Betting exchanges were launched in the early 2000s as an answer to traditional bookmakers. The goal was to allow peer-to-peer wagering with cheaper fees.
Sports betting exchanges have accomplished this mission to a great degree. Gamblers can bet at exchanges without having to pay large fees to operators.
However, betting exchanges are far from perfect. You want to consider the pros and cons before choosing them over a regular sportsbook.
That said, I’m going to discuss the advantages and drawbacks of betting exchanges and traditional bookmakers. You’ll get a better idea on which option best suits you by reading through these options.
Basics of Sportsbooks
Sportsbooks have existed in some form or another for centuries. They typically involve a company that creates lines and takes bets on the action.
Here’s an example of a sports betting line:
- The New York Jets are playing at the Miami Dolphins.
- The bookmaker creates the following line:
- Jets +3.5 (-110)
- Dolphins -3.5 (-110)
You can take either New York or Miami in this point spread bet. The sportsbook, meanwhile, makes their money by collecting “juice” (a.k.a. vig) from the losing side.
The -110 in parentheses indicates that bettors are risking $11 for every $10 they hope to win. The extra $1 is the juice in this case.
Another way to view juice is as a “margin” on the total bets collected. In the example above, both sides are risking an extra 10% (1/10) to place their wagers.
The sportsbook is guaranteed to receive 10% from one of the sides. This amount is essentially their profit margin.
Here’s another example to explain:
- -110 odds
- -110 odds
- Enter both sets of odds into a sports betting margins calculator.
- Margin = 4.77%
The bookmaker is theoretically looking at a 4.77% profit margin in this case. Of course, the action doesn’t always balance out on both sides of a wager.
But as long as the sportsbook is on the pros’ (a.k.a. sharps) side most of the time, they have a strong chance to win solid profits.
Basics of Betting Exchanges
Operators of betting exchanges don’t act like traditional bookmakers. They instead merely offer a platform for people to match wagers with each other.
The “backer” is the one who wagers on a certain outcome to win. If they like the New York Knicks at +155, for example, then they’re betting on the underdog Knicks to win.
The “layer,” which acts as the bookmaker, is wagering on an outcome to lose. They would be betting on the Knicks (+155) to lose and collect the backer’s money if they’re successful.
Operators take a small commission from the action. Their commission usually comes from the winning side, although some exchanges take a divided commission from winners and losers.
Here’s an example of how an exchange bet works:
- The Chicago Cubs and St. Louis Cardinals are playing.
- The backer proposes a $25 bet on the Cubs at -205.
- A layer accepts the stakes and odds.
Either a backer or layer can propose a wager in hopes that another side will match them. The key, though, is that each side must agree to the odds and stakes in order for a bet to be valid. There is more to these exchanges, this is just the quick version of the basics of betting exchanges.
How Do Sportsbooks and Betting Exchanges Differ?
You can see from the examples above that betting exchanges and regular bookmakers differ in key areas. But I’ll go into more specifics on their differences below.
Be the Bettor or Bookie at Exchanges
You don’t get to create lines or lay wagers at a regular betting site. Instead, you can only bet on outcomes that have been produced by the bookmaker.
Betting exchanges differ by allowing you to both wager for and against outcomes happening. When you wager against the outcome, you’re laying the bet and acting as the sportsbook.
Another gambler can back the bet and oppose you. The winner must usually pay the commission.
Exchanges See You Compete Against Fellow Gamblers
Regular sports betting isn’t quite like gambling on casino games, where you’re playing directly against the house edge.
But you’re still competing against the sportsbook in a way. They set the lines, and you choose outcomes that you think have a good chance of winning.
Exchanges, on the other hand, work differently in that you’re competing against peers. You take the opposite side of another gambler and hope that your chosen outcome is the correct one.
The operator doesn’t care which side wins the wager, because they’re guaranteed a commission no matter the result. Furthermore, they’re unaffected when you take advantage of an overly favorable opportunity.
Betting Exchanges Usually Have Superior Odds
One problem with regular sportsbooks is that they skew the odds in their favor. That said, you almost never get a great price on any outcome.
You can find better odds at exchanges in most cases. After all, fellow gamblers aren’t quite as sharp with their lines.
Long-shot wagers especially tend to have really good prices. Some layers are willing to offer terrible odds so that they have a better chance of finding a match.
For example, the Philadelphia 76ers may have +2500 odds of winning the NBA Championship at the average sportsbook. Somebody at an exchange, however, may be laying the bet at +2200.
