I'm confused, since betfair is an exchange aren't they just taking a cut of the action? Why would they add a heavy tax onto profits which would just drive heavy bettors away?
They do it because they can, and for many gamblers, Betfair is the only place they can realistically keep betting at. Other bookies will restrict winning gamblers’ stakes or refuse their bets, and other betting exchanges have far less liquidity than Betfair. So, successful punters on Betfair just have to grin and bear it...
n.b. The 20-60% ‘premium charge’ that Betfair inflict on long-term winners is different to their standard 2%-5% commission that they charge everyone for any net profit on a market. The premium charge is calculated weekly over a customer’s profit & loss. So its effect is not the same as if the commission was as high as 60% per bet. Like a tax, the PC won’t make a profitable gambler unprofitable, it ‘just’ means Betfair get to keep more of your profits.
It’s also worth pointing out that the standard commission (2-5%) can add up to far more than 60% of your winnings anyway. As no-one wins every bet they place, the commission will become a larger percentage of your net profit. For example, Betfair charge me 2% commission and I ‘qualify’ for their premium charge of 40% - but my betting patterns already result in over 40% of my gross profit going to Betfair :(
It’s not quite as bad as that - see my other comment; the calculation of the charge doesn’t mean you pay 5%+60% commission on winning bets. That kind of fee would be impossible to sustain, no-one has that kind of profit margin on their betting. The commission % charge and the PC % charge don’t work in the same way.
On the flip side, a great many people pay far higher than 60% of their net profits to Betfair... most will have paid over 100%...
n.b. The 20-60% ‘premium charge’ that Betfair inflict on long-term winners is different to their standard 2%-5% commission that they charge everyone for any net profit on a market. The premium charge is calculated weekly over a customer’s profit & loss. So its effect is not the same as if the commission was as high as 60% per bet. Like a tax, the PC won’t make a profitable gambler unprofitable, it ‘just’ means Betfair get to keep more of your profits.
It’s also worth pointing out that the standard commission (2-5%) can add up to far more than 60% of your winnings anyway. As no-one wins every bet they place, the commission will become a larger percentage of your net profit. For example, Betfair charge me 2% commission and I ‘qualify’ for their premium charge of 40% - but my betting patterns already result in over 40% of my gross profit going to Betfair :(