some punters £100,000. By James Moore]
* [http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/11/19/cnsport19.xml Daily Telegraph, 19/11/2004: Sporting Options founder ends up biggest creditor. By James Moore]