Stand in front of a slot machine for ten minutes and watch what it does to a person. A £2 stake that returns 40p is greeted with lights and a jingle, so a loss feels like a win. Researchers call this a “loss disguised as a win”, and the machine is very good at it. B.F. Skinner showed in the 1950s that unpredictable rewards keep a pigeon pecking longer than regular ones. A slot machine is that experiment with a licence, although the pigeon at least got corn. The only thing a slot machine pays out reliably is the jingle.

Now stand at the rail on a wet Tuesday at Kelso. One man swears the going is slower than described, another says the trainer has “stopped trying”, a third backed the grey for its face. Racing rewards knowing something. The slot machine rewards being there. All of which brings me to Fred Done.

The Betfred founder told the Sunday Times: “We have a verbal agreement to renew our sponsorship of the British Classic horse races for a further three years – but if October’s budget goes the wrong way on MGD, we will have to walk away from those, too.” He backs the Derby, Oaks, both Guineas and the St Leger. Doubling machine duty to 40 per cent, he says, would close 495 shops, cost about 2,500 jobs and remove £15.8 million a year from racing. He calls it “a raid by the new morality police”. I read that twice, mainly to check it wasn’t a bet. To his credit, in an industry where the small print is the product, he put the threat in a newspaper. It was not an idle one: Betfred has also announced that it will not renew its rugby league sponsorship, citing tax rises. One sport has been dropped and another is on the list.

What to call it

Call it what it is. Blackmail, in law, needs an unwarranted demand made with menaces, and a company lobbying a Chancellor is doing something lawful, so I use the word for the shape of the thing and make no allegation of an offence. The shape is this: give me what I want on product A, or I withdraw something you value on product B. Betfred is not threatening to stop selling machines. It is threatening to stop sponsoring horses. The machine is the profit centre and the horse is the bargaining chip.

Note the design. The agreement is, by his own account, verbal, so the threat costs nothing to make and nothing to withdraw. If the Budget goes his way, he renews with a handshake and is thanked. If it does not, he leaves, and has lost nothing he had committed to. It is the only hostage situation in which the hostage is invited to chip in for the ransom. So I checked the numbers.

Fifteen plus ten, and the Budget

General Betting Duty is 15 per cent of a bookmaker’s gross profit on racing. The Horserace Betting Levy is a separate 10 per cent on profit above a £500,000 exempt amount. The levy is not a tax as such, since it goes to racing, but on the bookmaker’s ledger it is a cost like any other. Sources describe the two as separate obligations, so the levy sits on top, and racing profit carries about 25 per cent. I could not confirm whether duty comes off before the levy is calculated. I checked the sum twice, using the method a bookmaker would: on my fingers, with a tenner riding on it. Then the Budget of 26 November 2025 rearranged the rest. Remote gaming duty, the online slot tax, rose from 21 to 40 per cent from April 2026. Remote betting goes to 25 per cent in April 2027, but racing bets stay at 15, so racing’s exemption leaves it paying 25 per cent once the levy is added, the same as a bet on the darts. Shop machines were not mentioned at all. Machine games duty stayed at 20 per cent, the standard rate, and shop betting stayed at 15. The Times now reports that the Chancellor is weighing a doubling of the standard rate to 40 per cent, with the 5 and 25 per cent rates going to 10 and 50, at the Budget on 28 October. So the horse pays about 25 per cent, the shop machine 20 and the online slot 40. The shop machine is taxed more lightly than the horse it is being defended with.

Working back from the levy

The levy raised almost £109 million in 2024/25. Take £107 million and gross profit, stakes less winnings, is about £1.07 billion. That is a floor. The BHA told MPs racing produced £1.18 billion of gross yield in 2021/22 while the levy raised £97 million, so roughly a fifth of profit escapes through the exempt amount. Apply the same ratio now and gross profit is nearer £1.3 billion, my estimate. It is profit, not turnover.

