Betting Exchanges are a recent innovation in horse wagering, having first been offered to the public in 2000, although only in the UK at that time. The theory behind betting exchanges is remarkably simple: consider the large pool of motivated bettors much like a group of investors at a stock exchange. The bettors, through an expressly designed online interface, place their bets not only FOR a horse to win, but with the additional option of betting for that horse NOT to win. As long as there is another bettor available to take a bet, then the bet can be placed.
Betting exchanges have appeal on a number of levels. First of all, no fees are charged simply for making a wager. The betting exchange takes a commission only if the bet is won, and that commission is limited to a maximum of 5 percent. As well, the entire system used by bookmakers to guarantee themselves a profit is discarded, since the bookmaker himself has been cut out of the picture.
Naturally, professional bookmakers and their representatives in the UK are less than pleased by the rise of betting exchanges, and they have risen spectacularly over the past 6+ years. These days, Betfair, the largest British betting exchange, processes up to 2 million wagers each day. To put this into perspective while retaining the stock market analogy, this trading volume is roughly 6 times that of the London Stock Exchange.
Betfair and other betting exchanges have achieved a global reach, offering bets on everything from sporting events to the results of the 2008 US presidential elections. As far as horse wagering is concerned, certain types of exotic bets are not feasible through betting exchanges since for every bet made there needs to be a counter bet. Even so, horse wagering makes up a substantial portion of the daily volume processed by betting exchanges.
Recently, Betfair and Yahoo have joined forces to offer casual gamblers access to a simplified form of the Betfair betting exchange from a dedicated Yahoo portal. When US laws permit it, betting exchanges like Betfair, having proved their honesty and reliability on the world stage, will be poised to enter the US betting and wagering world with a bang!