I hope with your knowledge and contacts Peter you have a better feel for it but to a local here it seems a real possibility. We lost online poker too recently for no sensible reason. Our politicians seem to have a very blinkered view on gambling and gaming issues. Games like poker - where an average person can take reasonable steps to at least break even are banned in the name of "doing something to prevent problem gambling" when the real -EV culprits like slot machines, state backed racing with incredibly high overrounds and of course lotteries are protected and coddled.
Don't even get me started on Keno ... which is in every pub and club in Australia. My grandmother won $500 the other day on a $5 investment ... the odds of winning it are 1 in 1560. She loved it and will come back. People pour money down these things and it is encouraged.
Governments here basically rely on people having no idea of basic probability, ban the profitable things as addressing the gambling issue encourage the dumb punters to keep passing back their pay packets on the taxed heavily -EV games.
So yes, squeezing out betfair seems entirely plausible.