Sports betting has come a long way from the days when you had to place a wager with your local bookie. Today, there are two major formats that allow people to bet on sports – traditional fixed odds betting and exchange betting. While both offer ways to potentially profit off correctly predicting the outcomes of sports matches, they operate using different mechanisms.
Traditional Fixed Odds Betting
Fixed odds betting is the classic system where a bookmaker sets the odds on a given event. For example, the odds for Team A beating Team B might be set at 2.0 by the bookmaker. This means a $100 bet would return $200 (the original $100 stake plus $100 in winnings).
The bookmaker like Betano Germany builds in a margin, ensuring a profit regardless of the event outcome. This margin is known as overround or vigorish. It guarantees the bookmaker makes money from the losing bets to pay off the winning bets and take their fee.
So in fixed odds betting, bettors are playing against the bookmaker. The bookmaker is taking positions against its customers. Customers can only bet as much as the bookmaker allows.
Exchange Betting
Exchange betting works differently than fixed odds betting. There is no bookmaker setting odds and taking positions. Instead, an exchange is an open marketplace where bettors wager against each other. The exchange simply facilitates the trades, matching backers (those betting for an outcome) with layers (those betting against an outcome). It collects a small commission on winning bets.
On an exchange, odds are fluid and change based on what bettors are willing to back or lay at different prices, just like a stock exchange. So if lots of people think Team A will beat Team B, they will likely back Team A at short odds like 1.2, moving the price. If few bettors agree with them, the odds will lengthen as there is unfilled demand.
The exchange model offers better odds and more betting options. With no bookmaker margin, backers get better odds, increasing profit potential. Exchange markets have maximum bet limits in the millions, dwarfing traditional bookies. There is also no risk of having a bet refused or stake restricted.
Key Differences
There are several key differences between traditional fixed odds and exchange betting:
| Aspect | Fixed Odds Betting | Exchange Betting |
| Odds Setting | By a bookmaker | By dynamic market forces |
| Margin/Overround | Yes (bookmaker’s advantage) | No (just exchange commission) |
| Bet Against | The bookmaker | Other bettors |
| Odds Movement | Static | Constantly changing |
| Betting Limits | Restricted by bookmaker | Very high (millions) |
| In-Play Betting | Offered | Extensive options |
Which is Better?
So which betting system is better – traditional or exchange? There is no definitive answer; it depends on your priorities as a bettor.
Arguably exchanges offer more value. The overround is vastly reduced so your bets have higher expected value. The depth of market enables trading for profit as odds shift. In-play betting is dynamically priced by the second too.
However recreational bettors may still prefer fixed odds for sheer simplicity. Checking odds and placing a casual bet remains easier with traditional bookmakers. Beginners benefit from not having to fully understand exchange intricacies too.
Many seasoned bettors use a combination of both exchange and fixed odds books. They exploit arbitrage opportunities, betting proportionally more where they estimate better value.
Rise of Betting Exchanges
Betting exchanges arrived in 2000 with Betfair launching its pioneering peer-to-peer betting platform. Traditional bookmakers initially dismissed the exchange model, believing it would fail.
However, revolutionary technology offering bettors better odds, bigger limits and in-play trading quickly gained traction. Rival firms realized the merits of exchange betting and launched competing platforms like Betdaq, Matchbook and Smarkets.
Within 5 years exchanges had captured over 20% market share in the UK. That figure now exceeds 40% as exchange betting continues to increase in popularity globally.
In response, many top European sportsbooks have now integrated full exchange functionality. BetVictor, Betclic, Bwin, Unibet and William Hill all offer exchange betting alongside fixed odds.
So while traditional bookmaking is not going away, exchange betting has proved it is here to stay. As the technology matures, we can expect more innovation that closes the gap between the two formats.