The UK is home to one of the oldest betting cultures in the world. As far back as the 18th century there was a sophisticated system of sports betting, based around races on Newmarket Heath and games of cricket in London, that involved millions of pounds wagered by wealthy aristocrats.

The modern UK betting sector is less chaotic and more responsible, and although it has been illegal to bet on sports at certain times in UK history, the regulated betting industry is one of the longest-established in Europe, making it an ideal location for betting innovation.

While UK bookmaking brands have become globally famous, perhaps the most significant UK betting innovation of the last quarter century is the rise of betting exchange sites.

Life Before Betting Exchanges

Traditional bookmakers have operated in the same way for more than a hundred years. Bookmakers set the odds for an event, add in a profit margin and then tweak their prices as the bets come in, with the intention of making a profit whatever the outcome.

While this has proven very successful for traditional bookmakers, by the turn of the century, the system had become stale. Sports bettors were finding that there was very little difference between the prices that bookmakers were offering, and bookmakers were able to shut down any betting account that showed a significant profit.

A Betting Revolution

The betting exchange model was a concept that aimed to completely revolutionize betting. The three main differences between the betting exchange and the traditional bookmaker are:

  1. Betting exchanges allow bettors to wager on a selection or against it, effectively taking on the bookmaker role, known as ‘laying’ as opposed to ‘backing’.
  2. There is no need for the exchange operator to set the odds on any market as these are set naturally by the activity of bettors backing and laying.
  3. Betting exchanges make their profits by taking a commission on winning bets. This means they don’t have to worry about profit margins in their markets and it also means that betting exchanges don’t close successful betting accounts.

The Rise of Exchanges

Not surprisingly, the betting exchange model became popular very quickly. Traditional bookmakers were alarmed at the relatively low commission rates that exchanges were able to sustain and at the success and popularity of live betting, which enabled bettors to bet on events in-play.

The betting exchange model has become so popular that no bookmaker can afford to ignore the prices that evolve on the betting exchange markets. The biggest betting exchange, Betfair, has even created its own Starting Price system, to rival the official UK horse racing Starting Price method.

Although bookmakers have embraced some of the flexibility that betting exchanges offer, creating ‘Cash Out’ options and introducing live betting, the bookmaking sector has yet to find a way to beat the betting exchanges, and the better odds they offer.

Monopoly Problems

There is, however, a flaw at the heart of the betting exchange model. It relies on large numbers of bettors backing and laying in its markets. This betting ‘liquidity’ produces markets that are more competitive than traditional bookmakers’ markets, but only if enough bettors get involved.

This has proven to be a problem for other betting exchange operators entering the market after Betfair. A lower profile means fewer customers, which in turn means less competitive markets, which then deters potential customers. While competitors struggle to get off the ground, Betfair has grown exponentially to become one of the biggest betting brands in the world, which is great for Betfair shareholders, but the lack of competition may ultimately result in a poorer product for bettors.


The betting exchange model has completely changed the face of UK betting. While there are issues around the dominance of one betting company, there is no doubt that the exchanges have brought more customer-friendly features and betting innovations to the UK sector.


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