Nothing better illustrates the folly of government being involved in running racing than the comment of a spokeswoman for NSW Racing Minister Graham West this afternoon.

She was responding to questions from AAP about the Federal Court challenge by Betfair and Sportingbet to the validity of NSW restrictions on them advertising in that state.

The spokeswoman said;

"The legislation being challenged is about protecting the NSW racing industry, a significant employer in this state," she said in a statement to AAP.

And that is precisely the point.

West admits that his legislation is protectionist, when the High Court ruled in the case Betfair brought against Western Australia that a state could not use legislation to prevent interstate competition to its own industry.

As the principal witness for the plaintiffs, West's own statement will comprehensively destroy any case that the NSW government might muster to defend its advertising restrictions.

This case has been brewing for a long time, with Sportingbet CEO Michael Sullivan saying:

"I've been questioning the New South Wales law for 5 years."

"Now that we've got the Western Australian decision under our belts the barristers views have changed."

"We believe that the New South Wales law restricting advertising is clearly in breach of the Constitution."

Betfair, which will go into the Federal Court proceedings a last start winner after its victory in the High Court case, has exhausted all avenues to get a solution to the advertising ban through persuasion of the government and Racing NSW.

In fact, while the Racing NSW attitude is as hard as it has ever been, bolstered no doubt by a determined TabCorp, in Victoria resistance to corporate bookmakers and Betfair has wilted considerably.

It is even rumored that the Victorian government has issued a directive that its own draconian anti-advertising rules will not be enforced by the Office of Racing. Clearly the Victorian government is getting the same advice as Betfair and Sportingbet's lawyers, which is that a prosecution would fail because the law is unconstitutional.

Ironically, given that defeat on the advertising issue is odds on for NSW, it still thinks that protectionist laws like its race field legislation are the answer to funding the NSW industry.

Already its staunchest ally in the anti-Betfair fight, Western Australia, is bleating about the $5 million a year it will be out of pocket if it has to pay product fees to NSW and Victoria.

It was Western Australia's support for the cause which led to it legislating against Betfair in the first place. Unfortunately for the anti-Betfair brigade, the legislation was so ill considered and so blatantly protectionist that Betfair scored a rare 7-0 win in the High Court.

With this case providing the best legal precedent any litigant could want, New South Wales will only be digging a deeper hole for itself if it defends the Betfair/Sportingbet action.

With Betfair scoring a likely two out of two wins against states "protecting their own racing industry", its not hard to imagine that a further case challenging the validity of race fields legislation will also succeed.

In contrast and unfortunately for the NSW racing industry, Peter V'Landys has an uninspiring record in court actions. He cost Racing NSW and the AJC and STC the best part of $1 million in legal fees over his fatally flawed action over TVN's right to broadcast Sydney racing.

V'Landys might imagine that the NSW government will do all the heavy lifting for Racing NSW in any action over race field fees, but he will quickly find that a civil action against his body will cost it untold time and legal costs.

As Sullivan pointed out, Sportingbet is now in its third year of paying product fees to Victoria without going anywhere near the courts.

"Racing NSW can try and charge a ridiculous 1.5% product fee, but they'll only get what's left after they've funded the extensions on their QC's houses", he said.

The sad part is that NSW is hardly negotiating from a position of strength. It is variously estimated that it will have to pay Victoria somewhere between $20-$40 million a year in product fees when inevitably they are introduced.

Surprisingly, the only party who appears to know exactly what the product fee income and expenses might be on a state by state basis is TabCorp.

A call to Andrew Harding, CEO of the Australian Racing Board revealed that the ARB had no idea what the position was nationally or on an individual state level.

Nothing illustrates more vividly the sad state of the Australian racing industry when its own national body has no idea of the industry's funding structure.

It makes it even more surprising that the NSW government would enact race fields legislation when the only party which even half way knows what the figures are is a company like TabCorp. It of course has a huge vested interest in seeing the numbers presented to suit its own argument.

Still when the Racing Minister shows that he doesn't quite grasp the significance of the advertising litigation, its perhaps not unusual that the race fields issue has completely escaped him.