As sports betting options in the US expand, so do the interests of bettors. One of the most common questions for newcomers is, “What is a sports betting exchange?” Simply put, betting exchanges are platforms that make matched betting possible and allow bettors to act like bookmakers.
So, how do betting exchanges work? Betting exchanges for US players allow punters to back a bet (buy-in) or lay a bet (sell). This type of platform allows them to earn the majority of their revenue. This is particularly valuable for bettors who are sick of inefficient odds at sportsbooks.
Keep reading to see a betting exchange explained below.
Betting exchanges let punters take odds into their own hands. The vast majority of matched bettors use betting exchanges in order to optimize their winnings. For this reason, those looking to see a betting exchange explained will first need to learn about matched betting.
Matched betting is a form of sports betting in which punters use deals from sportsbooks to leverage separate outcomes of the same bet in order to ensure a profit. It might sound complicated, but it’s entirely legal and used by seasoned punters year-round.
So, what is a betting exchange in more simplified terms? It’s a platform used primarily by matched bettors and bettors in general who want to post their own odds (also called a lay bet). Let’s take a closer look at the pros and cons of betting exchanges for US players.
Those hearing a betting exchange explained for the first time might think it sounds incredibly similar to a traditional sportsbook. So, what is a betting exchange in comparison to a sportsbook? The main differences apply to the odds offered and the way each type of company makes its money.
A traditional sportsbook relies on pundits, experts, and even the occasional AI-based algorithm to set odds. These odds are created according to the most likely outcome and how bettors are backing certain markets, which means it can be tough to earn money by backing an underdog.
Sportsbooks make money by creating specific margins in their odds. This means sportsbooks take home money on each bet through a small fee called ‘juice’ or ‘vig’. A standard margin is about five percent. Compared to this, how do betting exchanges work?
As mentioned above, a betting exchange is a marketplace that lets users set their own odds and attract bettors or bet on another user’s lines. Betting exchanges for US players make money by taking a cut of each winning bet, which tends to be between two to five percent of the total payout.
There are key differences between each type of platform that certain bettors may or may not find attractive. With a betting exchange explained from a user’s perspective, what are some advantages of both sportsbooks and betting exchanges?
Betting exchanges use different vocabulary than traditional sportsbooks. Two terms all newcomers will need to learn are back bets and lay bets. A back bet is used to decide which team will win; a lay bet is used to cover all other possible outcomes. In other words, a lay bet covers which team won’t win.
But, how do betting exchanges work in terms of wagering on outcomes if there aren’t sportsbooks involved? Let’s cover an example from the NBA.
If a punter wants to back the Warriors in a game against the Lakers, they’d be betting on the Warriors to win. Conversely, if a punter wants to lay a bet in the same game, they’d be wagering that the Lakers win or that the game ends in a draw. In other words, they’re betting on the Warriors not to win. The lay bet, therefore, covers two aspects of the bet: a Warriors’ loss or a draw.
With a traditional sportsbook, a punter is always backing the bet on offer from oddsmakers. However, in betting exchanges, users can create their own bets, as well as back bets and lay bets from others. So, if someone asks, “What is a betting exchange?” The simple answer is that it’s a marketplace that lets punters take advantage of the most lucrative odds on offer—or even set them themselves.
One of the biggest reasons punters use betting exchanges is to facilitate matched betting. As mentioned above, matched betting (also known as double betting) is when users leverage offers from different sportsbooks to maximize their returns. To do this, a user would first sign up for a bonus deal at a sportsbook and then use their free money to wager on the outcome of a game. A betting exchange will be used to back the opposite outcome from the sportsbook.
Betting exchanges for US players provide a marketplace to find a similar wager as the one they backed from a sportsbook with free bet money and then ‘lay’ a bet against it. This places them in the role of ‘bookmaker’, which lets them leverage the offer from their traditional sportsbook to cover the opposite outcome and cover themselves no matter the result.
Let’s cover a betting exchange explained from this angle: sign up with a new sportsbook to use a bonus deal to place a ‘back bet’, then log in to a betting exchange to play a ‘lay bet’ on those same odds. No matter what happens, a punter wins. There are even handy formulas that make calculating back and lay bets for matched bettors easy.
Though they’re still playing catch-up to traditional sportsbooks in terms of popularity, betting exchanges are expected to become a more popular aspect of the industry. Ready to get started with betting exchanges today? Keep reading for three tips on betting exchange trading.