Learn how a betting exchange works, and how we use them in matched betting.
A betting exchange is a marketplace where people bet against each other, not against the house. Instead of a bookmaker setting the odds and taking the risk, the exchange simply matches customers who want to BACK an outcome with customers who want to LAY (bet against) that same outcome, and charges a small commission on the net winnings.
This is different from a traditional bookmaker. With a bookmaker you can only place back bets. On an exchange you can be the backer or the layer. That ability to lay outcomes is what makes matched betting work.
On an exchange every selection has users offering prices to BACK and users offering prices to LAY. When a back price and a lay price meet with enough money available on both sides, the bet is matched. If there isn’t enough money at your chosen price, your bet (or part of it) stays ‘unmatched’ until someone takes it, or you change the price.
When you lay a selection, you might have to pay out if that selection wins. The exchange therefore asks you to have enough funds to cover the worst case, which is your 'liability'. It's calculated from the odds and your lay stake.
Exchanges charge commission on your net winnings in a market. This is typically 2% but with Smarkets you will pay 0% for your first 60 days. There’s no commission on markets where you end up losing overall.
Matched betting relies on covering both sides of the same outcome by backing with a bookmaker and laying on an exchange. The lay bet removes the risk of the bookmaker bet, letting you convert free bets and promotions into reliable profit.