Of course, betting exchanges don’t always have the greatest odds in every situation. Sometimes you’ll even have difficulty finding a match for a bet that you really like.
On average, though, you can look forward to getting the best prices at exchange betting sites.
More Promotions at Sportsbooks
You may have come across welcome bonuses and other promotions at traditional online bookmakers. Betting sites are generous with promos when considering that they make plenty of juice off each bet.
Exchanges, on the other hand, aren’t so generous with bonuses. Their commissions are generally smaller than the juice at regular sportsbooks, so they can’t afford to offer many promotions.
In some cases, an exchange might not offer any deals at all. This aspect can be a turn-off if you’re used to dealing with sportsbooks that feature plenty of bonuses.
The important thing to realize is that you don’t choose exchanges for the promotions. Instead, you pick them to have the ability to lay bets and also pay smaller commissions to the operator.
Bookmakers Have More Liquidity on Average
As mentioned before, exchanges sometimes have low liquidity in certain markets.
You won’t have any trouble finding lots of opportunities in popular leagues, like the MLB, NBA, NFL, and NHL. However, you’ll be hard-pressed to find any takers on bets for the 2nd Czech Republic Hockey League.
They also have a larger variety of bets, including accumulators and parlays. You can find limited accumulator opportunities at exchanges, but none offer parlays at the time of this writing.
Far More Sportsbooks Are Available
When betting exchanges began cropping up in the early and mid-2000s, they threatened to take the sports gambling world by storm. While they’ve carved out a considerable niche in the market, regular bookmakers still dominate sports betting.
Many gamblers still like the traditional method of betting, where they wager on lines that sportsbooks create. The same gamblers appreciate not having to make their own markets and having great liquidity.
It’s unclear whether the balance will ever shift towards betting exchanges. Betfair has grown quite large based on an exchange-only model.
Ladbrokes Coral offers an exchange in addition to their regular betting site. However, the rest of the market doesn’t come close to equaling the many traditional sportsbooks that are available.
Sharp Money Is Welcome at Exchanges
A “sharp” is a professional sports bettor who’s so respected that their wagers can influence oddsmakers.
Bookmakers often shift lines to make sure that they aren’t opposite too many sharps. The last thing they want to do is face off against successful pros.
Some bookmakers resort to outright banning sharps to avoid dealing with them. At the least, they restrict wager sizes that sharps can make.
But professionals don’t have to worry about this at exchanges. The operators are merely offering a betting platform, and they make money from the action no matter who wins wagers.
Therefore, sharps can bet all day without fear of having their account restricted or banned.
Sportsbooks Are Easier to Get Started With
Beginners will find that regular bookmakers are easier to use. New gamblers merely need to worry about understanding the odds and deciding how much they want to risk on any given bet.
Exchanges are mildly difficult to figure out, because they offer more options. Not only can one back wagers, but they can also lay them as well.
Learning how to use an exchange site isn’t like deciphering ancient manuscripts. However, the process is a bit more difficult than using the average sportsbook.
You can see that both betting exchange sites and sportsbooks have their pros and cons. I can’t emphatically recommend one choice over the other.
But I will say that you should consider traditional bookmakers if you’re a relatively inexperienced gambler. You’ll find that these sites are easier to use, since you only have to worry about betting on the given odds.
Another reason why you might choose a regular sportsbook is the welcome bonus. You can start off with a free bet or deposit bonus after making your first deposit. You might also be eligible for loyalty benefits, depending upon the site.
As you gain experience, you may consider checking out exchanges. These sites can offer some profitable opportunities, since you’re competing against other bettors rather than oddsmakers.
Additionally, exchanges usually feature superior odds. The layers are more generous on average, especially when it comes to long-shot wagers.
But these favorable prices and small commissions also come at a cost. Exchanges don’t cover as many markets nor offer as much liquidity in most cases.
If you’re a sharp or high roller, you’ll find these aspects undesirable. You may not be able to find the type of bets you’re looking for at exchanges.
You should weigh a number of factors before deciding whether to dedicate most of your action towards exchanges or sportsbooks.
Exchanges are great for when you want to lay bets, take advantage of low commissions, and get the best prices. Sportsbooks are good for collecting bonuses, ease of use, and liquidity.
No right or wrong answer exists when making your pick. You should, however, at least consider an exchange if you’ve never tried one.