What bookmakers attach to racing

The Betting and Gaming Council put bookmakers’ media-rights payments at £270.1 million in 2022 and £285.3 million in 2023, and projected £315.2 million for 2024. The Racing Post reported that the projection included VAT, and the Racecourse Association disputed it. Strip out 20 per cent and it is about £263 million, so I use £250 million. Sponsorship is £125 million, the BGC’s 2022 figure, and buys a name on a race that most racegoers could not recite by Sunday. Now the catch. Racecourse Media Group paid British racecourses £113 million for media and data rights in 2024. Bookmakers say about £250 million goes out. Racing sees £113 million. I cannot tell where the difference goes. Production, shop pictures, other rights holders and VAT are candidates. Someone should ask.

That leaves £106 million to £233 million, 10 to 18 per cent of gross profit, before head-office costs. Read that again. For every £10 the horse earns, the bookmaker keeps between £1 and £2 after paying the Treasury, the racecourse, the sponsor and the marketing department. He then defends the machine. Variable costs are my assumption of 30 per cent of gross profit for promotions, marketing, data, payments and shop costs, since no operator publishes them.

Now test Betfred’s own number against the table. Removing £15.8 million across 495 shops is about £32,000 a shop. The Racing Post puts the cost to racing of the 132 shops Betfred is already closing at about £4 million a year, or roughly £30,000 each, so the claim is at least internally consistent. It is also small. £15.8 million is about 6 per cent of the £250 million bookmakers say they pay in media rights. The threat is being made to look large by the size of the Classics, not by the size of the money.

The machine, by comparison

Shop machines produced £276 million of gross yield in January to March 2026 alone, about £1.1 billion a year on that run-rate. They pay 20 per cent duty, no levy, no rights bill and no sponsorship. Count the four bills: duty, levy, rights, sponsorship. The horse pays all four. The machine pays one, at a lower rate. Tea: tie. Racing is the shop window, the machine is the till, and it is the window that pays the rent. My inference: the sportsbook finds the customer and the casino keeps him.

Now the arithmetic of the threat. Doubling machine duty to 40 per cent on £1.1 billion of yield would cost the industry about £220 million a year if nothing else changed. That is close to the £250 million the trade says it pays for racing’s pictures. A business facing a bill of that size, and holding two products, will work out which one to sacrifice in the argument. The Classics are easier to threaten than the Treasury is to persuade.

The industry’s answer is that nothing else would stay the same. Entain’s modelling, reported by the Racing Post, has up to 1,470 shop closures industry-wide, 15,900 jobs lost and a net loss of £120 million to the Exchequer. That could be right. It is also the industry’s own model, offered as evidence with the method withheld. If it is sound it will survive publication. Publish it.

By my count Betfred’s site offers almost a thousand casino games, and racing is the secondary product. Betfred is not the worst bookmaker, and its owner deserves credit for saying in public what others say in private. Try Entain, Evoke and Flutter. In each case the first duty is to shareholders, and interest in the sport lasts as long as the sport pays. That is exactly why Betfred’s record matters. It is the good end of the trade.

The high ground, and how high it is

Betfred’s case rests on a moral claim: that a machine tax is a raid by the “new morality police”. So look at what the regulator has said about Betfred.

On 3 December 2025 the Gambling Commission announced an £825,000 settlement with Betfred’s shop operator over failures between May 2024 and March 2025. On B3 machines, the product in dispute, Betfred could not assess customers’ overall spending, did not always interact with customers once harm indicators appeared, and did not do so to the required standard. It also set its money-laundering risk thresholds at £15,000 of losses or £125,000 of stakes over 365 days, which the Commission judged too high. The Commission called the breaches “predominantly technical”. A customer losing £15,000 on a machine in a year, about £290 a week, is not a technical matter to their household.

On 30 June 2026 came a further £900,000, for the online business, after a 2024 assessment found that automated interventions were too slow and that a customer flagged for review would not be flagged again for seven days. One customer lost £17,900 in 24 hours. The Commission’s enforcement director called the gaps “unacceptable”. Betfred said it co-operated fully and acted swiftly, and the Commission acknowledged interim controls were put in place quickly. That is £1.725 million across two settlements, plus costs, and about a tenth of the racing money Mr Done says he might withdraw.

