When exchange betting was first introduced, at around the turn of the century, many believed it would revolutionize sports betting and lead to the demise of the bookmaker. It has certainly had a major impact on the sports betting industry, and it's proved to be very popular with bettors, but it hasn't yet replaced betting with bookmakers.
Exchange betting is also known as peer to peer betting, which is actually a more accurate description of what it is. It's basically about betting against other individuals, rather than a bookmaker, which is why so many thought it would kill off traditional bookmaking. While it hasn't done that, and probably never will, it's a form of betting you should definitely be familiar with, because it offers several benefits.
On this page we have explained the basics of exchange betting and how to use a betting exchange. We've also looked at the advantages and disadvantages of exchange betting when compared to traditional sports betting.
The Basics of Exchange Betting
The basic principle of exchange betting is relatively straightforward. A betting exchange essentially matches up people who wish to take opposite sides of a wager. For every wager agreed they are acting as the middleman between someone betting on a selection to win (the backer) and someone betting on that selection to lose (the layer). The layer is effectively acting as a bookmaker, taking the backer's stake and agreeing to pay out at the relevant odds if the selection wins.
The exchange handles all the money involved. At the point of a wager being agreed, they take the stake from the backer and the potential payout from the layer. If the selection wins, they return the stake to the backer along with the payout that has been taken from the layer. If the selection loses, the layer is refunded the potential payout, and it receives the backer's stake. The exchange makes their money by taking a small commission from whichever party wins a wager.
Using a Betting Exchange
Betting exchanges are run on websites which work in a similar way to most sports betting sites. Before you can start betting, you have to open an account and deposit funds. You'll then be able to login to your account and see all the various sports that are covered, and the available betting markets. You have to navigate to the market you wish to bet on, and then locate the selection you wish to back or lay.
Backing a selection works in pretty much the same way as it does with a bookmaker, in that you simply choose your selection and place your stake at the agreed odds. The main difference is that it's another bettor that will be taking your wager and not a bookmaker. There's also a difference in the way the odds are agreed.
When betting with a bookmaker you have to take the odds currently being offered, but with an exchange you have the opportunity to choose the odds. You can submit a proposed wager with the stake and odds that you want, and if a layer chooses to accept your terms, then the wager is agreed and your stake will be deducted from your account. You can also choose to accept an existing wager which has already been proposed by a layer if you like the terms.
You have the same options when laying a selection. If someone has proposed a wager and you like the terms, then you can accept. The exchange will then deduct your potential liability, which is the amount you will have to pay the backer if the selection wins, and the wager is agreed. You can also choose to set your own odds for a selection and the stake you are prepared to lay. If a backer accepts that proposal, the wager will be agreed.
There's technically no limit to the stakes or odds that can be proposed. There's never any guarantee that your terms will be accepted though, because it depends on if anyone else finds them attractive. In the event that you propose a wager and no one accepts it, it will simply be cancelled. Any funds that have been deducted from your account will be refunded, with no commission payable.
Advantages of Exchange Betting
There are two major advantages which exchange betting has over traditional sports betting. The biggest of these is the simple fact that you can lay selections i.e. bet on them to lose. This isn't something that you can do with a bookmaker, and it opens up lots of new opportunities for making money.
Let's say you want to bet on an upcoming tennis tournament, for example, and have picked three players likely to win it but can't decide which one is the most likely. You could back all three players, but the best case scenario is that you win one wager and lose two. With exchange betting, you could lay a few other players instead. This way if one of your three picks does win, you'll win all of your wagers.
There's obviously some risk involved, as one of the players you lay could go on to win the tournament, but you should be happy enough with this risk if you are confident enough in your picks. You also have the added benefit of potentially making money even if one of your picks doesn't win. You'll still win all of your wagers providing the tournament is won by any player that you haven't laid.
This is just one example of many scenarios where laying can be useful. It's often the case that picking a selection which is unlikely to win is a lot easier than picking one that's likely to win. You can be exposed to high losses relative to your potential wins, particularly if laying big outsiders, but you should be able to win a good percentage of the time.
Laying also gives you the opportunity to use certain strategies that help you to manage your risk. Let's say you backed the Seattle Seahawks, at odds of 15.00, to win the Super Bowl at the start of the season, and they make it to the playoffs. The odds on them winning the Super Bowl will be much lower by that point, so you could then lay them.
As you can see from this example, you've managed to guarantee a profit regardless of the outcome. This comes at the expense of some potential profit, but the point is you've completely eliminated the risk of your original wager. You could always lay a smaller amount if you were still reasonably confident the Seahawks were going to win and didn't want to sacrifice so much potential profit.
The other main advantage that exchange betting has to offer is the odds for backing selections. You'll frequently find better odds on exchanges than you'll find at the bookmakers. They may only be a little higher in some cases, but even a small improvement in the odds you get can make a big difference to your overall returns in the long run.
Disadvantages of Exchange Betting
There are a couple of disadvantages of exchange betting too. They are fairly minor, but you should be aware of them before deciding whether or not this form of betting is for you.
The main drawback is that you may not always be able to get your bets matched. Although this is unlikely to be a major problem if you are betting on the most popular markets, it's something you could run into fairly often if you bet on less mainstream sports or smaller events. The other disadvantage is the bonuses and rewards available. Although some exchanges do still offer these, they aren't as generous or valuable as what most sports betting sites have to offer.
Author: Brad Johnson
Updated: March 2015
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