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Can Betting Exchanges Ever Overtake Sportsbooks?

Most sports gamblers are accustomed to traditional online bookmakers who create odds on almost every outcome people can bet on.

The online sportsbooks in exchange of your services are a small fee for all the action to provide for the gamblers in form of a fee or vig. The losing side pays the juice, which is typically around 10% of the bet.

However, many sports bettors do to not realise that there is an interesting alternative to sportsbooks called betting exchanges. These are the sites where operations are similar to stock trading sites.

You can take betting exchanges as online casinos where you bet or wager against each other provided that the site takes a smaller cut of the action. This is why at the sites you will find more favourable odds than standard bookmakers.

One might think even the advantages, why doesn’t everyone choose exchanges over regular sportsbooks?

This is simply because, when it comes to sports betting there is much more to consider than just juicy odds and low commissions. We are about to discuss how betting exchanges work and what are their respective pros and cons. Let’s get started.

How Does a Betting Exchange Work?

When we consider the key areas, betting exchanges are not very different from sportsbooks. At the core, they operate as betting sites where gamblers can wager on sports just like traditional bookmaking sites.

One of the biggest differences, however, is that the exchanges have no hand in creating odds. That is correct, an exchange is just a platform for other gamblers to find some action. On betting exchanges, the cameras themselves create the markets by either backing or laying wagers. Packing a feature means you favour the winning outcome while the layer means your wagering on it to lose.

For a valid wager, the only requirement is both parties agreeing to the conditions. Either side can set the betting odds and price initially and as soon as the other side accepts, you have got yourself a wager.

Backers are gamblers who are essentially like bettors at regular sportsbooks. The only difference that betting exchanges that these people can actually be a market maker rather than forced to choose what odds bookmakers are offering them. Whereas, the layers act as the bookmaker by agreeing to pay the backers outcome is successful.

The operator, that is, the betting exchange takes a small commission as payment for providing the platform. This commission can be taken from the winning side or can be split between winner and loser equally.

Let’s understand how a betting exchange works with this example.

Suppose a match between the Detroit Pistons and Milwaukee Bucks is going on.

A backer proposes a $30 bet on Milwaukee at -240.

A layer accepts the odds and the bet size.

If the Bucks win, it implies the backer won.

The betting exchange will charge a 5% commission on their win.

As you can see from the above example, the operator has no part to play in the actual bet. Their only role is to provide a platform and take a commission from one or both sites as a commission.

Advantages of Betting Exchanges

Betting exchange sites offer some big benefits as compared to traditional sportsbooks. Let’s have a closer look at what are the main advantages of using betting exchanges.

Lay Bets

At a regular bookmaker, you only get the chance to back the winning outcome. There is no opportunity for you to bet against a side winning is simply put, a team or player losing.

Betting exchanges are unique in this manner because you can back or lay bets against other players putting you into the bookmaker’s role.

Ability to create markets 

The ability to make markets is another opportunity that you get with exchanges. You don’t have to sit back and take odds whatever is offered to you like with the sportsbooks. Instead, you have the freedom to choose the odds on both sides by deciding whether you want to lay or back a certain outcome.

As long as the other side agrees to the condition, you have a valid wager.

Low commissions 

Sportsbooks take a vig from the losing side of a bet, this is why they always have a built-in profit margin on each proposed wager.

Often the juice taken from the losing side averages out to be around 10% which is almost double the what betting exchanges charge to the winning side. Even some of the biggest betting exchanges like Ladbrokes Coral and Betfair that run both betting exchange and sportsbook only take 5% from the winning side.

Some other sports betting leaders like Smarkets only charges a 2% commission to the winners while Matchbook takes 1% from the winning aide and losing side respectively.

Favorable Odds

Sportsbooks already have a nice profit margin because they offer skewed odds. Now given the fact that sports gambling is already hard enough to beat, you have even lower chances of winning when the greatest odds are not offered.

Betting exchanges on the other hand offer the best prices across the board as backer and layers are more than willing to match up with each other more evenly.