Fairness requires two caveats. These are settlements, not findings of deliberate exploitation, and Betfred remedied the gaps. But the fines are only the visible part. The invisible part is what was earned before anyone looked. If the systems for spotting harm were not good enough, nobody, Betfred included, can say how much machine and casino revenue came from customers those systems should have caught. That figure is not published. In my view it decides whether “morality police” is a slogan or a defence. The shops in the threat are the shops in the settlement, and a bookmaker that has twice in seven months settled with the regulator over how it treats its machine and casino customers is poorly placed to hold the moral high ground, let alone take a horse race up it.

Meanwhile, at the tills

Consider two of the businesses saying they cannot afford this. Bet365 reported profit of £349 million for the year to March 2025, down 44 per cent, and paid its majority shareholder, Denise Coates, at least £280 million in dividends and pay. Profit fell by nearly half. Nobody told the pay. In fairness, £130 million went to the Denise Coates Foundation, and that is a good thing to say in their favour. Entain booked a £488 million impairment for the November tax rises, turned £1.16 billion of underlying EBITDA into a statutory loss of £680.5 million, and proposed a £125 million dividend anyway. The loss is on paper. The dividend, one assumes, is on cheque. Both warn of jobs at risk. A dividend, unlike a Classic, is rarely reviewed after a Budget.

The high street and the kettle

Then there is the shop itself. Betfred’s figures imply an estate of about 1,000, of which 495 is roughly half, and Mr Done fears none will be left by 2030. A shop offering a bolted-down stool, a screen showing Kempton with the sound off, a kettle of uncertain vintage and a machine in the corner is a waiting room, not a destination. Customers pay for experience, in the coffee shop, the pub and the barber’s chair. Nobody queues for a dishevelled experience. Otherwise the customer has a phone, and the phone has the machine on it. Racing needs the shop as a window. The shop needs to be worth looking into.

Customers turned away

Only a business that can afford to lose customers treats them this way. Picture a butcher who bars anyone who knows a good cut of beef. The ideal customer, it seems, is a loser with a short memory. Operators restricted 643,779 accounts in 2024. Of those, 46.78 per cent were in net lifetime profit, against 25.42 per cent of all active customers. The BHA’s own chair was restricted in January 2025. For the punter the message is plain: back horses with knowledge and win, and you are the customer the system is built to exclude. Lose steadily on the machine, and you are the one it is built to keep. Racing fights checks on punters’ finances and stays quiet about the bookmaker’s right to refuse the bet.

The question nobody asked

If Fred Done wasn’t born here, where would he have chosen to be born? Somewhere with no machine duty, presumably, yet I suspect he would want a country where a bookmaker can sponsor five Classics, threaten to withdraw them over a slot-machine tax, and still be received as a friend of the sport. As far as I can tell there is exactly one such place, and he was born in it. (This is a joke, not a comment on anyone’s tax residence.)

Detach, and demand

Racing cannot fix this by lobbying alongside the people who restrict its customers. It must detach. First, ask where the difference between £250 million paid and £113 million received goes, and publish each bookmaker’s revenue by product. Second, put it in writing: a verbal agreement is a bet you cannot enforce, so make the Classics a contract before Budget day on 28 October. Third, argue racing’s case on racing’s evidence and leave the machine fight to the trade body. Fourth, publish the media-rights formula before 2028. Fifth, publish the modelling behind the 1,470 closures and 15,900 jobs, so that racing is not asked to stand behind numbers nobody has seen.

The charter racing needs

The Gambling Act 2005 gives the Gambling Commission three licensing objectives, and the second is that gambling is conducted in a fair and open way. In my view the Commission has neglected it since the day it opened. On restrictions it says it is “not within our regulatory remit to mandate how individual operators manage their commercial liabilities”, which is a regulator’s way of saying it has not looked. So racing should demand a betting charter. One, a right to a bet: any customer not shown to be at risk can place a minimum stake on racing at the advertised price. Two, no restriction for winning, and reasons for any restriction given in writing. Three, an independent appeal, decided in weeks, not years. Four, restriction data published by operator and sport. Five, best-odds promises honoured in full, with the small print in normal-sized type. Six, sponsorship that is not conditional on the tax treatment of an unrelated product.

Racing should be the sport the bookmaker sponsors, not the human shield he hides behind. Tax the profit on the slot machine. Leave the horse alone, stop lending it out as a hostage, and make the industry sign the charter before it asks for anything else.