What is a Sports Betting Exchange? Sports Betting Exchanges Explained.

Sports Betting Exchange

For those who have been wagering on sports for a long time or for those that have just barely scratched the surface, people are aware that odds are associated with the everyday money line, spread and totals markets.

Whether it's -110 odds for a spread or an over/under for a specific game, it is known that the sportsbook operator, whether digitally on an app or at a retail location at a window, uses a vig. Customers must pay the sportsbook operator a small price for being able to use their platform to place said wager.

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Enter The Sports Betting Exchange

Enter the sports betting exchange, which is a marketplace that allows customers to wager against each other, instead of the sportsbook operator. When customers use this exchange, it comes with lower fees and vigs that are normally associated with using a sportsbook operator.

For example, instead of wagering $110 to win $100 on the New York Knicks to cover the spread of three (3) points against the Orlando Magic, a customer can post their $100 wager for the same wager and wait for another customer to accept their action.

Better Prices At Sports Exchanges

Customers can find better prices through an exchange because there is a less built-in house edge. For example, a company named Sporttrade launched in New Jersey to start this NFL season. Customers at Sporttrade had to risk -106 odds on the Philadelphia Eagles to cover the 2.5-point spread against the Minnesota Vikings, while most sportsbooks have the classic -110 odds on the spread.

The money line for the same game was Eagles -130 and Vikings +127, where traditional sportsbook operators were offering this around -145 on the Eagles and +115 on the Vikings.

Benefits of a Sports Betting Exchange

It has been mentioned already, but the most obvious benefit is the fees associated with placing a wager with any sportsbook operator. Instead of placing NFL point spread wagers at -110, a betting exchange will have the same point spread markets with less than -105 odds and closer to even money.

This is a different approach compared to a normal sportsbook operator who are trying to beat their customers and are hoping for them to lose their wagers.

At a betting exchange, they earn money through the number of transactions and truly do not care about the results of placed wagers. This is another benefit, as the customers aren't labeled as sharp or have any limits placed on their wager stake due to their history within the sportsbook.

Cons of a Sports Betting Exchange

It is important to note the negatives of a sports betting exchange. The largest hurdle of this not taking off in the United States compared to overseas just yet is that customers can ONLY accept proposed wagers from other customers that are within the same state lines.

The Federal Wire Act of 1961, which does not allow the transmission of gambling info across state lines. This has an impact for a few reasons. Anyone wagering on a New Jersey betting exchange could only bet against other people in New Jersey.

Not Enough Users

There is a limited player pool of customers accepting each other's wagers. Finding a partner to accept the other side of a proposed wager may prove to be difficult depending on the wager amount.

One can assume finding a smaller wager size is easier than finding someone else on the exchange within the state lines that is looking for a spread wager for thousands of dollars. In the same vein, this will be more difficult to accomplish with smaller sports and smaller sporting events.

It may be easier to find a suitable partner for a primetime NFL game but may prove difficult when trying to secure a wager on small college basketball, football, or non-EPL soccer markets. Finding a match for wagers is the most difficult part of working within a sports betting exchange.

No Bonuses

The other negative is for customers who enjoy earning bonuses or accepting promotional offers through a sportsbook operator.

Wagering through a sports betting exchange does not allow customers to enjoy the benefits or parlay boosts and/or tokens, odds boost offerings, promotional offers, and any sort of reward status for continuing to wager at the same place over a long period of time.

This has been a key focal point for digital sportsbook operators trying to retain customers throughout a season.

Summary of a Sports Betting Exchange

Although a sports betting exchange may sound enticing to more seasoned sports bettors, it is unlikely to grab a hold of the everyday customer while The Wire Act is still operational.

With the push of same game parlays and other prop betting markets, it is doubtful that sportsbook operators will lose any of those customers to sports betting exchanges as well.

It is a good idea in theory to create a peer-to-peer sports betting marketplace, but there is a long way to go before any deep roots are formed in the United States.

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