If you deal with long-shot bets especially you will find solid prices. For example, if you are getting odds of +2200 at an exchange on the Dallas Cowboys in a Super Bowl game, most sportsbooks will be offering you +2500 odds for the same.

Sharps are welcomed 

Most probably you are a casual gambler who is just looking for a little action. However, if you are a highly successful sports bettor, who is regarded as a sharp then you will appreciate how openly exchanges welcome your money. Sharps are noted professional bettors whose bets can actually influence the odds.

Problem is sometimes regular bookmakers restrict sharps from making bets or even ban their accounts to avoid getting into too many losses.

This is why exchanges are much more suitable for sharps as they are not competing against the bettors like sportsbooks. They are merely a platform to connect gamblers to wager against each other, exchanges lose no money even if sharps win big.

Why betting exchanges don’t overtake sports gambling? 

Well, by now you only find that the betting exchange websites have some clear positive aspects going for them, still, there must be some catch.

There are evidently some downsides of betting exchanges that keep them from dominating the sports gambling world. Here we are about to discuss what are these drawbacks.

Low Liquidity

There is no shortage of liquidity at the standard sportsbooks. If the bookmaker is offering you odds, you can make the bet irrespective of the event.

Sportsbooks offer you great opportunities to wager on the more and more obscure sports such as darts and snooker. This is where betting exchanges lack big time as they are only concentrated on major markets. This is why you will not find some who is willing to wager on secondary leagues on exchange sites.

While at the biggest exchanges you will still find a wide range of opportunities, but across the board, regular sportsbooks offer you more variety.

Weak Promotions

Exchanges clearly do not make any big commissions from bets, but to be in the business they have to make for these low fees.

Weak promotions are how these exchanges keep their profit margins. As compared to online bookmaker promotions and bonuses offered by betting exchanges are simpler and often lame. Free bets, deposit bonuses and VIP rewards are not as lucrative as you will find with traditional sportsbooks.

We can argue that low commissions are better than promotions in the long run, but strictly speaking from bettors’ perspective promos at exchanges are not that better. 

Fewer Options

Another reason why you might have to struggle is the fewer number of betting exchanges. Sportsbooks are in abundance and you really don’t even have to try. A simple Google search will get you countless results.

But when it comes to betting exchanges there are only a handful of options that you are restricted. Even in your country all of these might not be available.

Although betting exchanges have created a nice niche for themselves, they are still limited in quantity.

Exchanges are More Complex 

When you first started gambling with online sportsbooks you might have had no problem to learn the ropes. If you already understand the odds beforehand, rest everything is self-explanatory.

Betting exchanges on the other hand are wide open as backers and layers can set odds. If you are new to sports betting we advise against the exchanges as they require you to have a knowhow of sports betting.

Conclusion

The question still remains whether the betting exchanges will ever become a bigger force.

Some so-called “pundits” have forecasted that the betting industry will be dominated by the exchanges eventually but so far these predictions have fallen flat on their faces.

Betting exchanges clearly offer you a nice alternative to sportsbooks as you have to pay lower commissions and get better odds. Furthermore, you do not lose as much to the operator as one might with sportsbooks and you have a stronger chance to make a profit.

Also, you have to freedom to lay bets and support the losing side. This uniquely positioned wager technically makes you the bookmaker as you take the losing side as the outcome.

But do not let all these advantages fool you into thinking that betting exchanges are not without downfalls.

Liquidity still remains trouble for betting exchanges as there are not enough markets to bet on as they are more concentrated only on major leagues. Also, as compared to sportsbooks these websites have a learning curve and can be difficult to read the first time. You have to learn about backing or layering sides and creating a market.

Promotions are not the best suite of betting exchanges. You will not appreciate the promos these sites offer if you compare them to what you get with sportsbooks.

Depending on your taste, you might not find betting exchanges all that better than sportsbooks. There are clearly certain advantages but the drawbacks are also to be accounted for.

If you are feeling bored with sportsbooks or are fed up of big bookmaker margins, sports betting exchanges can provide you with a change.

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