A betting exchange is a platform that allows users to bet against each other. Instead of placing your bet against a bookmaker, you place it against another person.
By betting against other people, you can take either side of a bet. You can bet for something to happen, just as you would if you were betting against a bookmaker. This is called a back bet.
You can also assume the role of bookmaker and bet against something happening. This is called a lay bet and is what makes matched betting possible.
Betting exchanges are becoming increasingly popular as the odds tend to be better than those at traditional bookmakers. The odds are determined by what real people are willing to accept when betting against each other, so there’s no bookmaker factoring in their profit margins!
How do they work?
Betting exchanges can seem a little daunting at first glance, but there’s nothing to worry about. They’re very similar to bookmakers.
At Betfair, the blue column shows you the best available back odds. Just like placing a bet at a bookmaker, placing a back bet on Man Utd would be betting on them to win. If your bet wins, you will receive your stake multiplied by the odds. Using the odds above, a £10 bet at odds of 2.5 would return £25 (10 x 2.5 = 25), including your £10 stake, just like when betting at a bookmaker.
The pink column shows you the best available lay odds, where you play the role of ‘bookmaker’. Placing a lay bet against Man Utd would be betting that they won’t win. If Man Utd don’t win, and you’d placed a £10 lay bet, you would receive the £10 stake from the other person. However, if Man Utd win, your lay bet would lose, so you’d pay the other person as the bookmaker would. With a lay stake of £10 at odds of 2.5, that would be £15.
So, there are two sides to every matched bet on a betting exchange. You have one person betting that Man Utd will win (back bet) and another betting that they won’t win (lay bet). All possible outcomes are covered. The back bet covers Man Utd winning, and the lay bet covers Man Utd drawing or losing.
How do they make money?
Bookmakers make their money by offering odds that are lower than the true odds of an event occurring. This practice ensures that in the long-term, no matter what happens, they will make a profit.
A betting exchange is different. Since it’s people betting against each other, the exchange itself doesn’t lose any money regardless of the outcome of an event. So, how do they make their money?
They do so by charging a small commission on winning bets, usually between 0-5%. It’s their fee for providing a platform on which you can exchange bets. So, if your back bet of £10 wins at odds of 2.5, an exchange with 2% commission would take £0.30 of your £15 winnings, leaving you with £14.70.
Which is the best betting exchange?
If you want to start making money from the bookies, you’re going to need a betting exchange account.
When it comes to choosing an exchange, it’s very much Betfair v Smarkets. They’re head and shoulders above the rest and are both perfectly viable options, with a few subtle differences.
Betfair are the better option if you’re new to matched betting. They’re the bigger brand and offer new customers 2% commission instead of their standard rate of 5%. Sign up using the link above, and Betfair will automatically apply the 2% commission to your account.
Smarkets are a great option, too, with some unique markets that you won’t find at Betfair. They don’t have as many users as Betfair, so it’s not as easy to match your bets on the more obscure events, but their standard commission is just 2%. There’s a £10 bonus available to new customers as well. Sign up using the link above, and Smarkets will refund your first £10 worth of losses.
Whichever exchange you choose to get started with, you’ll need an account with both if you want to maximise your profits long-term.
Betting exchanges can be a tad confusing to start with, so don’t worry if things seem a little unclear at this stage. When you start navigating their interface and working through some example matched bets, things become a lot clearer.
Placing lay bets at a betting exchange is key to the matched betting process, so it’s a concept that’s worth taking your time to understand.
Once you’re ready to walk through your first matched betting offer, things should become a lot clearer!