What is Betting exchange?
A betting exchange is a platform on which customers bet against each other rather than against a bookmaker, with the exchange charging commission on net winnings.
Users can back an outcome to happen or lay it, acting as the bookmaker by betting that it will not happen. The exchange matches opposing bets and takes a commission, typically a few percent of winnings in a market. Because prices are set by users, exchange odds often sit closer to true probabilities than fixed-odds prices.
Betfair, launched in the UK in 2000, popularised the model. Exchanges require liquidity: with too few users, bets cannot be matched at fair prices.
Exchanges are frequently compared to prediction markets, which also let users trade on outcomes peer to peer, though prediction markets operate under financial rather than gambling regulation in some jurisdictions. Exchanges can also show how prices move as information arrives.
