By Joanna Lee
The Money Programme
"At least a race a day, if not more, are now being corrupted." This claim made by Ladbrokes Chief Executive, Chris Bell to the BBC Money Programme, has sent shockwaves across the horse racing industry.
The assertion is the latest bout in a long battle between the traditional bookmakers such as Ladbrokes and William Hill, and betting exchanges such as Betfair.
Betfair began in 2000 and is an internet site which matches two individuals with differing opinions on the outcome of any sporting event.
When you bet on a horse to win with Betfair, you are not betting against Betfair, as you would be if you made a bet with Ladbrokes or William Hill, you are betting against another punter who thinks the horse will lose.
Both sides of the bet are put in a separate account run by Betfair and when the race is finished, which ever side wins the bet, will win the money.
The claims made by Chris Bell underline the main criticism of the traditional bookmakers, against Betfair.
Ladbrokes and William Hill say that the option of betting on a horse to lose with Betfair is opening the door to somebody benefiting if they know a horse won't win.
David Harding Chief Executive of William Hill expresses his concerns to the Money Programme: "Because the opportunity's there, because it's possible to stop horses inevitably people will seek to profit from it."
But Betfair assert that far from corrupting racing, they are helping to prevent cheating by monitoring every account they have.
"We know who you bet with, we know where your money came from, we know where your money is being withdrawn to. All that information is there, it's a full audit trail, it's an unprecedented audit trail," Mark Davies, managing director of Betfair told the Money Programme.
In June 2003, Betfair signed an agreement with the Jockey Club, the racing regulator, to alert them to any suspicious betting patterns on the site and to make their records available to the Jockey Club for investigations.
The Jockey Club confirmed to the Money Programme that the agreement has been extremely important in at least one case investigating allegations of cheating.
Throughout the battle, Betfair has continued to emphasise its marketing message of better odds for the punter, more choice and better value.
The Money Programme tested Betfair's claim of better odds against the traditional bookmakers.
If a punter were to bet £2 on each of the winners in an afternoon's racing at Goodwood on May 18th, on both Betfair and with the traditional bookmakers, he would have won £187 with the traditional bookmakers, but £334 with Betfair.
And all the signs are that the punters are happy with the service. Betfair's customer base has grown from 75,000 in 2002 to 200,000 today, with an annual turnover of £2bn.
But the traditional bookmakers are fighting back with another argument.
They claim that when Betfair punters bet a horse will lose, like traditional bookmakers, they're taking bets from people who think it will win. So the bookies say, these punters are effectively bookmakers and should be licensed.
The government will announce later this month whether it plans to target individual Betfair punters who bet on horses to lose - this would open the door to the option of their being taxed.
This development would have far reaching implications for the running of the Betfair business.
But behind the PR war, splashed across the headlines of every newspaper in the country, experts argue that it is not the concerns over corruption, but rather the squeeze on the traditional bookmakers' margins which is the real reason for the battle.
Keith Elliot, Director of the Horserace Betting Levy Board said:
"In essence the advent of the exchanges has meant that the bookmakers can't control the prices as they could in the past and that has reduced their profits on horse racing and that has affected every one of their betting shops in the country."
So the traditional bookmakers have found a new way to keep their profits up on horse racing. They've got rid of the horses. Virtual racing, where the horses and the riders are computer generated, are now available in thousands of betting shops across the country.
"The good thing about these races of course is that you don't get fallers and every one of them is trying and it is a perfect race," explains Chris Bell from Ladbrokes.
It also has fixed margins, so over the long term, the bookmakers can't lose.
The stakes are high for both sides, and the battle is intensifying as Betfair waits for the government's announcement later this month.
Whatever the outcome and however hard the PR battle rages between the traditional bookmakers and Betfair, the smart money is on Betfair to last the pace.
Battle of the Bookies was shown at 1930 BST on Wednesday 2 June on BBC Two