A betting exchange is similar to an online bookmaker in that it allows bettors to bet on sports events. However, the exchange does not set the odds, other bettors do.
The exchange makes its money from commission: a percentage of the winnings from every customer on every event or market.
In return for this commission, the betting exchange acts as a matchmaker and a clearing house. It pairs up bettors on either side of a bet, holds their stakes until the results are known, and issues the winning pay-outs.
For example, if you want to offer 100 to 1 odds on Liverpool winning the Premier League for up to £100 in bets, the exchange will post it exactly that way. If another bettor offers the same at 120 to 1 odds, the exchange will post that, too. Other bettors can take their pick of the two, obviously going with the higher pay-out.
This breeds competition and a ‘free market’ for betting.
Another attractive feature of betting exchanges is the ability to ‘lay’ bets. A lay bet is a bet against an event happening, e.g. if you lay Chelsea winning its next match, you are betting that Chelsea will not win.
It is not the same as betting that Chelsea will lose, just that they will not win. After all, they could draw the game. Your lay bet would then win.
All a lay bet requires is another bettor willing to be the ‘backer’ of the bet and take the other side. In the example above, you require another bettor to bet that Chelsea will win, to accept your lay bet that they will not.
Other Advantages To Betting On An Exchange
Betting exchanges also come into their own with betting while the sports event is taking place, i.e. in-play or in-running betting.
Virtually every aspect of a game or event can be wagered on as play occurs, e.g. which side will score the next goal, whether a golfer will sink a long putt, who will win the next point in a tennis match.
Exchanges also allow you to place the bet and then close it (‘cash out’) when in profit, as the odds move.
For instance, if you are watching the tennis and Serena Williams goes a set down, but you think she will still win the match, you can bet in-play on her winning. If Williams wins the next set, then the odds of her winning the match will improve. You can – on a betting exchange – close your bet in profit, i.e. take the money and run. Then it doesn’t matter who wins the match. You have profited regardless.