betting exchanges

Betting Exchanges

Since their creation back in 1999, betting exchanges have had a major influence on the betting industry. They offer the gambler far more flexibility and value than traditional bookmakers. They allow you to trade bets like you would trade on the stock market and allow you to lock in a profit before an event has even taken place. This is a popular technique called matched betting and it’s one of the best ways to make money online.

Betting exchanges have facilitated matched betting and are one of the key ingredients to making a risk free, tax free profit online. Therefore, it’s vital for matched bettors to understand betting exchanges inside out. That’s why we’ve created this introductory guide.

What is a Betting Exchange?

A betting exchange is an online platform that matches gamblers looking to place bets against each other. In essence, a betting exchange allows the punter to act as a traditional bookmaker would.

If Punter A wants to back Chelsea to win, Punter B can back Chelsea NOT to win, an option that was’t available before betting exchanges were around.

This has brought a lot of controversy into the betting industry which we’ll come onto later.

Different Business Models

Bookmakers generate revenue by offering less efficient odds. They build their margins into the odds in the first place. Betting exchanges generate revenue by taking a commission on players net winnings. Therefore, they can offer the true market price and usually at better odds than bookmakers. This means a potentially higher payout for gamblers and ultimately more value.

The betting exchange business model involves no risk like a traditional bookmaker. They make money whatever the outcome of an event. There are also far less overheads, no physical shops, less staff required. The list goes on. You’re probably starting to see why betting exchanges are so popular within the industry.

History of Betting Exchanges

The first betting exchange, Betfair, was founded in May 1999 and completely changed the way the betting industry functioned. Since then, there have been a number of competitors enter the marketplace, Betdaq and Smarkets being the main two.

However, until recently, Betfair has remained the most popular and the biggest betting exchange out there. They are now facing increasing competition from Smarkets in particular as they continue to grow and bring a distinctive approach to the industry.

Back and Lay Betting

At a betting exchange, you can back (buy) an outcome like you would at a traditional betting shop or you can lay (sell) an outcome. The latter is pivotal to making money with matched betting.

What is Back Betting?

Back betting is the most common and popular type of betting. This is the concept traditional bookmakers are built around. With a back bet, you are betting on an outcome to happen, Chelsea beating Leicester for example.

Let’s say you want to stake £20 at odds of 2/1 (3.0 in decimal format) on Chelsea to win.

If Chelsea did beat Leicester, you’d win £40 from your bet and you’d also get your stake of £20 back. Overall, the bookmaker will return £60. If you lost the bet, the bookmaker would keep your £20 stake:

Back Bet

Winning Bet:   £20 x 3.0 = £60

Losing Bet:   – £20

Matched bettors very rarely place back bets at a betting exchange. There is no point as this would defeat the point of matched betting. However, if you did, you would be charged between 1.5% and 5% commission on your net winnings.

What is Lay Betting?

Lay betting is simply the opposite of back betting. You are betting that an outcome will not happen. Betting on Chelsea NOT to beat Leicester for example.

Let’s say you place a £20 lay bet at odds of 3.0 on Chelsea NOT to beat Leicester. If Chelsea don’t win, your return will be £60. If they do win, you’ll lose £40. If the game ends in a draw, your lay bet would win.

Lay Bet

Winning Bet:   £20 x 3.0 = £60 

Losing Bet:   – £40

A common question when it comes to lay betting is why you’d lose £40 in the above example. Your probably thinking this is double my initial stake…

In simple terms, the losing gambler pays the winnings to the successful gambler. Therefore in this example that is £40.

As we mentioned earlier, there is a commission between 1.5% and 5% to pay on net winnings. This amount depends on which betting exchange you use, more on that later.

Placing Your Bets at a Betting Exchange

Placing your bets at a betting exchange is pretty much the same as at a traditional bookmaker.

Simply find the market you’re looking for and click on either the back or lay market. The colour depends on which betting exchange you are using. For more information please see the different betting exchanges section below. Here at The Sure Bettor, we use the Smarkets colour scheme so anything in green represents a back bet and anything in blue represents a lay bet.

If you’re happy with the odds, you can go ahead and enter your stake. If you want to create your own odds, you can change them accordingly and wait for someone to match your selection.

Once you’re happy with your bet, press confirm and you’re all done.

Note: If you’re placing a lay bet you’ll need to make sure you have enough money in your account to cover the liability (the potential loss in your exchange account).

Different Betting Exchanges

There are a number of different betting exchanges we can use for making money with matched betting. Below are the most popular betting exchanges out there. You can find out more about each one by clicking the individual links below.

Smarkets

Smarkets are one the most popular betting exchanges out there thanks to their industry leading commission of just 2%. Founded in just 2008, Smarkets are definitely one to consider for your matched betting.

Betfair

By far the most popular and certainly the biggest betting exchange out there, Betfair are certainly the go to for many people.

Matchbook

Another great betting exchange that certainly lives up to its expectations. Well worth checking out for your matched betting needs.

Betdaq

Another great betting exchange that certainly lives up to its expectations. Well worth checking out for your matched betting needs.

As the betting industry continues to shift to an online based marketplace, more and more betting exchanges are cropping up all the time. Traditional bookmakers are now also getting in on the action. Ladbrokes now have their own betting exchange which trades alongside Betdaq, which they acquired in February 2013. However, we suggest sticking with the big players for the time being.

Betting Exchange Controversy

Since the first betting exchange was created they’ve received much criticism from traditional betting companies, specifically Ladbrokes Coral and William Hill. They argue betting exchanges are corrupting sports betting as it’s much easier to ensure a horse will lose a given race than it is to ensure it will win for example.

However, you can see that this argument is solely revolving around the bookmakers. They don’t want people to be able to bet against an outcome as they’re losing customers. Their argument is based around their own commercial interest rather than for the good of the industry.

This has caused bookmakers to improve their services and implement new ideas to gain customers back. Concepts such as as price boosts and cash out have all been created for this very reason.

Make Money with Betting Exchanges

As you’ve probably learnt from reading this article so far, we can use betting exchanges to make a guaranteed profit from bookmakers free bets and promotions. We place our back bets at the bookmaker and our lay bets at the betting exchange.

The bookies are continually offering promotions to entice customers to keep betting. There are hundreds of offers we can take advantage of on a daily basis and you can easily make up to £1000 every month with this method.

That’s it for our article on betting exchanges. You can find in depth reviews for each of the most popular betting exchanges by clicking the individual links in the ‘Different Betting Exchanges’ section above.

For more information on anything matched betting related, you can get in touch with us or check out some of our other articles.

What is Matched Betting?
Why The Sure Bettor?