What is a betting exchange?

Ever wanted to play the role of the bookmaker? Looking to spice up your bets with multiple available odds on the same event and on the same platform?

This is precisely what betting exchange sites offer.

Though they are reserved for more advanced users, betting exchange platforms allow members to connect directly by offering odds – “lay bet” – or taking odds formed by other users – “back”.

This article sets out to explain how a betting exchange works and the advantages of using a betting exchange.

Betting exchange explained

kentucky-derbyBetting agencies fall into two different categories: bookmakers and exchanges.

Bookmakers offer customers odds and therefore you bet against the bookies (similar to betting against the spread). However, exchanges, on the other hand, are determined by fellow users which you “lay” a bet against.

Bookmakers, however, are recommended for beginners as they are easier to use and understand. In betting exchanges customers are “laying bets” rather than “placing bets”.

Furthermore, betting exchanges enable you to bet on both outcomes, for example, betting both for and against a team winning.

This, however, has one serious downfall as it makes it easier for corruption to run rife in gambling. Anonymous punters are able to bet on a horse losing a race which is much easier to fix rather than the horse winning.

What is a betting exchange site

Many online bookmakers offer the option of a betting exchange instead of the fixed odds the bookmaker calculates.

Since 2011, the betting exchange has been available in the USA through the betting giant Betfair.

The USA Betting exchange allows bettors to wager against each other on horse races. This is similar to the English method in which the site takes a small commission from the winner of each bet.

In May 2011, a law was passed making betting exchanges a legal betting method in California.

How a betting exchange works

BettingThis person-to-person betting method allows people to swap or exchange bets.

For example, you may wish to bet on a specific horse at 3/1 (that is decimal odds of 3.0) and someone else may want to offer or ‘lay' that same horse at 2/1. This is possible with a betting exchange.

The majority of the time decimal odds are used for this type of betting and it offers bettors up to 25% higher betting odds.

The maths behind this is that the ‘overround‘ of a mature betting market is always 100% with a betting exchange rather than up to 125% with a normal bookmaker.

The betting exchanges make money through charging a small commission the winner of the bet. The normal starting commission is usually 5%.

Backing V Laying

As mentioned before, when you use a betting exchange you have the option of being the “lay” in a bet instead being the “back”.

The difference between the two is very simple. When you “lay” a bet you are playing the role of the bookmaker so you decide the odds whereas when you “back” you can only pick the odds to wager on.

Furthermore, when you “lay” a bet you also have the option of wagering on a person or team losing.

For example: if you are laying Djokovic in a tennis tournament you are actually backing the whole field to beat him, whereas if you “back” Djokovic you are backing him to beat the whole field.

“Laying” a bet might seem like the easier option however if your selection wins you must pay the backer his winnings which could be a lot more than the stake itself.

Betting Exchange V Bookmaker

Some of the main pros and cons of the traditional bookmaker versus a betting exchange are the following:

Pros of a betting exchange 

  1. The customer does not bet directly with the bookmaker in a betting exchange. Instead of the site just connects gamblers with different views on the same outcome of an event. This means the customer can get better odds when using the betting exchange.
  2. By playing the role of a bookmaker in a betting exchange the customer can determine his own odds and the website only takes a profit from the winner's net winnings which is usually between 2 and 5%.
  3. Customers can “lay” a horse to win and to lose.

Cons of a betting exchange

  1. It is difficult to successfully use a betting exchange without a large player or user base as without the right person to “lay” your bets against the exchange does not work.
  2. It is a complex form of wagering as it takes more time and thought than entering bookmakers and taking their odds.
  3. The option of live betting is limited to a betting exchange.
  4. The majority of the time odds are expressed in decimal terms and not in the traditional betting odds way which can further add to the complexity of the system.