I would guess that the presence of Betfair does increase cheating out on the race track to some degree. However any increase would be small and the benefits to bettors of having access to Betfair outweighs any small increase in the level of cheating. Let me put it this way Betfair has been covering UK and Australian racing for several years now and betting on the races has not come to a grinding halt in either place just because Betfair is available and cheating has become much worse than it was before Betfair started up
The problem with Betfair though is that it is on the downhill slide as a company overall. It is now run by accountant types who think it is in their best interests for nobody to win but instead churn away their accounts to Betfair. The interview with Scott Ferguson from December 10th 2011 on this blog sums things up well
http://centrecourttrading.blogspot.com/
So I don't think Betfair customers are going to be getting the same good deal they have had in the past
Both Betfair and the horse racing authorities could do plenty more to prevent cheating out on the track. It could only help the Betfair business model. Nothing will deter layers more than laying a horse that looks to be a 4-1 shot on form but then the horse gets smashed into 6-4 before winning so easily it should have been 1-20 maximum and the rest should have been 100-1 or longer
