Rule 4 is a general rule of betting which relates to the reduction of winnings when a horse you have backed wins or is placed. They are made when a horse is withdrawn from a race because it becomes easier for the other runners to win. An amount of money is taken out of winnings to balance the effect of the non-runner.
The Commission has concerns if evidence exists that bookmakers have deliberately shortened the odds of known or likely non-runners in order to maximise Rule 4 deductions for their own commercial gain to the disadvantage of consumers. It has previously commented that such actions would be contrary to the statutory obligation to ensure gambling is fair.
In what amounts to a warning to the betting industry, the Commission has published the following statement on its website:
We have completed enquiries into a race that formed part of a British Horseracing Authority’s (BHA) investigation into race-horse trainer David Evans and the events relating to bets made with Ladbrokes Betting & Gaming Limited (Ladbrokes) on his horse Black Dave on 9 January 2015.
Immediately after placing a bet on Black Dave with Ladbrokes, Mr Evans indicated that Tango Sky (the other horse he had running in that same race) would be withdrawn. Based on the evidence available, we concluded, and Ladbrokes accept, that a Ladbrokes trader had deliberately shortened the price on Tango Sky in order to maximise Rule 4 deductions.
Whilst the action was against company policy, Ladbrokes have acknowledged that they did not provide adequate training on the policy to all relevant staff. We also found that Ladbrokes had failed to appropriately review all information available to them prior to initially providing the Gambling Commission with what were proven to be inaccurate explanations as to the reasons for the price shortening on Tango Sky.
We have written to Ladbrokes to provide them with advice in relation to their conduct. We also wish to draw to the attention of the betting industry the learnings and best practice arising from this matter:
- Following this enquiry, Ladbrokes made revisions to its policy covering sports betting integrity and the misuse of inside information. These revisions mean that if it received similar information in the future markets would be suspended immediately and no price changes would be implemented. The market would not be re-opened until it was sufficiently clear as to whether or not the selection will participate.
- All members of the Ladbrokes trading teams have been required to complete refresher training on sports betting integrity and misuse of inside information for personal or commercial gain.
- All direct calls to the Ladbrokes trading team were/are recorded and audited to ensure that their relevant policy was/is followed correctly. These controls proved effective in identifying the sports betting integrity concerns in relation to Mr Evans which were reported to the BHA and ourselves in accordance with licence condition 15.1.2 before the race in question commenced.
To understand whether you are managing Rule 4 in line with the standards it expects, the Commission recommends that betting operators should ask themselves the following questions:
- Policies – Do you have robust company policies that deal with sports betting integrity and misuse of inside information requirements? Do these policies appropriately cover the requirements laid out within licence condition 15.1.2 and ordinary code provisions 4.2.8, 7.1.3 and 8.1.2? Are the policies reviewed on a regular basis? Do they contain adequate detail to give guidance in relation to Rule 4 compliance?
- Training – Are all employees working within the trading team trained in this area? Are records maintained in relation to such training? Are employees aware of the implications of non-compliance, both to themselves and the business?
- Assurance – Do you monitor and audit the activity of your trading team to ensure any breach of policy is identified and promptly escalated to the Gambling Commission’s Sports Betting Intelligence Unit and, where appropriate, the relevant sport’s governing body? Is there a clear process in place to manage this effectively?
- Betting rules – Are your rules in relation to Rule 4 accessible and written in plain and clear language?
The Commission goes on to warn:
The industry needs to remember that its long term viability is built on customers having trust that they’re being treated fairly. Anything that is, or could be perceived as, unfair risks damaging the reputation of the industry as a whole.
We will continue to monitor the situation. If we become aware that our expectations are not being met, we will consider exercising our formal regulatory powers on both the bookmaker and wider industry. This could include, for example, seeking a licence condition that mandates a specific approach to Rule 4 that would mitigate the evident risk; namely, applying Rule 4 based on the price of the withdrawn horse at time of bet placement or the price of the withdrawn horse at its official withdrawal time as recorded by the British Horseracing Authority.