The History of Betting Exchanges

Sports betting has been taking place since before the invention of electricity and can even be traced back to the Greek and Roman empires. A lot has changed over those 2,000+ years but sports betting has withstood the test of time. It is not only an exciting way to emotionally and monetarily invest in games, but has also developed into a multi-billion dollar industry, with sportsbooks generating huge profits.

Sportsbooks rake in the dough by being the oddsmakers and charging fees or a “vig” as they call it, to place a bet. The best way to avoid paying to play is to bet peer-to-peer, resulting in the emergence of sports betting exchanges. Prophet Exchange will be the first U.S.-based exchange stateside but before bettors dive into this new market we should take a glance at where it all began. Below is a quick history of betting exchanges and their origins.

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When and Where Betting Exchanges Originated

We have to travel across the pond and over two decades into the past to get to the beginning. As much of the world celebrated our survival of Y2K, sports betting in the United Kingdom was about to change forever as the first official sports betting exchanges were launched. Initially, there were many different small exchanges operating but Flutter took control of the market and was the most successful early on. This was short-lived as Betfair announced its arrival with a “Death to the Bookmaker” campaign garnering themselves instant recognition and popularity.

As other smaller sites struggled to stay in business, Flutter and Betfair battled for market supremacy with neither gaining an edge. The two companies eventually decided a merger would benefit both sides, with Betfair taking over control of Flutter in early 2002, becoming the dominant force in the sports betting exchange market. Betfair has maintained this title but other companies have come along over the last two decades and sustained success as the exchange model becomes more familiar and grows in popularity among bettors.

For more on the differences between sportsbooks and betting exchanges, you can read our in-depth breakdown

Why They Were Created

Traditionally, legally betting on sports has required a person to wager on non-negotiable odds set by sportsbooks. In this world and as previously mentioned, the sportsbooks make their money by charging fees or a “vig” on bets which has become the accepted norm among bettors (and is unavoidable). Betfair, and soon in the U.S. thanks to Prophet Exchange, wanted to give the oddsmaking and betting back to the bettor while also eliminating the middle man. By offering peer-to-peer exchanges, bettors control the odds and avoid paying these fees to the sportsbooks, instead, giving just a small commission on winning wagers to the hosting exchange. Essentially, the betting exchange model was created to give control back to the bettor.

What Does the Future Hold?

The future of betting exchanges, especially in the United States, is bright. As sports betting becomes legal across the country, and customers gain a better knowledge of how it all works, the advantages of betting exchanges like avoiding fees and setting your own odds are becoming a focal point for bettors of all levels. Exchanges are still relatively young and new to the scene in comparison to traditional sports betting. However, as the focus turns from simply being able to bet to where and how we should bet, exchanges should continue to grow in popularity.