Exchange Betting Explained

A betting exchange is a platform for peer-to-peer gambling, meaning that the betting interaction takes place punter-to-punter and not punter-to-bookie. Essentially, bettors are placing their wagers against one another, rather than against a bookmaker.

The best and most comprehensive betting exchange is Betfair, by some distance. Betfair now has two platforms: a sportsbook (punter-to-bookie) and an exchange (punter-to-punter), and both are for staking bets.

Betting exchanges are another form of gambling, so whilst the term may sound very different to traditional bookmaker betting, it is not complicated. We’ll delve right into what exchange betting is, how it works, and everything else you may want to know about it here.

What is exchange betting and how does it work?

Exchange betting is a punter-to-punter process where, instead of betting with a bookie, your bet is actually taken on by other members of the exchange community. So theoretically you could have a bet with your friend, where he or she puts up the cash that you could win should your bet be successful. In this scenario you are backing a bet and your friend is laying the bet.

The betting exchange is the portal in which these bets take place, so on one side of this process you have all the punters who chose to ‘back’ the bet and on the other side are punters who refute the bet and chose to ‘lay’ it.

Here’s an example: Man Utd play Luton in the FA Cup. They are so likely to win that the market suggests they are 1/10 odds. If you’re not familiar with odds, that means you will need to deposit £10 into a pot in order to bet on Man Utd winning to get only £1 back (plus your tenner, minus commission).

If you think Man Utd may lose or draw, you can lay that win market. That means that you can put £1 into the pot in order to claim the other person’s £10 if United do not win.

An exchange process is available on most markets and Man Utd to win is a single market. To lay that market you are simply suggesting that Man Utd will not win that match, so it may be a draw or they lose and you will have successfully laid that bet.

A betting exchange is imperative if you are arbitrage betting, as you’ll be looking for a range of odds and frequent changes to create your arb betting scenario and lay your bet.

Why use a betting exchange?

Betting exchanges tend to attract more eagle-eyed players looking for an advantage, but even for the casual punter there’s one big plus point – the odds are almost always better than sportsbooks.

This is because, a bit like a stock exchange, a betting exchange like Betfair features punters competing with the prices and, the more volume there is, the fiercer the competition and the better it is for the punters.

Betting exchange vs Sportsbook

First up, let’s establish if you are betting or laying. Betting is when you are backing the result, laying is when you are refuting the result. Let’s assume you are bettin. The difference in sportsbook betting is that your bet is taken on by the bookie and in 99.99% of the time it is accepted and placed.

On an exchange you are betting with members of the public who are not linked to the main operator. So on the Betfair exchange for example, you are NOT betting with Betfair. 

For a  bet to be placed on an exchange, enough people need to have laid your chosen result for there to be money in the pot available should you win. Once there is enough money in the lay pot to cover your bet, it is placed. This is called matched, therefore your wager is placed and your bet is matched.

On Betfair, your bet can sometimes stay in a state of pending until the pot builds up enough to match your bet. They have alerts, options & settings available for you to decide how the matching system works for you, how long to leave it pending etc. This is not ‘Matched Betting’, which is a scheme cooked up by savvy gamblers using the exchange to profit from bonus promotions.

You can’t lay bets on a sportsbook, so you can’t pick a horse to lose a win bet, or you can’t pick Man Utd to lose against Luton from our earlier example. There are ways of achieving a similar circumstance like a Luton Draw or Win bet, but that is still considered a win bet… you have not laid Man Utd in this scenario.

What’s the difference between an exchange and a bookmaker?

A bookmaker is a single person or company willing to take your bet, providing you odds and paying you out if your bet wins.

On an exchange you may actually have hundreds of bookies and/or members of the public contributing to the pot. So in principle the exchange is simply providing the software for bookies to operate – if they choose – en masse, without having to set up their own service. You don’t actually know who’s paid the money in when you win through an exchange, it’s simply a big pot of money.

Owing to the fact that lots of bookies turned to exchanges to run parts of their bookmaking businesses, the gambling commission created a new digital gambling license for those profiting from operating on an exchange to a professional capacity.

So be prepared: if you intend to make your millions laying other people’s bets on the Betfair exchange (effectively being a bookie), the gambling commission might choose to investigate your activity. If you start making a steady and regular income (in the thousands), you could be seen to be running as a business.

Which betting exchange is the best?

The best betting exchange? Quite simply, it’s Betfair. While there are some Betfair alternatives, the principle relies on the community of punters willing to back and lay bets that contribute towards the pots of cash available as winnings.

Without that massive community, you might struggle to get your bets matched. So with that in mind, Betfair – being by fair the biggest community – is our strong recommendation.

What’s the best betting exchange app?

Betfair has the best exchange app and can be downloaded from their website, from the Apple App Store and via Google Play for Android devices. You can also check compare betting apps in our review article.

Does it cost money to use an exchange?

Yes it does. You’re not betting with the operator, so they need to make a fee for the luxury of you using their software. They normally take a commission upon the completion of a wager. So if your bet wins and pays out, they normally take a small cut as a commission.

What does trading on the exchange mean?

Trading on the exchange is simply a term used to highlight how a market is doing on the exchange as opposed to trackside with bookies or an online sportsbook.

If you ever watch ITV horse racing (or Channel 4 racing before that), you might hear a presenter suggest that the price (odds) of a horse are trading better on the exchanges than with the touts. That’s mainly because information travels differently online and often the exchange is the first to react in moving prices. So much so that nowadays, the exchange like Betfair is the focal point for all other bookies when pricing up their own markets.

About The Gambler

Ryan Murton is the Editor-in-chief at Bookies Reviews. He is a keen football & boxing fan. He also has an interest in the NFL. He is a passionate Burnley supporter & also likes the Green Bay Packers.

Ryan has previously worked for bookmakers like Betfair & Paddy Power, as well as working at Oddschecker, the odds comparison platform.

You can follow Ryan on Twitter or find him on LinkedIn.

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