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What are Betting Exchanges? (June 2024)

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Betting exchanges are a popular alternative to sportsbooks. Rather than placing your bet at a sportsbook, you are proposing bets to fellow punters. This means you can pick whatever bet takes your fancy, and most important of all, you set your own odds. That’s right, there is no sportsbook offering prices for any of the wagers. At a betting exchange, you are the bookmaker and the bettor. Just form your predictions and name your price.

Peer-to-Peer Betting Explained

You can imagine betting exchanges as wagers against people and not a sportsbook. The marketplace connects bettors to a massive community, in which the people dictate the prices, not a sportsbook. The odds you can get at betting exchanges are better than at sportsbooks because of the betting juice that books apply. This is basically a small house edge that they put in all of their bets to make a profit. To learn more about that, skim through our article on juice in sports betting.

Betting exchanges can run without vast sums of capital, as the operator does not pay your winnings from its own pocket. Instead, it ensures that money is transferred between bettors. However, to make sure that the business stays afloat, betting exchanges charge a commission on all wins. Usually, this rate is between 2% and 5%.

In Theory

There are three important terms to define before going forwards.

  • Backer

The person who makes the bet, who is “backing” the wager. This is a straightforward wager, just like the ones you can place in a sportsbook. You set the odds yourself and then place your wager.

  • Layer

The person who places a bet against the backer. This person is the “layer” and they place a lay bet. This is the opposite of the wager you would make in a sportsbook. The odds are inverted, and instead of betting on something to happen, you are betting on it not to happen.

  • Liability

Liability is the stake that the layer needs to place. It is the money they are liable for and must pay out if the lay bet does not come through. If you win, you take your liability and your profit. If your lay bet loses, you lose your liability.

Whether you want to back or lay a bet is completely up to you. You can start by backing or laying a bet against a wager that is already proposed by another punter. Or, you can submit your own wager, and wait for someone to make a counter bet. As long as people are betting against each other, the system works. If you submit a proposal but no one takes you up on your bet by game time, then your wager is declared void and your stake is returned.

Example of Peer-to-Peer Betting

In an English Premier League soccer game between Manchester City and Arsenal, you back Manchester City to win. The bookmakers offer odds of 1.8 on the City to win, but at the betting exchange, you can go as high as 1.8. You stake $10 to win $18, and someone decides to lay $18 against you – your bet is active.

A layer places a bet against your wager. Should Arsenal win or the game ends in a draw, they would win. The layer must put aside $8 in liability to win $10.

It is crucial to understand the relation between the bettor’s wager (Manchester City) and the “sportsbook” wager (Arsenal or draw). The sportsbook’s bet uses inverse odds, where you have to calculate the odds by dividing the profit by the stake.

  • Manchester City to win – $10 backing stake, 1.8 odds, profit of $8, and a total return of $18
  • Arsenal to win or draw – $8 liability, profit of $10, and a total return of $18

The formula for the sportsbook’s odds is the following:

  • Total Return / Liability

In the example above, this is

  • 18/8 = 2.25

However, at a betting exchange you will not see the lay betting odds. Instead, it gives you the same (or similar) odds of the backing bet you are going up against. You have to set an amount you want to win (from the backer’s stake) and it will tell you the liability. The liability is basically what it will cost to place the bet.

How to Place Bets at a Betting Exchange

When you jump into a betting exchange, you will see plenty of proposals lying around. With each proposal, there are odds offered and also an amount of cash that is already staked against that bet. And that is where you come into it. All you have to do is pick a bet with the odds you like and then stake your money into the pool.

For each selection, the exchange should offer one, or multiple, odds on the backing bet and on the laying bet. The odds are usually almost the same, as the laying odds are shown in an inverse format. Rather than show you exactly what the odds on the lay bet are, you can enter how much of the backing bettor's money you want to win, and it will present you with the liability.

Strategies

The flexibility of the odds gives you a lot to play around with. You can find plenty of futures and pregame betting markets. Live bets are also available, and they are not as volatile as you may think. Even though these bets are being thrown around by peers, the live betting market tends to move slowly. Here are some things you will want to consider when planning your bets.

Stick to the Market

Whilst it may be tempting to see how high you can sell your odds at, it is better to bet on odds that are already in the market. If a bet is going at odds 1.5-1.7 in the market, you are better off picking 1.7 and sticking with your bet, rather than test the market with a price of 1.8. Try to stake money on wagers that are already out there.

Approach Live Betting with Caution

Live betting lines move differently at betting exchanges. Conventional bookmakers have computers that generate the odds constantly, reflecting what is happening in a game. At betting exchanges, instead of relying on computing and algorithms, the odds are dictated by people. The guessing game does not only revolve around the sporting event, but you will also need to make a proposal that someone else will bet against. If you go too high, you are at risk of waiting.

And then what if something monumental happens and changes the course of the game? You need to quickly withdraw your proposal and come up with new odds. Remember, you are not only the bettor but also the bookmaker.

Hedge Betting

The great advantage of betting exchanges is the great prices, but it is not the key highlight. A lot of hedge bettors can find great opportunities in back-to-lay or lay-to-back bets. These are contrasting wagers that are placed against each other, and the idea is to make a profit either way. Because each backing bet has a lay bet (or vice versa) you can hedge all your bets if you want to. The idea is simple: buy a bet at good odds, and when the market swings in your favour, cut out some of your potential profits to bet against that wager. Your second bet should cut all your losses, so you are onto a surefire winner.

