The gambling regulation arm of the U.K. government released an internal paper recommending special legislation for appropriate licensing of sports exchanges like Betfair and Tradesports. While this doesn't yet change the fact that in the U.S. exchanges are treated no differently than any other betting activities, it's great to see a major nation realizing that exchanges are a different entity from the traditional bookmaking operation and beginning to react accordingly:

As to the proposals contained in the paper, it is considered that betting exchanges merit a specific licence for their activities. This licence will permit them to establish betting markets and to hold monies on behalf of their users.

Link

If you ever bet on sports and do not know what a betting exchange is, you owe it to yourself to familiarize yourself with them now. Betting exchanges are quietly beginning to revolutionize the way in which sports and other similar bets are handled. Both sites above have explanations of what the exchanges are and how they work.

Key points:

• The "risk $11 to win $10" model of bookies is a handicap that even professional sports bettors have a very, very tough time beating. In sports exchanges, you pay a commission on your trades to the house, which ends up being much less. At Tradesports, for instance, the commission ends up being 1.6% on even money bets - 6 times less than bookies.
  
• The contracts are tradeable - say you buy a bet contract at even money, but the star player of the opponent's side gets injured before the game. The odds go up to 2:1 for the opponent, but you think their chances of still pulling off a win are higher than that. You can sell off that bet you made for a risk-free profit.
  
• Not only are the bet contracts tradeable, they continue to trade until the event is over. So the odds (bids and asks) constantly change while games are in progress, meaning you can make and offer bets at any time during the game. Some games have more than 50% of their volume happen while the game is in progress.
  
• You are offering or taking bets against other bettors, at prices (odds) set like they are on a stock exchange. I don't see this in itself as an inherent advantage; however, it does mean that you can take the "bookie" side of longshot bets and sell them to people who want to bet those longshots. This is good because longshot bets are often the most profitable a bookie has - they incur higher variance and risk, but at a higher reward. The odds on these exchanges are generally very close to vegas bookie odds because of arbitrage seekers. So that's good for you as a seller of those long bets.

Those are the four main areas that make betting exchanges vastly superior to bookies. About the only disadvantage of exchanges compared to bookies is that it is difficult to place single large ($1,000+) bets on an exchange - you would have to spread it out as new bids come in. But as exchanges grow, their liquidity is continuing to improve.

Once exchanges are made legal in the U.S., the bookie as we know him today will be obsolete.

Is there any more info on moves by America to allow free trade with betting exchanges?

P.S.
If you pop on over to the wikipedia page on betting exchanges http://en.wikipedia.org/wiki/Bet_exchange
you insites would be appreciated.

Posted by: Betting Exchange on March 29, 2005 05:26 PM

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Posted by: Mark Adams on September 19, 2005 08:49 PM