For those of you that don't know......
A betting exchange matches two separate bettors taking opposites sides of a game. A bettor, (not the bookmaker) puts forth an offer of say, team A, -7, -100 for 500 dollars, and if/when a bettor decides to accept the offer of taking team B, the present opponent, at +7, -100, there is a match and the bet is on for both bettors. If the player on team B wants only 330 dollars of team B, a third bettor can take the remaining 170 dollars on offer, so the betting amount can be broken up into more than one person matching the bet on offer. Offers are accepted in the order that they are put forth, so if the offers are equal on the same game, and one offer was made on Wednesday and the same offer by another bettor was made on Thursday, the Wednesday offer is accepted first. If a bettor making the offer at -7, -100 is pipped by another's offer of -7, -102, the person wanting to bet team B will of course get the best bet on offer and that bettor would get team B +7, +102, rather than team B +7, -100.
EITHER WAY, BOTH SIDES GET MUCH BETTER PRICES ON THEIR BETS, NOT PAYING -110 THAT IS THE INDUSTRY STANDARD.
There are obvious advantages....the house is guaranteed balanced action, and has absolutely no risk, unlike bookmaking the way it always has been. The house receives a commission, typically 1-5% that they collect from the winning bettor depending on how aggressive/greedy they want to be. The bettor has much less juice to pay. That savings adds up over the course of a bettor's season and lifetime, so an exchange will attract savvy players that are serious about making money in the sports betting market without the concern that he will get kicked out if he is a winner.
Matchbook and betfair have been operated successfully overseas for many years, and perhaps there would be others that I am not aware of. The disadvantage is that exotic bets you will rarely find matches for, so an exchange doesn't offer parlay and teasers. If one makes an offer very close to the start of a game, there is the danger that an offer will not be matched, and that person offering will not have action on the game. A bookmaker could of course choose to be a dummy client that could accept all action that looks likely not to be matched close to the game, as they have done through the millennia.
Unlike normal bookmaking where bookies have notoriously limited or outright banned winning bettors, there is no reason for a bookmaker to kick winning bettors out as the operator has assured balanced action in an exchange....in fact they would encourage winners because it increases the liquidity of their offerings.
The reason that exchanges will become part of the normal landscape soon in the USA is that new exchanges have won court cases allowing them to operate in states where sports betting is supposed to be illegal in the USA.....they also won a court case in Nevada, which I never would have thought would be allowed to go ahead.
Fanduel and Draftkings, the kingpins of USA bookmaking, have taken notice, and are considering opening their own exchanges, as the very fertile landscapes of Texas and California will be in their crosshairs.
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