Betting exchanges and how they differ from sportsbooks
How a betting exchange works, what backing and laying mean, how commission changes the price you get, and where prediction markets fit in.
A sportsbook sets its own prices and takes the other side of every bet. A betting exchange does neither. It is a marketplace where users bet against each other, and the exchange earns its money from a commission on winnings or, on some exchanges, a fee per trade. That difference changes how prices are set, what they cost you and how you should compare them.
Exchanges and sportsbooks side by side
| Sportsbook | Exchange | |
|---|---|---|
| Who sets the price | The sportsbook | Other users, by the offers they post |
| Who you bet against | The sportsbook | Another user |
| How the operator earns | A margin built into its prices | A commission or fee, charged separately |
| Can you bet against an outcome | Only by backing the other outcomes, or a market such as double chance | Yes, by laying it |
Because no margin is built into an exchange price, the best back and lay prices in a busy market often sit close together and close to fair. The gap between them, plus the commission, is what trading there costs. The vig guide shows how to measure the margin on a sportsbook.
Backing and laying
On an exchange, every bet has two sides:
- Backing is the familiar bet: you win if the outcome happens.
- Laying is the opposite: you win if the outcome does not happen. You act as the bookmaker for someone who is backing it.
The two meet at a price. Say one user backs a team at 3.00 for a stake of 10 and you lay it.
- If the team does not win, you keep the backer's stake of 10.
- If the team wins, you pay the backer's profit of 10 × (3.00 − 1) = 20.
That 20 is your liability, the most you can lose, and the exchange holds it from your balance until the market settles. Laying at long odds means a large liability for a small possible win, so the lay price matters as much as the back price.
Commission: the exchange's cut
A traditional exchange usually takes a percentage of your net winnings on each market, often a few percent, and nothing on a market where you lose overall. On a winning bet, that makes the price you actually get a little shorter than the one listed.
Back at 3.00 for 10 with a 5% commission:
- The profit if you win is 10 × (3.00 − 1) = 20.00.
- The commission is 5% of 20.00 = 1.00.
- You keep 19.00 profit, a return of 29.00, which is the same as decimal odds of 2.90.
The general rule is: effective odds = 1 + (listed odds − 1) × (1 − commission). For a listed price of 2.10:
| Commission | Effective odds |
|---|---|
| 0% | 2.100 |
| 2% | 2.078 |
| 3% | 2.067 |
| 5% | 2.045 |
So 2.10 on an exchange charging 2% beats 2.05 at a sportsbook, but at 5% it is slightly worse. Commission applies to lays too: in the example above, the 10 you win when the team does not win becomes 9.50 after 5%.
Prediction-market exchanges
Some exchanges, especially in the United States, are prediction markets. Instead of odds, they trade contracts on a question such as "Will this team win?". A yes contract pays $1 if the answer is yes and nothing if it is no, and its price moves between 0 and 100 cents as users trade.
A contract's price is its implied probability. A yes contract at 62 cents implies 62%, which is decimal odds of 1 ÷ 0.62 = 1.61 (rounded), or about -163 in American odds (from the unrounded 1.613; the rounded 1.61 gives -164).
- Buying 10 yes contracts at 62 cents costs $6.20.
- If the answer is yes, they pay $10.00, a profit of $3.80.
- If the answer is no, you lose the $6.20.
Fees vary by operator: some charge a flat amount per contract, some a fee that depends on the price (often only when your order takes a resting offer), and some a commission on net winnings like a traditional exchange. A few charge nothing on matched trades, so check the operator's own fee schedule. With a fee of 1 cent a contract, the 10 contracts would cost $6.30 and the effective decimal odds would be 10.00 ÷ 6.30 = 1.59.
The gap between the yes and no prices works like a sportsbook's overround. If yes costs 62 cents and no costs 40 cents, buying both costs 102 cents for a payout of 100 whatever the result, so those extra 2 cents are a cost of trading at the asking prices, on top of any fee. Enter a contract's price as a probability in the converter below (62% here) to see it in decimal, American and fractional odds.
Read as American odds: +150
+150 = 2.50 = 6/4 = 40.0%
The implied probability includes any margin in the price. A fair price comes from removing it.
How OddsKeepr shows exchanges
OddsKeepr lists exchanges in their own Exchanges view on each board, beside the sportsbooks view, only where an exchange is licensed or accepts residents. Exchange prices are shown as listed, before commission or fees, so they compete for the best price only with other exchanges and never against sportsbooks. To compare the two fairly, work out the effective price first, as above, then put it next to the best sportsbook price. How to compare odds covers the rest.
Check who licenses or regulates an exchange where you are before using it; how to check a sportsbook licence shows how to use a regulator's register. Keep your gambling within what you can afford to lose. If gambling stops feeling like entertainment, free and confidential help is listed for every country under where to get help.