SportX Explains: Sportsbooks vs Sports Betting Exchanges

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So, you’re interested in learning about the difference between a sportsbook and a sports betting exchange?

Maybe you’ve heard of professional sports bettors that make $50-$60 million a year and you want to learn how.

Maybe you’re tired of constantly refilling your Bet365 account, but never withdrawing any winnings.

Or maybe you won so much on Bet365… that you got banned.

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Regardless of what brought you here, learning about the differences between a sportsbook and a betting exchange is the first step to becoming a smarter, more profitable sports bettor.

The Decision: Sportsbook or Sports Betting Exchange?

If you want to bet on sports, you have two options: a sportsbook or a sports betting exchange. Every sports betting site in the world falls into one of these two categories.

It’s kind of like Apple vs Android or putting ketchup on your eggs: there’s no gray area between the two options, so pick a side. No pressure.

This guide will explain the difference between sportsbooks and sports betting exchanges so you can pick which option is best for you.

First, we’ll give a short explanation of what makes a sportsbook different from a betting exchange. Then we analyze the six factors you should think about when considering what type of sports betting site to use.

Ready? Let’s go.

What’s a sportsbook?

Sportsbooks are an ancient form of betting that date back more than 400 years. Similar to a casino, sportsbooks represent “the house” and every bet you place on a sportsbook is a bet against the house.

This creates a direct conflict of interest between sportsbooks, like Bet365, and their bettors. When you win a bet, those winnings come out of Bet365’s pocket. On the other hand, when you lose, your money goes straight to Bet365’s bottom line.

Aside from Bet365, popular sportsbooks who operate as the house include William Hill, Bodog, and 888sports.

What’s a sports betting exchange?

Betting exchanges represent a more modern approach to betting. Betting exchanges, like Betfair, are similar to stock exchanges: they match buyers with sellers and take a commission on every trade.

For instance, say the Toronto Raptors are playing the Golden State Warriors tonight. Trader A submits an order on Betfair for the Raptors to win. Trader B submits an order for Golden State to win.

Betfair matches the two bettors, putting them in direct competition against each other. If the Raptors win, Trader B’s bet will be sent to Trader A’s account, with Betfair taking a small percentage. This means that on a betting exchange, users bet peer-to-peer instead of against the house.

Aside from Betfair, other examples of betting exchanges include SportX, Matchbook, and Betdaq.

That’s cool and all but… which one should I use?

So there you have it, a quick explanation of the two types of sports betting sites you can pick from. Now that you know the basic differences, let’s dive into the six factors that matter to YOU, the sports bettor: simplicity, control, liquidity, limitations, odds, and profit.

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Simplicity

Sportsbooks – Simple

If you want to bet on the Toronto Raptors to beat the Golden State Warriors tonight, all you have to do is login to Bet365, click on a single set of odds provided for the Raptors Money Line, and enter the amount you want to bet.

Betting Exchanges – Complex (at first)

After you login, and navigate to the Raptors/Warriors market, the first thing you’ll see is an order book that shows all bets submitted by other traders. The order book automatically sorts all odds and gives you the best odds available.

Observing how the order book changes leading up to the event allows you to determine how other traders are betting on this market.

Control

Sportsbooks – No Control

When using a sportsbook, bettors have a single choice: they can bet on the odds offered by the house (ie. Bet365) or choose not to bet. All odds are set by the sportsbook, and users cannot change them.

Betting Exchanges – 100% Control

With betting exchanges, traders can accept the odds available on a particular game, but can also set their own odds if they don’t like what they see. This allows users of exchanges to act as the “house” if they choose.

Naturally, with more freedom comes more responsibility. Betting exchanges seem intimidating at first, but users have greater control over their betting experience.

Market Making – Because you can set your own odds, betting exchanges can be traded in a similar fashion to stock exchanges. Users are able to place bets on both outcomes of an event and guarantee a profit.

