What is a Betting Exchange?

Whilst internet betting was growing in popularity, two entrepreneurs invented a revolutionary new betting product that changed the market completely. Until then, your only option was to place a bet with your traditional bookie on a selection to win. That was soon to change. When online betting exchange sites such as Betfair became available, they allowed gamblers to play the role of the bookie. An online betting exchange was like a stock market of sorts. They gave the opportunity to trade sports bets like they were stocks.

Effectively, what this means is that when you wish to sell a sporting selection, Betfair match you with another punter who wants to back the selection to win. Therefore, you are playing the role of the bookie. Here in our matched betting blog post, we are going to look at what a betting exchange is, some of the most popular betting exchanges, and what the positives and negatives of them are.

The Definition and History of a Betting Exchange

A betting exchange is a platform where bettors can bet against each other rather than against a traditional bookmaker. Users can place both back bets, predicting an outcome will happen, and lay bets, betting against an outcome. These markets are available across sports including horse racing, football and basketball.

Betting exchanges were pioneered by Betfair, which launched its exchange in 2000. Its success led to the emergence of other platforms, including Smarkets and Matchbook. Today, betting exchanges offer a wide range of sports and other markets, providing bettors with an alternative to traditional bookmakers.

How Does A Betting Exchange Work?

Before using a betting exchange, it’s important to understand the difference between back bets and lay bets.

A back bet is the traditional type of sports bet, where you stake money on an outcome you believe will happen. For example, you might back a football team to win a match or a horse to finish in the top three in a race.

A lay bet, on the other hand, involves betting against an outcome. Rather than backing a horse to win, for example, you could lay that horse to lose. Similarly, you could lay a football team to win, meaning you are betting that the team will not win the match.

Lay betting is a key part of matched betting, a strategy that uses bookmaker offers and betting exchanges to potentially generate a profit when the required bets are placed correctly.

How Are Bets Matched on a Betting Exchange?

Unlike a traditional bookmaker, a betting exchange provides a platform where users can effectively bet against one another. The exchange matches users who want to back an outcome with those looking to lay the same outcome.

For example, imagine one user wants to back a horse at odds of 4/1 with a £10 stake, while another user is willing to lay that horse at the same odds for the required stake. The exchange can match the two bets, with the backer betting on the horse to win and the layer betting against it.

Once matched, the exchange holds the relevant stakes until the event has finished and the outcome is settled. If the bets cannot be fully matched, only the matched portion of the wager will be accepted.

How Do Betting Exchanges Make Money?

Betting exchanges generally make money by charging commission on users’ net winnings rather than building a margin into every available price in the same way as a traditional bookmaker.

The exact commission rate and terms can vary between exchanges, so it’s important to check the relevant charges before placing a bet. For matched bettors, commission is particularly important because it can affect the potential profit from a qualifying bet or offer.

Understanding how exchange commission works can therefore help you calculate your potential returns more accurately and identify opportunities where the impact of commission can be reduced.

What Are The Best Betting Exchanges?

Nowadays, several betting exchanges are available to users, each with its own set of features and advantages. Below, we will be breaking down the best betting exchanges you could potentially utilise for your matched betting endeavours.

Betting exchange sites

There’s a very high barrier to entry for online betting exchanges, though, so to this day, only 5 exist, and they can be particularly useful when value betting. We’re going to give you the rundown of our small but comprehensive betting exchanges list.

Betfair Exchange

So at number 1 in the list of the best betting exchanges is Betfair. They were the pioneers, and this is the reason, in many ways, that they are still number one.

You see, a betting exchange is largely only as strong as the customers it has. Without customers, there is no money in the markets. Without any money in the markets, you can’t place a bet.

Betfair haven’t rested on their laurels, though. They have used their early strength and invested their money in continually improving their product. They have the best platform, the greatest number of markets, and, of course, the best liquidity.

One downside is that they use this mini-monopoly to their advantage and charge higher commission rates. They also charge a premium to the most profitable customers.

Such was their growth, they even introduced their own sportsbook alongside the exchange. And then, in 2015, they merged with the Irish giant Paddy Power to become the world’s largest gambling company.

Smarkets

This may be a surprise inclusion at number two in our list of best betting exchanges. But the new boy to the market has really grown in popularity.

It is clear that Smarkets has been able to target Betfair’s weak points. This has led to a growing number of customers joining their platform. They are not shy about marketing the fact that they take just 2% commission on wagers.

These large customers are known as seeders, and they’re the ones who are generally responsible for providing a lot of the liquidity to markets.

Aside from having good liquidity, the Smarkets platform is very easy to use and has a good range of betting options.

Betdaq/Ladbrokes exchange

For many years, the Betdaq exchange was the number one competitor against Betfair in the list of betting exchange sites. Unfortunately, they just didn’t quite have enough to make it over the final hurdle, and they fell away soon after.

This has damaged their liquidity, and the technology of their platform is seriously lacking. The one good thing they have going for them is that they were taken over by Ladbrokes, who have the financial muscle to help them rise once again.

In fact, you may notice that Ladbrokes has an exchange site, too. This is exactly the same platform as the Betdaq one, with the same markets and the same liquidity. The only difference is the branding.

Matchbook

There is nothing particularly wrong with Matchbook; it’s difficult for an exchange to really differentiate itself. At the end of the day, the markets on offer will be similar, as well as the odds.

But it is really dependent on the liquidity on offer, and it feels like the Matchbook liquidity isn’t as good as the rest. This gives it bottom place on our betting exchange sites list.

What we will say, though, is that it is worth having an account with all of them, as all are capable of having the best prices on their day.

EasyBet

Unlike traditional betting exchanges, EasyBet doesn’t operate its own exchange. Instead, it connects users to multiple betting exchanges through a single platform, allowing bettors to access prices from different sources without switching between accounts.

One of EasyBet’s biggest strengths is its streamlined interface. Rather than logging into several exchanges to compare prices and available liquidity, users can view and manage their bets from one place. This can save time for regular bettors and sports traders looking to find the best available odds.

Pros and Cons of Betting Exchanges

Before using any betting exchanges, it is important to understand both the benefits and potential drawbacks of this betting style. Betting exchanges offer features that traditional bookmakers can’t, such as the ability to lay bets and trade positions. We have created a pros and cons list that can help you decide whether betting exchanges are for you:

Pros:

✅ Better odds than traditional bookmakers

✅ Lay betting is an available option

✅ Ideal for matched betting

✅ Large selection of sports betting markets

Cons:

❌ Commission is charged

❌ Low liquidity can make betting difficult

❌ Can be more complex than traditional betting

❌ Limited promotions

If you find the art of placing matched bets confusing, we have a library of betting tools available, including our matched betting calculator, that can be used to make the process simpler.

FAQs

Are betting exchanges legal?

Yes, betting exchanges are legal in many countries, provided they are licensed and regulated by the relevant gambling authority.

Why are exchange odds better?

As bettors compete against each other rather than a bookmaker, betting exchanges typically offer better odds. Instead of building a profit margin into the prices, exchanges generate revenue by charging commission.

What is Liquidity?

Liquidity is the amount of money available to match bets in a market. High liquidity means your bets are matched quickly and usually at the prices you want, whilst lower liquidity can result in unmatched bets or worse odds.