The first betting exchange appeared in 2000 as a way for punters to bet against each other rather than against a bookie. Betting exchange users have the option of setting their own odds or accepting odds that have already been offered – the odds are pooled so it’s actually ‘peers-to-peers’ rather than ‘peer-to-peer’. The odds move in reaction to news and events, as well as the prices offered by bookies – sometimes even enabling punters to place a bet at a bookie and then lay the bet on an exchange to guarantee themselves a small profit (known as ‘arbing’).
Betting exchanges make their money by charging a commission on winning bets. Even taking this into account, however, betting exchanges generally offer better odds than traditional bookmakers or betting sites.
Best Betting Exchanges For UK Punters
|2%||Now only 2% for all customers, based on the net profit of a market (no charge if net loss).|
|5%||Discount based on volume up to maximum of 60% (minimum commission rate is 2%).|
Advantages of Betting Exchanges
We’ve already discussed one of the main benefit that betting exchanges offer – better odds. Because the odds are set by the punters rather than the bookie, you’ll find that the equivalent vig is much lower. Exchanges change a commission – between 3 and 5% – on winning bets, but in a large number of cases the net cash winnings will still be greater than what you would have received from a bookmaker.
The second significant advantage that a betting exchange offers is the ability to lay bets. Unlike traditional bookmakers where you can generally only bet for something to happen (eg: Arsenal to beat Liverpool, England will win the world cup or that it will snow on christmas), by their very nature betting exchanges allow you to bet against something (eg: Arsenal will not beat Liverpool, England will not win the world cup or it will not snow on christmas). This is an important factor as without someone to bet against, there would be no bet.
Betting against an outcome is known as ‘laying’ and is incredibly popular. For example, you might not have a good idea about who will win Wimbledon this year, but you may have a pretty good idea about who wont. The odds for these kinds of bets are usually very short – in fact if an event is unlikely to happen (England winning the world cup) you may need to risk £100 in order to win £10.
Being able to bet against an outcome provides two additional benefits. First, if a bookmaker is offering particularly good odds for an event you can take those odds and then bet against your own bet at a betting exchange to lock in a small profit. For example, if Coral is offering odds of 6/1 for England to win the world cup but the price of laying this bet at Betfair is 5/1, you could place £10 at Coral and £48 at Betfair. Whatever the outcome, you would make a guaranteed profit of around £2:
- If England win you would make a profit of £50 at Coral, but lose £48 at Betfair – leaving a modest £2 profit.
- If England lose, you would lost your £10 at Coral but win £12 at Betfair – again giving you a £2 profit.
This practice is known as arbing, and there are some people out there who make a fairly large amount of money doing it. Bear in mind, however, that once the bookies catch on to what you’re doing you may well find your account limited to small bets.
We should also point out that the amount of money you’re risking is significantly greater than the amount you make as a profit. Whilst this small amount is theoretically guaranteed, there are times when you end up severely out of pocket.
Most of these are user error such as laying in the wrong direction, missreading the odds or not aligning the payout rules between the bookie and the exchange – in particular, arbers need to be careful with tennis betting where different sites often use different payout rules. But sometimes when something unexpected happens a bet will be voided at one site, but not at the other – turning your arb into a real wager.
The second benefit of being able to lay bets is that it offers you the opportunity to quite literally ‘hedge your bets’. Lets say you place a bet of £100 on England to win the world cup during the group stages of the tournament at 15 to 1 (Ed: repeatedly using this as an example isn’t going to make it happen!). If England make it to the final, their odds will shorten significantly – let’s say 2/1.
In this scenario, you could ‘lay’ your England bet for a guaranteed profit. Your £100 bet stands to win £1,500, but if you were to place a £1000 bet in the opposite direction at 2/1 you would make profit regardless of the outcome (if they win you receive £1500 from the bookie and lose £1000 on the exchange leaving £500 profit, and if they lose you would lose £100 at the bookie but gain £500 on the exchange).
Similarly, if you have a large accumulator that has made it to the final event, you may want to hedge all or part of the bet – especially if it’s for a significantly large payday.
Disadvantages of Betting Exchanges
So if betting exchanges are so great, why doesn’t everyone use them? In reality, a large majority of the betting public still use traditional bookmakers rather than betting exchanges.
The reasons for these are two fold. First, because of the way an exchange is set up, and the fact that bets are not placed against the bookie, a betting exchange cannot offers as many specials and promotions as a bookmaker. For many punters, the draw of these promotions is far too tempting – even though they might still be better off betting at an exchange.
It’s not just introductory offers either, many bookmakers will offer their customers ongoing promotions and daily specials such as ‘money back if there’s a red card in a game’ or a ‘free bet if you horse wins at odds of 4/1 or greater’ – both of these are examples of real offers that we’ve seen from the fixed odds sportsbooks.
The principles of how a betting exchange works simply does not allow for this kind of promotions – Betfair cannot offer refunds on £25 bets when the exchanges commission on the bet would only be a couple of pounds. Remember – the money from a lost bet doesn’t go to the exchange, it goes to another punter. So it just isn’t in the numbers.
The second major disadvantage of betting exchanges is a big one, and one that is unlikely to have a solution. Because each bet is against other customers, betting exchanges cannot offer multiple or accumulator bets – there is physically no way for the system to be able to handle it.
Given the popularity of accumulators – particularly with the recreational ‘saturday morning’ crowd, this is a fairly heavy blow.
The exchanges have tried to overcome this by offering multiples in a traditional bookmaker format along side their peer-to-peer platform – where you are now betting against the house rather than another punter, but this defeats the whole point of the exchange and has had relatively poor uptake from the betting community who would rather stick to a bookie for this kind of bet.
Betting Exchanges Vs Traditional Betting Sites/Bookmakers
So now you know benefits and disadvantages that a betting exchange offers over a traditional bookmaker, here comes the big question – which is better.
From our perpective, it depends on what you’re looking for. If you want to place straight bets without any fancy promotions, then betting exchanges will offer you a greater return for your money and are almost certainly your best bet. Similarly, if you want to be able to bet against an outcome, then betting exchanges are your solution.
On the other hand, if you like free bets, money back specials and other promotions and/or you want to place multiple or accumulator bets, then a traditional format betting site is what you need.