For example, David can submit a $100 bet at 2.104 odds on both the Over and the Under for a Toronto Raptors game. Regardless of the final score (assuming other traders have filled both of these offers), David will lose $100 on one side of the bet, and return $210.40 on the other side of the bet.

By market making, David locked-in a profit of $10.40, representing a 5.20% return before fees.

Liquidity

Sportsbooks – Liquid

Since the sportsbook provides all liquidity, your bet will always be filled instantly. However, your bet will likely have worse odds (explained below) and there is a limit on the maximum size of your bet.

Betting Exchanges – Depends on which side of the bet you take

If you are accepting an order on the market, your bet is filled instantly, just like a sportsbook.

If you are offering an order to the market you have to wait for your order to be filled. This includes a risk that your order will not be filled at all (if no traders on the market want to bet against you).

User Limits & Bans

Sportsbooks – Winners banned

Sportsbooks systematically ban winning bettors from using their platform. Since sportsbooks take the opposite side of every bet with bettors, they only make money when you lose bets.

Imagine you’re the CEO of Bet365. Profit goes up when bettors on your site lose, and profit goes down when users win.

Sportsbooks are incentivized to maximize losing bets on their site.

So what do you do when you have a bettor that takes money from you by consistently winning? You ban them. That’s what you do.

Sports Betting Exchanges – Winners welcome

Betting exchanges never ban winning traders from using their platform. Betting exchanges match traders against each other and take a small fee, similar to how Uber matches riders with drivers. Therefore exchanges do not care which trader wins or loses, they are just incentivized to maximize dollars bet.

Betting exchanges have no conflict of interest with winning traders, so winners are welcome.

Odds

Sportsbooks – No transparency

Sportsbooks don’t share information regarding how odds are set, how maximum bet sizes are calculated, and how other bettors are betting. They often manipulate odds not to reflect the true price of the sporting event, but to maximize profits for themselves.

If a sportsbook feels they are at risk of losing lots of money on a specific outcome, they may offer worse odds in order to limit their risk. Just like banning winners, this is a result of the conflict of interest between sportsbooks and bettors.

Betting Exchanges – 100% transparency

All odds on betting exchanges are set by traders. With no manipulation involved, the odds offered on a betting exchange are a true reflection of market sentiment towards an outcome.This creates a more efficient market with better odds than sportsbooks.

Profit

Sportsbooks – High profit… for the house

In addition to manipulating odds to reduce risk, sportsbooks also incorporate 4-8% fees into their odds. This reduces the number of profit opportunities for winning bettors.

A 4-8% fee means that a bettor guessing the result of a coin toss needs to be right 54-58% of the time just to break even. For this reason, only 10% of bettors are profitable in the long run using sportsbooks.

Sports Betting Exchanges – High profit…. for users

Betting exchanges typically charge much lower fees and offer higher odds than sportsbooks. As well, sports betting exchanges give you the opportunity to trade your own positions as a market maker.

These factors give serious sports bettors a greater opportunity to profit when using betting exchanges.

If users generate higher profit on betting exchanges… why do sportsbooks still exist?

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Both models appeal to different kinds of users.

The simplicity of sportsbooks attract bettors who are looking for entertainment and are willing to pay high fees for that. Remember “the house always wins” but as long as you gamble responsibly there is nothing wrong with having fun and betting on a sportsbook.

The increased chance of long term profitability attracts serious bettors to betting exchanges. While the peer-to-peer format of exchanges means they cannot offer fun but high fee and risky bets like parlays, they do offer the best odds and therefore best chance at making money long term.

In summary, if you bet for the entertainment factor and don’t care about high fees, then an easy to use sportsbook with lots of fun betting options like Bet365 is the right choice for you.

On the other hand, if you are looking for a site that gives you the best chance to make money long term, then a betting exchange like SportX is perfect for you.

About SportX

SportX is the world’s best crypto sports betting exchange, where users bet peer-to-peer against other bettors. Built on Ethereum and powered by Dai, SportX is a decentralized sports betting exchange that always places its users first by giving them ownership.

To try SportX, head to our landing page and click “Get Started.”

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