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Betting exchange

Horse racing at Arlington Park, 2007

The term betting exchange is used to describe a form of bookmaking in which the operator offsets its risk perfectly through technology, such that the effect to the customer is that customers are seen to bet between themselves. Coined because of its apparent similarities to a stock exchange – it is often defined as “a stock exchange for bets” – it is therefore commonly seen as a peer-to-peer gambling website, when in fact it is more closely described as “many-to-many” (i.e. most bets are not strictly one person on one side betting against one on the other). Equally, it is often suggested, or commonly believed, that the operator is merely acting as a broker between parties for the placement of bets, rather than a bookmaker, although the reality is that bets are being accepted and offered simultaneously through the exchange’s technological interface. Since it is only the exchange operator who holds a bookmaker’s licence in most cases, the legal and licencing requirements invariably dictate that the legal contract for all bets be with the operator itself and not between customers. Most betting on a betting exchange has been a form of fixed odds gambling, although recently the phenomenon was also briefly established in the sports spread betting market.

Links

• BBC article on how betting exchanges work
• Bloomberg article on betting exchanges
• Tactical Trader article about betting exchange trading
• An analysis of the betting exchange industry

This guide is licensed under the GNU Free Documentation License. It uses material from the Wikipedia.