Historically, sports betting has involved a customer placing a bet with a bookmaker that a specific outcome will occur.
The customer is betting that something WILL happen – Manchester United to beat Liverpool or horse number 10 to win the Epsom Derby, for example.
This is called ‘backing’ a selection.
A bookmaker offers odds on that outcome occurring and the customer places a bet on that outcome with the bookmaker taking (or ‘laying’) their bet.
In simple terms ‘backing’ is making a bet that something will occur and ‘laying’ is making a bet that something will NOT occur.
For any bet there has to be two willing parties involved – one looking to ‘back’ the bet and the other one looking to ‘lay’ the bet.
Historically, the party laying the bet has been the bookmaker.
In recent years, however, with the huge growth of online sports betting, the traditional bookmakers have been joined online by betting exchanges.
Betting exchanges offer customers the opportunity to back specific outcomes, just like a traditional bookmaker does, but also allows the customer to act as the bookmaker themselves, and ‘lay’ the outcome of an event.
For example, a customer may think that a football team is unlikely to win and so they would like to ‘lay’ them.
If the team does not win, such as the other team wins or there is a draw, that customer makes a profit.
If the team does win, then the customer loses and pays out money.
The customer ‘laying’ the bet is acting like a traditional bookmaker and betting against a specific outcome happening.
The most popular betting exchange that allows customers to both back and lay is Betfair.
Founded in 1999, Betfair has grown to be the world’s largest online betting exchange and offers betting markets on a vast number of events from around the world, with some individual events having millions of pounds or dollars traded on them.
All wagers on betting exchanges are placed between customers – customers who think a specific outcome is likely can ‘back’ it while customers who think it is not likely can ‘lay’ it, essentially acting as the bookmaker themselves.
Exchanges have grown in popularity as they offer better value compared to bookmakers, with the prices on most events being larger than you would be with a traditional bookmaker.
To cover the cost of facilitating the process, exchanges take a small commission on all winning bets.