When people bet online, they use either a bookmaker or a betting exchange. These two work in different ways. Bookmakers offer fixed odds and make money by using a margin in them. Instead of a margin, betting exchanges charge a commission. Understanding what a betting exchange commission is and how it works can help bettors know whether it is better than margins and which option could help them win more money.
What is a Betting Exchange?
A betting exchange is a place where people can bet against each other. One person bets on something to happen and another bets on it not to happen. For example, a bettor can bet that a football team will win, and another bettor in the platform can bet that the same team will not win.
Betting on something not to happen is called a lay bet while regular bets on something to happen are called back bets. The betting exchange only connects the people who are betting. It does not set the odds. It just charges a small fee only when a bet wins. This fee is called betting exchange commission.
How Does Betting Exchange Commission Work?
The betting exchange commission is a small percentage taken from a bettor’s winnings and not the total stake. It is only charged when bettors win a bet. Most exchanges charge between 3% and 5%, depending on the exchange and the bettors’ activity.
Example
A bettor signs up on a betting exchange that charges 5% commission rate on winning bets. They want to bet 100€ on a football team to win at odds of 3.0. If the bet wins, the return will be 300€. Deducting the 100€ original stake and 10€ commission charged by the betting exchange, the net profit will be190€.
If the bet loses, there will be no betting exchange commission charged. This way of working is different from bookmakers. Bookmakers build their profit into the odds they offer. This profit is usually called a margin.
What Is The Difference Between Commission and Margin?
Betting exchange commission and bookmaker margins are very different. Bookmakers hide their profit in the odds, while exchanges take a small fee from the winning bets. Let’s compare them more closely.
Bookmaker Margins
A bookmaker always sets the odds. The odds are made slightly worse than the “real” or “fair” odds would be. This difference is called margin, and it guarantees profit for the bookmaker over time. Even if a bettor wins, they may get less value because of the embedded margin in the odds.
Betting Exchange Commission
The exchange does not set the odds. Bettors in the platform set the odds depending on the demand and activity in the markets. The odds are usually closer to the real value because users are competing. They pay a commission whenever they win and not when they lose. This often gives better value, especially for experienced bettors and bettors who know how to search for it.
Is it Better to Pay Commission or Margin?
Many bettors believe that betting exchange commission is better than bookmaker margins. They believe the odds are better because in an exchange the bettors set the odds themselves and it is of their interest to offer fair odds.
Another point is that the fees are more transparent in betting exchanges. Bettors can see the commission, but they cannot see the bookmaker’s margin easily. They have to know the complicated math in order to understand what the margin is in each odds price.
Another thing is that bettors in betting exchanges only pay when they win and not when they lose. Commission is only charged on winning bets, so the losses of bettors are not included. For those who want more value and win often, commission is usually better.
However there are a few things to think about when it comes to commission vs margin. On very small bets, the difference may not matter much. For casual bettors, a bookmaker may be easier to use, because there are no lay bets and no complicated rules and terminology to know, such as liquidiy, liability etc. Some exchanges charge more commission than others which means that bookmaker margins might be better.
Which One to Use to Win More?
Betting always has risk. Whether bettors use an exchange or a bookmaker, they can always lose money. The important thing is to understand how fees work, so they can make better choices.
A betting exchange commission helps bettors win more money especially in value betting. The odds are usually better because they are set by the bettors and they can be modified as well.
Bettors are not betting against a company trying to make a profit from their loss. They are betting in a platform that does not participate in the betting process and does not sets the odds. It only connects bettors, makes sure the bets are settled correctly and they charge a fee on winning bets for keep providing such services.
A great advantage in betting exchanges, besides the commission, is the lay option feature. Bettors can place a lay bet, which means they have the option to bet on something not to happen, which is not allowed in bookmakers.
While betting exchanges often offer better value, there are some cases where a bettor might make more money with a bookmaker using margins. Bookmakers often offer free bets, cashback, odds boosts, bonus offers or loyalty rewards. These can increase total returns, especially for casual bettors and are not available on most exchanges.
Although bookmakers build profit into the odds, meaning they set margins, they do not take a free from the winnings.
In very low margin events, sometimes this can give better payout than an exchange that charges 5% commission on the bettors’ profit.
Some less popular markets or big underdogs, bookmakers may offer more generous odds than what is available on an exchange, especially on an exchange with very low liquidity. In these cases the bettor may get higher returns from the bookmaker even with a margin.
In Conclusion
A betting exchange commission is a small fee bettors need to pay only when they win. Bookmakers make money using margins hidden in the odds. Chooding between commission and margins depends on how often a bettor bets, how much they bet and how important value is to them.