The exchanges make money by taking a commission instead of building vig into the odds.
Another huge difference between a betting exchange and a sportsbook is that with the exchanges it’s possible to lay bet, which means betting on a choice to lose rather than win.
This may not make much of a difference in popular American team sports where there’s one winner and one loser, but in one-way market bets like props, or say horse racing and golf, lay betting is especially popular because you can bet that an outcome won’t happen.
Say you really do not think Jon Rahm will win The Masters. He’s a +700 favorite to win the event, according to the listed odds on DraftKings. You have a choice to bet on Jon Rahm or any other individual player, but you do not have the odds to choose “anyone but Jon Rahm,” also known as “the field” or simply a “no” for a “will Jon Rahm win The Masters?” wager.
This also applies to futures in team sports. For example, entering the playoffs the Packers were +380 to win the Super Bowl last season, but there is no option for the Packers NOT to win the Super Bowl.
With betting exchanges, every bet has to have an equal and opposite bet taken by another user. So in order for a “yes” bet on a future to have action, a user has to take the other side and back the field.
Betting Exchanges in the United States:
The Federal Wire Act of 1961 makes things complicated in the United States because it banned the transmission of gambling information across state lines. This makes it hard for the exchanges because they need to be different and separate in each state, so funding enough money for payouts can be a problem. Most need to have customers to fund a lot of the market.
Even though there isn’t currently a big market of betting exchanges for use in the United States right now, they still can be useful to a bettor.
Just visiting sites like Prophet Exchange allows bettors to get an even better idea of the market and sharp value based on what other bettors are willing to buy and sell on the exchange.
For a more detailed explanation, here’s a video breaking it down: