The Rise of Betting Exchanges

The **Betting Exchange** revolutionized the sports gambling industry in the early 2000s by replacing the traditional "Punter vs. House" model with a **"Peer-to-Peer"** trading ecosystem. Pioneered by **Betfair**, this model allowed users to **"Lay"** (bet against) outcomes, effectively turning every user into a potential bookmaker. **Key Innovations:** * **Price Discovery:** Driven by supply and demand rather than risk-averse handicappers, exchanges provide the most accurate "true odds" in the market, often operating near a **100% book** (zero margin) before commission. * **The Trader Economy:** The availability of APIs enabled high-frequency algorithmic trading, allowing users to profit from market volatility (scalping) rather than match outcomes. * **Integrity Paradox:** While initially feared because they allowed users to profit from losing (incentivizing match-fixing), exchanges became vital integrity partners by providing transparent, identity-linked audit trails that traditional cash-based bookmakers lacked. Despite their efficiency, exchanges face challenges in fractured regulatory markets (like the US), as they require massive, centralized **liquidity pools** to function effectively.