Will gamblers become sport traders?
Back in the days when applying for a loan meant a personal interview with your local bank manager – who was still regarded as a figure of the utmost probity – nothing was more counterproductive to securing a loan than admitting you were a professional gambler.
Such incurably negative attitudes to betting seem ironic given the UK's wholehearted embrace of gambling culture in an era that began with pools coupons and the ITV Seven, and culminated with City wheeler-dealing and the National Lottery.
This entrenched negativity is partly a testament to the power of popular representations of gamblers.
In Ealing movies, bookies and punters were always spivvish types in spotted bow ties, while feckless punters could be relied on to swiftly blow their winnings on booze, women and the next day's card.
Professional tipsters eager to sell their recommendations to the public tried to overcome these impressions by giving themselves reassuring pseudonyms.
In the 1950s and 1960s, when rank still mattered, they called themselves colonel this and major that, or adopted monikers such as Master Spy, which suggested they possessed top secret information.
In the 1980s, as telegrams and 'one-horse letters' gave way to premium rate telephone-tipping services, smart operators discovered a new nomenclature. They and their clients were not gamblers but 'investors'. How much more respectable that sounded.
Gamblers were still perceived as Flash Harrys, but an investor might be a sensible middle-aged man, living in Surrey or Cheshire, perusing the racing scene as wisely and dispassionately as an analyst studying stocks and shares.
The modern day gambler
The 1990s saw the emergence of shrewd, high-stakes tipsters, such as the former foreign exchange dealer Dave Nevison and the suave Henry Rix, whose adverts were redolent of oak-panelled walls, bespoke tailoring and twice-yearly meetings to divide up profits.
One of the quieter, but equally astute, professionals was Keith Sobey, who spent 26 years in the respectable role of accountant and senior government auditor. The 62-year-old Geordie is a lifelong racing fan who made a profit from betting as a sideline.
In 2001, he took early retirement and set up Centaur, a tipping advisory service based in his native north-east. By the middle of the past decade, it had 2,000 clients.
Its racing recommendations were so successful that its morning telephone messages to back a particular runner could move the market on a horse from 66-1 to as short as 4-1.
Subscribers might be anyone from pensioners betting £10 per time to 'investors' with managed accounts wagering between £100 and £4,000 a race.
Sobey is proud that the company's accounts are audited annually by CLB Coopers and that its profits or losses are totally transparent.
Centaur provided what Sobey has called 'a wonderful income'. Annual turnover exceeded £1 million, realising a profit of around £200,000.
This included the proceeds from seminars (that continue to this day) on what the company describes as 'sporting intelligence'.
By 2003, Sobey was keen to expand into football betting, noting that non-racing fanatics still had a problem with the concept of profitable investment on the turf.
However, Centaur's first football fund foundered on the problem of there being only three possible outcomes to a football match. When the football analyst's picks hit a losing run, clients lost the lot.
Attracting the 'investor'
Sobey really wanted to target the mainstream investor market, and he saw that the key to success lay in the massive potential of betting exchanges, with the guaranteed liquidity and range of options offered by Betfair and its competitors.
The exchanges liberate punters by offering them dozens of 'in-running' markets. Sobey believes that these can be studied and traded in the same way as a Goldman Sachs trader studies and bets on financial markets without needing to identify an eventual winner or loser in advance.
Betfair is expanding in Europe and the huge Asia Pacific markets, and it may one day expand into the US.
Sobey believes this will eventually legitimise the old game of tipping and punting, and create a new generation of traders with expertise in football, golf and cricket, just as their City forebears have mastered currencies, bonds and shares.
So confident are Sobey and his managing director, former derivatives trader Tony Woodhams, in this vision that they have moved down from County Durham to smart new offices in the City.
They have set up the first fully regulated sports betting hedge fund, with a staff of three full-time professionals to make perhaps hundreds of trades a day on match day and in seasonal markets.
Equally central to their empire building is a scheme for a government-approved MBA graduate diploma in sports betting trading.
The idea is to offer bright young university graduates an alternative route to the careers and six-figure salaries they may once have gone looking for in banking and law.
It's an ingenious notion, and seemingly light years away from the quaint old world of the Major and Master Spy.
I am intrigued by the thought that my sons and their sports-mad university contemporaries could earn good money and credibility by sitting in an office and trading on the Derby, the US Masters and the Champions League.
However, I'm also a prisoner of the prejudices of the era I grew up in and inclined to be suspicious of claims that a new generation has worked out a foolproof formula for cracking the age-old mysteries of betting on racing and sport.
In more than 40 years of going to the racetrack, for example, I've met no more than a handful of people who have consistently made serious money from betting on the ponies. Several of them were bookmakers, underlining the adage that it's better to be a layer than a backer.
But that is precisely Sobey's point. Betfair has enfranchised us all to profit from the folly or ignorance of others, as once only Ladbrokes or William Hill could do, and with £250 million flowing through Betfair each week there are some awfully big profits to be made.
That's no doubt why Woodhams feels so bullish. "These sort of companies, at this stage of their development, don't come along too often," he says.
Maybe he's right. But my guess is that if Centaur's hedge fund, and its academy of sporting intelligence, wants to attract and retain the brightest and best it needs to concentrate on the role of layer rather than backer in its daily trades.
Thousands of mug punters are obsessed with every race and every match. The few who go home rich are not interested in the spectacle, only the result.
It's those hard-headed clients – the real investors – who will probably determine whether Sobey's venture lasts the course.
This article was originally published in Money Observer - Moneywise's sister publication - in May 2010