Why do Bookmakers Close?

Bookmakers have a strong presence on the high streets of towns and cities up and down the country. They have managed to maintain the near constant attention from the public, despite multiple recessions and austerity measures. The national bookmakers are household names and their odds are often mentioned on sports broadcasts and in the newspapers to give the viewers the statistical background on the favourites to win. Due to this large popularity, it’s rare to see a major bookmaker go out of business and close down; but the gambling commission will take action when it is necessary and many smaller bookmakers and gambling websites have been closed down in recent years. We will look at the reasons why these bookmakers were closed, and what happens after a bookmaker is closed, in order to gain a deeper understanding of this scenario.

Great Competition

The gambling business is a highly saturated market. As we’ve mentioned before, the major bookmakers (think of Ladbrokes, Coral, William Hill) are highly unlikely to go bust due to their high levels of popularity among the general public, but what happens to the smaller bookmakers who are trying to just start out and make a name for themselves. In many cases, the dominance of the major players squeezes these smaller companies into bankruptcy, regardless of if they’re an online company, or a high street boutique style firm.

When there is so much choice with a myriad of large national companies, the members of the public will be unlikely to hand over money to these smaller companies because of the lack of security with their bet. But this forms a Catch-22 like situation: the smaller company doesn’t have the resources to offer protection that rivals the major companies, and because of that people won’t give them money, and because people won’t give them money they can’t offer the protection. This is clearly a vicious cycle that leads to the administration, liquidation and eventual bankruptcy of the smaller firms. Is there any way to break this cycle though, or are all new betting companies doomed to fail nowadays? It is still possible to create a betting company and succeed, but you would need to garner the trust of the public to ensure your success. This means that if it’s an online shop, they would need a clean and sophisticated looking website that promotes the idea of trust; same goes for a high street store, they must try to make their shop look as clean and tidy as possible and have the employees dress in a uniform. Moreover, if a new company wanted to create business for themselves, they could try utilising betting offers and deals. These may be of more use to the online  companies as they can cast a wider net, and pull in customers from all over the country, as oppose to the high street shop which is somewhat confined to the population of the town or city they are situated in. But even if a company manages to do these things, there’s certainly no guarantee that they will succeed in the saturated modern betting market.

Fines and License Suspensions

Gambling Comission’s Logo

Not every bookmaker, whether on the internet or on the high street, is going to pursue legitimate business practices. The unscrupulous individuals who run such businesses may be involved in illegal activities such as fraud or embezzlement; and if caught this could result in the business going under due to immense amounts of legal fees or fines. Moreover, the public will lose trust in the company if they had been involved in criminal investigations, this will ultimately reduce the income of the business and may lead to the dissolution of the company. But it’s not just illegal practices that can severely injure the finances of a company. Companies which contravene the rules and standards of the Gambling Commission and the Advertising Standards Authority (ASA) will be handed down massive fines which could bankrupt smaller companies and even manage to put a dent in the profits of the national firms. For example, just this year Betway received the largest fine in the history of the Gambling Commission, £11.6 Million which was due to their mishandling of their “VIP” customers system; William Hill also received a fine of £6.2 Million due to their poor money laundering controls. This shows that even the largest companies are subject to severe fines from the relevant authorities, and that the punishments can be significantly damaging to the company.

What Happens if the Bookmaker Closes Down?

Now that we have examined the leading causes of bookmaker bankruptcy, we should look at what happens to the customer’s money when the bookmaker goes under. There are three levels of protection offered by bookmakers. The first is Basic protection: This means that the customer’s money is legally part of the business, even when it fails, however this also means that the company cannot spend your money on its day to day expenses. Surprisingly some major firms only offer this level of protection such as Betfred and William Hill. Second is Medium level protection: Under this level there is some level of insurance and your money will be paid out by a third party in the event of bankruptcy, this is used by Unibet and Ladbrokes, among others. Third is High level protection: This level ensures that your money is held in an independent and separate company and is used by companies including Paddy Power, Betfair and Coral.

It is generally advisable that you use a company which has at least medium level protection for your money. However, if you don’t have any money standing with a company using low level protection, then you have nothing to worry about. It should be noted though that every company is different, and therefore, just because some people were refunded when one betting firm went under, it does not necessarily follow that you will be refunded when the next one goes bankrupt. If you are not refunded you can attempt to raise action in the small claims court to win the money back, or you could try and contact the Gambling Commission but they can only help you if the company is licensed by them; this is obvious for the larger companies, but perhaps this is not an obvious assumption for small independent firms on town high streets.

Conclusion

Overall, we can see that there is a multitude of reasons that can cause a bookmaker to become bankrupt and close down. These reasons could be the massive competition that faces small, recently founded companies which struggle to get their foot in the door of this highly saturated market. Another reason we have looked at is the fines and penalties handed down by the Gambling Commission, which manage to make a significant dent in even the largest firms. Most importantly, when creating an account with a bookmaker, understand what level of protection they offer you for your deposits; otherwise you could be left with nothing if the company fails and goes under. Learning more about the bookmaker is clearly an invaluable task, especially if you plan on depositing large sums into the account, so that you don’t lose it all in the even of bankruptcy.   

Keith Hetherton - Chief Editor

Keith Hetherton is a seasoned expert in football and betting offers. Keith studied business and computers in University of Greenwich before working with the likes of William Hill and GVC.