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Gambling on shares – don’t bet on it

Want to place a bet with your bookie on the direction of the stock market, interest rates or specific stocks? Those days may soon be over.

Betting agencies have been warned they could land in hot water, if they take bets on sharemarket indices without holding a financial services licence.

Australian Securities and Investments Commission (ASIC) is also concerned about bookmakers taking bets on movements in official interest rates, according to reports in the Fairfax press. A spokesperson for ASIC suggested that betting on financial products could be considered a derivative, and could be used to hedge actual sharemarket transactions or positions. If the bet was used for hedging purposes, then wagering operators would need an Australian financial services licence.

Bookmakers have increasingly offered more bets on movements in financial indicators, with Sportsbet recently offering markets on the share prices of BHP Billiton (ASX: BHP), Billabong International (ASX: BBG) and Qantas Airways (ASX: QAN), as well as Harvey Norman Holdings’ (ASX: HVN) profit for the financial year. Last Friday, Sportsbet was offering odds on whether Fortescue Metals Group’s (ASX: FMG) share price will recover by the end of the year, but it seems to have disappeared when I checked the site this morning. You can still however bet on which listed company Lachlan Murdoch will buy next.

SportingBet (not to be confused with Sportsbet) has said that it was given the green light by the Northern Territory Racing Commission to offer a market on interest rates without a financial service licence, as interest rates aren’t on the ASX. Both bookmakers are currently offering odds on changes to official interest rates by the RBA. According to the report, none of the betting agencies contacted held a financial services licence.

The Foolish bottom line

With intense competition for the gambler’s money in horse-racing and sports, bookmakers are moving into new areas and were bound to eventually come up against some barriers.

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Motley Fool writer/analyst Mike King owns shares in BHP. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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