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A legal battle between two wagering firms and NSW racing authorities has begun in the High Court.

Betfair says a 1.5 per cent turnover fee levied by Racing NSW reduces competition and discriminates against interstate operators.

Counsel for Betfair, Neil Young QC, on Tuesday told the court the fee was not uniform but in fact was discriminatory.

He said Betfair participated in a national market.

Betfair argues the turnover fee will affect its ability to operate because the company is a low-margin operation that matches punters against each other.

The company then takes its commission from winning bets.

In March, both Betfair and Sportsbet were granted leave to appeal against a decision by the Federal Court that they tender the fee as legislated.

Both firms say paying the fee on gross profit is a fairer way to operate.

The case continues.

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