Betting Exchange

A betting exchange allows players to bet against each other. This is different to a bookmaker, where players are constrained by bets offered by the operator’s markets.

Key to making betting exchanges function is the concept of lay betting - ie picking a selection to lose or draw rather than win. This is the opposite of back betting.

Example
For instance, player A wants to bet £5 for a horse to win at 10/1. This is a back bet. Player B wants to bet £50 that the horse will not win at 1/50. This is a lay bet. Both of these bets return the same amount.

When lay betting you are in fact risking your liability. Take a lay bet at odds of 2.00 in which you wish to win £10. Although you only have to stake £10, the amount you are in fact betting is £20 in total and this will become the ‘liability’ in your exchange account. If your bet comes in your liability + your stake is returned. In this case, £30 in total.

Notable Examples
The most well known betting exchange in the UK is Betfair but exchanges are becoming increasingly popular - particularly with the growth of internet sports betting.

Business Model
Betfair and other betting exchanges make their money by charging a small commission on each winning bet.