The concept of peer-to-peer betting – the precursor to a betting exchange – was first brought to the public by the UK website Flutter.com in May 2000. At the same time Irish-based betting exchange Betmart.com was launched into the UK. Soon after, UK-based Betfair launched what it originally called “open-market betting”, in June 2000 – a name which was quickly changed, by the media and the associated industry, to “betting exchange”. Betfair embraced a pure exchange model – one Flutter later adopted and, some say, even improved upon in places – but it took a year before Flutter launched their new technology, and first-mover advantage proved decisive for Betfair. Though Flutter managed to climb to a reported 30% market share, Flutter’s backers were content to broker a merger which left Betfair the dominant partner by a reported ratio of 84:16. Post merger, Flutter’s customers were transferred to Betfair’s system, which was later upgraded to embrace some of Flutter’s functionality. Betfair went from strength to strength and controls a reported 90% of global exchange activity today. In late 2004, Betfair announced a rescue package which resulted in it absorbing the customers of Sporting Options, which had gone into administration with debts in excess of £5 million.

As with other types of exchanges, betting exchanges thrive on liquidity and customers tend to focus on the exchange where they are confident their bet can be paired up with a matching counterbet. Breaking with British tradition, Betfair uses decimal odds instead of fractional (traditional) odds because they are more popular globally. Some of its competitors allow customers to use fractional odds if they prefer.

Unsurprisingly, Betfair’s success has attracted a number of rivals.

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