Betting exchanges have been around since about 2000 and revolutionised online gambling by allowing normal punters to act as bookmakers and lay selections as well as bet on them. They also promise (and generally deliver) much better odds as they eliminate the bookmakers’ profit margin by connecting people who want to bet on opposite sides of the same outcome.
Bets at exchanges are sometimes called peer-to-peer betting as, whilst bookmakers also use them, in theory the idea is about bringing together everyday bettors.
Whereas the bookies normally take a cut, with exchanges both punters get, in theory, odds that more closely relate to the probability of an outcome. The exchange takes a commission for enabling the transaction but even allowing for this the payout is usually better than at a bookmaker.
A simple example would be betting on the coin toss in cricket (a ludicrous bet if ever there was one). A bookmaker may offer 10/11 or even lower on both heads and tails, leading to a 90p profit if you bet a pound and win. At the exchange the odds on both would be evens and so even with the maximum five percent commission on winnings your return would still be 95p.
History of Betting Exchanges
Betting exchanges were first created in 2000 and virtually since inception the market has been dominated by Betfair. Various other sites have come and gone whilst other rivals have persisted but Betfair continues to hold onto around 90% of the market.
They were slow to grow in the early days as people struggled to grasp the concept and understand how the exchange worked and also to come to terms with decimal odds, which exchanges favour over the traditional UK system of fractional odds.
However, as punters became more and more tech savvy and aware of the benefits growth became ever faster and now Betfair alone has around one million active users.
Pros & Cons
Betting exchanges are a great option for many people but whilst they have many pros they also have some downsides and as such may not be for everyone. But read and make up your own mind.
- Better Odds – By cutting out the bookmaker exchanges offer odds that can be up to 25% higher (occasionally even more), especially on outsiders at long odds.
- You Can Lay (Bet Agains) – You can act as a bookie and lay selections, effectively betting on an outcome not to happen, be that a horse not to win a race or a team not to win a match.
- You Can Trade – Related to the above, the ability to back and lay means you can trade easily, backing when the odds are high and then laying when they are lower (or vice versa) to lock in a guaranteed profit. You can therefore cut your losses on a losing bet, hedge your bets to accept a smaller profit or some combination of all these strategies.
- You Won’t Get Limited or Banned – When you win consistently at a bookmaker you will get limited to small stakes and eventually banned. At an exchange, because you are not betting against any one single person this will never happen (although see below about liquidity).
- Great For In-Play Betting – Because the odds are set by individual punters a wide range of in-play markets can be offered as there is no need for constant monitoring by the bookmaker/exchange.
- Liquidity – In order to place a bet, or lay a selection, there has to be someone on the exchange willing to take the other side of that proposition. On major sports and markets this is rarely a problem but on some of the lesser markets you may not be able to find anyone to match with and so may not be able to place your bet, may not be able to get as much money on as you would like or may have to accept inferior odds.
- Not Great For Multiples/Accumulators – In recent times exchanges have introduced the facility to back and lay accumulators but this is not what they were designed for and the odds can often be lower than at the best bookies.
- No Credit – Exchanges require the money from both sides of a bet up front so credit is rarely, if ever, an option.
- Few Specials Markets – Because liquidity is required the exchanges offer fewer unusual, smaller markets that are unlikely to attract enough money to function so if you like strange bets, a conventional bookie could be a better option.
List of Betting Exchanges
As said previously, many exchanges have come and gone but the three main ones still going strong are:
- Betfair – The original and undisputed king with the widest range of markets and by far the most liquidity. The site generally works like a dream, handling around 90% of the market – more than seven million transactions a day – with ease and having expanded into fixed odds betting, poker, bingo and other areas there is something for everyone, with a raft of promotions and freebies too.
- Betdaq – Betdaq was a privately owned Irish company until it was bought by Ladbrokes in 2013. Their base commission rate tends to be lower than Betfair’s which can lead to higher effective odds but whilst the site works smoothly enough, they just don’t have the liquidity on all but the biggest events to rival Betfair. Industry experts hope that the acquisition by Ladbrokes will improve both liquidity and the bonuses Betdaq offer…time will tell.
- Ladbrokes – The Ladbrokes exchange is actually Betdaq’s product, which has been integrated into the Laddies site following the purchase of Betdaq by the Ladbrokes group. This merging of minds finally provides some real competition for Betfair, and opens to world of exchange betting up to a whole new group of people.
All of the exchanges offer new customers welcome bonuses and have occasional promotions on top of that so be sure to check them out now. Better odds, no limits and the chance to be the bookmaker…what are you waiting for?
The following exchanges have now closed down and no longer operate in any capacity. We’ve left these here purely for posterity.
- WBX – The World Bet Exchange was very much the poor relation of exchange world and struggled with liquidity. Because of this they couldn’t offer as wide a range of range of markets as at the others. The commission structure was more complex than at the other betting exchanges and whilst it was generally lower there was room for improvement overall. Its closure in 2015 did, however, come as a shock to many who saw the fledgling exchange as a plucky potential rival to to Betfair and Betdaq/Ladbrokes powerhouses.