Read anything about bookmakers operating in the UK and it won’t take long before you’ll see something regarding the United Kingdom Gambling Commission. The industry’s regulator is responsible for issuing licences to bookmakers and it is illegal to operate a betting company in the UK without such a licence. That does not, however, mean that you don’t have any other options.
The advent of Exchange betting sites such as Betfair has allowed people to essentially act as their own bookmaker, up to and including the idea of laying bets for other people. This allows punters to basically become a bookmaker without the need to gain a licence from the UKGC, though it obviously comes with risks for the people taking someone up on the offer of laying their bets for them.
A Quick Explanation Of Betting Exchanges
The first place to start is with a quick explanation of what a betting Exchange is and how it works. In short, an Exchange is a site that allows gamblers to bet against other gamblers, with the site acting as the middleman that puts them in touch. Rather than ensuring that an edge is built into every bet in order to make money, as a traditional bookmaker does, Exchange sites take a commission percentage of the winning bet (usually between 2-5%).
The important thing to realise about a betting Exchange is that it can be a complicated place to do business if you haven’t used one before. Whilst they have significant benefits over a standard sportsbook, with the fact that you’ll get closer to ‘true’ odds being one of them, it can also be a way to lose large sums of money if you don’t know what you’re doing. Even the terminology is different to normal bookmakers.
The two types of bets you’ll find on an Exchange are Back bets and Lay bets. Back bets are those in which the bettor believes that the thing they are betting on will happen. Say you’ve picked a horse in a race with twelve horses, a Back bet will mean that you think that the horse that you’re betting on will win the race at the expense of the other eleven horses that are taking part in the event. This is the same idea as betting on something with a conventional fixed-odds bookie, except here you need to find someone else offering you the bet on the exchange.
A Lay bet, meanwhile, is best explained by saying that it believes the bet will not win. To use that same example of the race with twelve horses, placing a Lay bet on one of them means that the bettor believes any of the other eleven horses will win instead of that one. If the horse that the punter has Layed wins then they lose their bet and the Backer wins, whilst if it loses the Backer loses and the Layer wins. Laying a bet is effectively what fixed-odds bookies do to you, except they build in margins and generally that means poorer odds.
If you place a Back bet and the horse wins then you’ll obviously be paid your winnings. If your Lay the horse, though, then you will be liable to payout winnings if you were wrong and the horse wins the race. The sum that you’ll have to pay is known as your liability and you’ll have to have enough money in your betting account to be able to Lay any given bet on the Exchange in the first place.
There are two other key factors to back a back you must find someone laying that market. You can only stake up to an amount that the person laying the bet is willing to accept, this is known as a matching bet. There will be multiple people laying the same market at different odds, the best odds won’t necessarily offer the market for the stakes you want so you may need to back a bet with someone laying at lower odds but will accept a higher stake.
Likewise when laying a bet you need to find someone to match it (i.e. accept the bet you’ve laid). If you offer odds lower than the market average you may struggle to find a backer, although offering more liability (i.e. you are willing to pay out more if you lose) makes those bets more attractive. The size of the market (total amount laid) is known as the liquidity and more popular markets (e.g. match result in a Premier League game) will have higher liquidity than less popular markets (e.g. next manager of a specific club).
Acting As A Bookmaker
Whilst you’re not allowed to operate as a traditional bookmaker in the United Kingdom without having a licence from the UKGC, what you can do if you want to is use an Exchange site to essentially act as a bookmaker. What you’ll do is go on to your site of choice and Lay the bets that you wish to, making a profit if your selection is correct and losing money on the occasions that it’s not.
Those that stray away from the given market value of a bet may struggle to find people willing to Back their Lay bets. You can make your bet more appealing than the main market, of course, but that would drastically increase your liability. Laying a bet with a £20 liability would see you make £10 profit if any horse other than the one you Layed wins, but it will see you lose £20 if the horse you Layed ends up winning.
Lay bets are obviously only valid if someone choose to Back them. What you may find is that your bet gets partially matched, resulting in your liability lessening but your potential profit also dropping down. There is a cottage industry of people who Lay bets on the Exchange and thereby make themselves a bookmaker without needing to go through the rigmarole of being licensed, but risking having bets only partially matched.
Exchanges are used by many typical punters but they are also the favoured platform for professional gamblers. These are the people that take great care in setting their odds to, in effect, create their own margins that guarantee profits (like a typical bookmaker would). This is no bad thing though as it makes the very point that you can act as your own bookie and some people even make a living from it – although it takes a huge amount of time and investment to do this over a long period.
Why People Do It
Bookmakers are, essentially, Laying bets that punters wish to place. By doing it on an Exchange you’re not doing all that much different to a bookie, up to and including the fact that you’ll have to think about the 2% to 5% profit that you’ll lose from your winnings if your selected wager ends up winning. That is how Exchange sites make their money, so you’ll need to make sure that you can balance your book successfully.
The benefit is that you’re able to make money from a wealth of possible outcomes, as opposed to the one outcome that will see you win if you place your bet with a traditional bookmaker. Whilst this is especially helpful in the world of horse racing, where the Laying and Backing is clear, it is just as good in football betting, tennis betting and more. If there’s a market then you can try to Lay an outcome.
Aside from anything else, this is something that people can do in order to get an experience of what it’s like to become a bookmaker without actually having to set up a business, gain a licence and so on. You’re essentially doing the same thing as a bookmaker, putting real capital at risk to do so, but without the major outlay that would require. Instead you can use that money to Lay as many bets as you want.