What is a Sports Betting Exchange?

The industry surrounding the predicting of sports results and placing wagers has grown massively. There are two betting platforms in use today. The first being the traditional online bookmaker and the other being exchange betting, a relatively unheard of avenue of betting introduced in 2000 and has not gained much ground among sports lovers.

What is a betting exchange?

A betting exchange is a marketplace where traders can place bets against other punters. It involves the buying and selling of bets on sporting events against fellow sports lovers rather than against a bookmaker as is the usual form of sports betting.

Also known as peer to peer betting, it is essentially where punters go to buy and sell bets on sporting outcomes. It is you versus another human being. There is no longer the element of the “company bookie”. You are the bookie coming up against another human bookie! The most common betting exchanges are Betfair, Matchbook, Smarkets, and BETDAQ.

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How do they work?

If you are only familiar with the usual setup of betting, then the exchange can be a bit confusing. The traditional bookmaker is very simple. They offer odds on sporting outcomes to the public. If you choose to back the outcome and it wins, you receive winnings from the bookie.

On the other hand if the outcome does not go as you had wagered, the bookie keeps your bet amount. To break in the simplest of terms, the bookie may offer Sh1000 on Arsenal to beat Manchester United and if Arsenal win, you get Sh2000. If the Red Devils upset the Gunners, they then get to keep your Sh1000. A betting exchange is however a completely different proposition.

As explained above, it is a marketplace for the public to bet between each other on sporting outcomes. This is different from the traditional bookmaker in that the exchange also gives you the ability to be the bookie yourself and take bets from others!

How cool! To also put it in layman’s term, let’s say our punter is called Adam. For example, now the customer can become the bookmaker and accept on Arsenal to win. By doing so if Arsenal happen to win, Team Profit Adam has to pay out Sh2000.

If Arsenal fail to win, Team Profit Adam keeps the other person’s bet. Therefore by becoming the bookmaker, Adam is effectively betting that Arsenal do not win, this is known as a lay bet. This is basically how exchanges work, matching punters with opposing views on a given result who via the betting exchange make an agreement on both the stake and odds.

Back and lay betting broken down

Traditionally betting has occurred between a customer and the bookie where the punter “backs” (bets that an outcome will occur) and the bookie “lays” (bets that the outcome will not occur). Betting exchanges offer the opportunity for anyone to both back and lay.

Just like in the financial markets where a trader buys at a low price and then aims to sell high price, when betting on an exchange, you attempt to lay low and back high.

This is to lock in profit before the event has happened. Matched betting works by cancelling out the risk on the back bet at the traditional bookies by betting against yourself at the same odds i.e. the lay bet. In other words, you are matching your bet.

Following your first qualifying bet, you will then be awarded the free bet by the exchange. This is where the profit is made. Simply put, you repeat the process; bet using the free bet and then lay the bet. Whatever the result, you are guaranteed to make a profit.  

Advantages over a betting site

  • Matched betting is mostly risk free.
  • More chances to win
  • Greater betting experience
  • Better odds
  • Locking in a profit

When you place a bet you will make a small loss on that bet, but you are given a free bet to use. This bet doesn’t rely on a particular outcome. For example if you bet on Liverpool to win, you would also lay on Liverpool to win which is to bet on their failure to win. Either way you are covering both sides i.e. Liverpool winning and Liverpool not winning which involves them losing or having a draw.

However the risk comes when mistakes are made so you have to double check everything and follow the steps exactly. Being able to lay a bet offers the punter more chances to win, particularly in events with multiple competitors. For example in a horse race with 10 horses, you can lay a horse not to win. If any other horse wins, your bet will pay out. With the traditional bookies, you are always at a disadvantage compared to them.

No matter what game you’re playing, the betting site has an edge over you. The mathematics is always on their side, have upper hand. However with betting exchanges, there is no notion of the house always winning. The fact that you are pitting your wits and knowledge against other punters gives it a very surreal feel. It is just you and fellow bettors battling it out on the neutral ground of the exchange.

One of the main advantages of exchange betting is the odds for backing selections. You are bound to find better odds on exchanges than those from the traditional bookmakers. Although the odds may be just a bit higher than the bookies, it is this small improvement that can make a big difference to your overall returns in the long run.

Betting exchanges also provide for an innovative and practical real-time feature that offers punters the opportunity to take a return on their wagers before an event has started (pre-game cashout) or finished without waiting for its natural conclusion. With bookies, the cashout involves laying the outcome of your initial back bet to cash your profit or loss out. However the cashout feature is taken to a much higher level on most exchanges.

With them, you can lay whenever you want for however much the market allows. For example imagine you placed a bet for Inter Milan to beat Juventus at odds of 2.6 3 days before the game is played. Then on match day you discover that Cristiano Ronaldo will not start for the Old Lady, causing Juventus’ odds to plummet to 2.2, odds which you can lay and effectively cash out your bet for a profit before the ball is even kicked. A further advantage is that you can do this as many times as possible throughout the match.  


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