Hedge betting does come with its dangers though, and it will not work for you all the time. You can find out more on the subject in our guide to hedge betting.

Betting Exchange Disadvantages

Though it is a bit more complicated, betting exchanges really do look better than sportsbooks. There is a small commission on your winnings (and only your winnings), but otherwise, you are getting better odds. Hold on before you do sign up to one though, as you are giving up many privileges that you would get at a sportsbook.

No Promotions/Bonuses

Before you discard the bonuses and promotions at sportsbooks, you may want to think about all that entails. Yes, it is true that a lot of goodies have fine print which says you need to clear high wagering requirements, stake a certain amount of money, or bet on events you would not otherwise. But a lot of these can still be useful. You may not use them all, or even most of them, but it may be worth looking into the following:

  • Deposit Bonuses
  • Free Betting Games
  • Betting Coupons
  • Cashback Offers
  • Loyalty Programme for Frequent Bettors
  • Insurance on Bets (generally for horse racing)
  • Casino Bonuses (if you are playing at a casino & sportsbook)

For obvious reasons, “enhanced odds” or boosted odds” are not really applicable here. They are probably just as good as the standard odds you can ask for at a betting exchange.

Limited Exchanges and Smaller Markets

What this means is basically that there are far fewer betting exchanges than sportsbooks. Therefore, the coverage and diversity of the betting markets are not as large as what you can find at sportsbooks. Not everyone places soccer bets such as which team will score first, will there be a goal in the first 5 minutes, will there be goals in both halves. That is not to say that no one places these bets, but at betting exchanges, people may be more conservative with their wagers.

There are thousands of sportsbooks across the globe, and you can find ones that specialise in certain sports. This leads to even greater coverage and many niche bets that you will struggle to sell at a betting exchange. Just browse through the markets at some of these specialised sportsbooks:

https://www.gaming.net/best-nfl-betting-sites/

https://www.gaming.net/soccer-betting/

https://www.gaming.net/tennis-betting/

https://www.gaming.net/horse-betting-sites/

https://www.gaming.net/boxing-betting-sites/

No Parlay Betting

This one will certainly divide punters. As you are wagering against other players, it is impossible to pick accumulator bets. You cannot simply pick different wagers and combine them into one wager. It does not just extend to parlays. There is no round-robin betting, boxed racing bets, teasers, or any other options that require multiple selections.

No Cashout Function

Another perk about betting at a sportsbook is the cashout function – which is not available at betting exchanges. The bet you make has to either win or lose, and you cannot revert your bet once it is in the system. This means not only giving up on cashouts, but also special tools like partial cashout or early payouts.

Country Limitation

Betting exchanges need to be licensed, just in the same way as sportsbooks. The Malta Gaming Authority and the UK Gambling Commission can issue licences to betting exchanges. There are other gambling regulators, especially those that are UK white-listed, that can also regulate betting exchanges. However, a lot of gambling authorities do not recognise this form of gambling. If you are living in the US or Canada, you do not have many options. At the time of writing, only New Jersey in the US and Ontario in Canada can authorize betting exchanges. And even then, your options will be extremely limited.

For reference, you can check out the range of top bookmakers in your country or state.

https://www.gaming.net/ontario-sports-betting/

https://www.gaming.net/canadian-sports-betting/

https://www.gaming.net/offshore-betting/

https://www.gaming.net/australian-sports-betting/

If your state/country is not listed, then you can always run a search through our blogs. We have covered virtually all the states in the US and provinces in Canada, as well as many foreign countries. Chances are, we have you covered, and have assembled posts on the top sportsbooks in your area.

Limited (if any) Crypto Betting

Another thing you must consider is that due to the strict laws, there will be many limitations. Though some crypto betting exchanges are starting to appear on the horizon, they pale in comparison to all the crypto sportsbooks you can bet at. The world of cryptocurrency is expanding at a tremendous rate, and bookmakers are opening their doors to all sorts of currencies. These include the following:

https://www.gaming.net/crypto-sports-betting/

https://www.gaming.net/bitcoin-sports-betting/

https://www.gaming.net/ethereum-sports-betting/

https://www.gaming.net/litecoin-sports-betting/

https://www.gaming.net/dogecoin-sports-betting/

Conclusion

At the end of the day, whether you play at a betting exchange or stick to a sportsbook is completely up to you. It can be worth trying out just to see how this form of betting differs. The interface at betting exchanges does take some getting used to. If you have never seen one before, then you may find the sheer amount of information and betting proposals quite daunting. However, you can quickly adjust to it. In truth, there is nothing wrong with playing at a betting exchange, so long as you know its limitations. One can argue that sportsbooks have limitations on their odds, but in a way, you are paying for that. The money that they make goes into providing you with extensive betting markets, promotions, features, and customer support so you can reach out to the people in charge. A couple of other things that can be thrown in there are live streams and a guarantee that you can always place your bet.

Lloyd is passionate about online gambling, he lives and breathes blackjack and other table games, and he enjoys sports betting.