Betting exchanges have now been around for more than two decades, the first being launched around the turn of the new millennium. Whilst they have become increasingly mainstream and are used by millions of punters around the world, for many they remain something of a mystery. Lots of people prefer to stick with what they know rather than discover something new but if you are yet to give a betting exchange a go, there’s a chance you could be missing out.
People may prefer online bookmakers for a whole host of reasons. But if you are concerned about the commission exchanges charge, or how that works, or simply want to understand it better, this article will help. We’ll look at how the commission is charged and how it varies between different sites and sometimes even between different markets. We will also look at how this affects the odds and whether exchanges are even worth bothering with when the commission is factored in.
Commission at Betting Exchanges
We look at what exchanges are in more general terms elsewhere on the site. However, the key point to note here is that they operate an entirely different model to that employed by bookmakers. Rather than setting their own odds and taking bets from punters, they act as the middleman to bring bettors with opposing views together.
If you think a certain horse will win a race, and I think that same horse will not claim victory, an exchange will a) facilitate us finding each other and b) hold both of our funds so we can both be confident of getting paid should we be proved right. Whilst a bookie sustain their businesses by offering odds that are lower than what is technically “fair” (for example, offering odds of 4/5 when evens reflects that bet’s 50% chance of winning), an exchange simply charges a small fee for its services.
This fee takes the shape of a commission that is charged on bets. If they wanted they could have charged customers a small monthly fee, or imposed a charge to deposit funds, or some other model. However, all exchanges have opted to charge a bet-based commission and whilst things have changed over the years, and there have been, and still are, numerous different exchanges, this has almost always only been charged on winning bets.
How Does Commission Work?
The simplest thing to note is that you will typically only pay commission on winning bets. If you place a bet at 2.00 (this is evens, or 1/1, but as exchanges use decimal odds rather than fractional, we will use those from now on in our examples) for £10 and it loses, you do not have to even think about commission. In fact, if you place a bet of £400 at 500 (499/1), or a bet of £25,000 at 1.40 (2/5), or any bet at all, commission will not come into the equation unless your wager wins.
We will look more closely at the rates of commission betting exchanges charge shortly. However 5% is a good benchmark so let us consider some examples based on that. Note that commission is charged whether you back a bet (a “normal” bet like you would place with any bookmaker) or lay one (essentially taking someone else’s bet on a selection, making you the bookie). In either scenario, it is not based on the stake, but on the winnings (your total returns minus your stake or, in the case of a lay bet, the liability). As such, it does not matter whether your bet was at tiny odds or huge ones, the commission is solely based on your returns, what you cleared.
- Winnings on bet £1 = commission of 5p
- £10 = 50p
- £50 = £2.50
- £100 = £5
- £800 = £40
- £2,000 = £100
- £25,000 = £1,250
The idea of paying £1,250 in commission might seem crazy but of course if you are lucky enough to have landed winnings of £25,000, that will be small fry. Looking at a more typical win for most punters, you can see that you would lose just 50p back to the exchange should you win £10.
How Is Commission Paid?
Given that commission is only paid on successful wagers, the simplest and most logical way for the exchanges to collect it is to deduct it from winnings before they are paid. For example, if you placed a bet of £50 at 3.0 (2/1) your returns would be £150 before commission. That leaves winnings of £100.
Commission of 5% would be £5 and so the exchange would return £145 in total to your account. Because it is only taken from winnings, there would never be a case where you need to deposit funds to pay commission, or where the commission could mean your account accrued a negative balance.
How Does Commission Affect the Odds?
It is generally accepted that exchanges offer better odds than standard fixed odds betting sites. There is a lot of variation though and this is not always the case. It is a rather complex issue that we look at more fully in our main article comparing exchanges and bookmakers.
However, what is not questionable is that paying commission reduces the effective odds. Evens in fractional odds is the same as 2.0 in decimal ones but evens at a bookmaker is essentially a bigger price than 2.0 at an exchange due to commission. In other words, where the odds are the same, generally speaking (subject to any available offers, stake limits, and so on) you would be better placing your bet with the fixed odds betting site.
That is simple enough, but knowing at what point the exchange becomes more lucrative, even allowing for the commission, is trickier. The table below shows how commission (based on 5% and always a £10 stake) affects winnings (excluding the initial stake).
| Odds | Bookie Winnings | Exchange Winnings (minus commission) | Effective Odds at Exchange* |
|---|---|---|---|
| 1.30 | £3 | £2.85 | 1.29 |
| 1.80 | £8 | £7.60 | 1.76 |
| 2.50 | £15 | £14.25 | 2.43 |
| 4.00 | £30 | £28.50 | 3.85 |
| 8.00 | £70 | £66.50 | 7.66 |
| 20.00 | £190 | £180.50 | 19.05 |
| 50.00 | £490 | £465.50 | 47.55 |
* Note that odds are approximate and rounded where necessary. In addition, these are theoretical and not all exchanges will offer such prices.
Looking at things from the other angle, below we can see the odds you would need at an exchange to better similar prices at a commission-free bookmaker. Once again, this assumes a 5% rate of commission.
- 1.43 at the exchange is better than 1.40 at a fixed odds bookmaker
- 2.06 is better than 2.00
- 3.11 is better than 3.00
- 6.27 is better than 6.00
- 10.48 is better than 10.00
- 26.27 is better than 25.00
As you can see, the commission has relatively little impact and so you do not need the exchange prices to be much better for them to overcome the 5% that you might have to pay should your bet win. Even so, when comparing odds between “normal” betting sites and exchanges, it is crucial that you factor in the commission and look at the net returns, rather than just the initial odds.
What Commission Do Betting Exchanges Charge?
As stated, 5% is a fairly standard rate, certainly at the major name in the exchange world. However, the exact rate varies from site to site, over time, by market and according to other factors too. Some sites may allow you to accrue a discount on your commission based on wagering levels, others may have different packages that offer lower commission but perhaps fewer freebies elsewhere. Equally you might see promotions on certain specific markets or events where a reduced level of commission is offered.
However, there are lots of factors to consider when deciding which exchange to make your main pick and the commission level is unlikely to be the most important. For most gamblers, the usability of the site and app, the range of sports, matches and markets, and perhaps most importantly of all, the liquidity (money within the exchange on the other side of bets that makes placing your own wagers possible), are all probably more important.
Even so, all things being equal, just as making a bet with no commission is better than paying 5%, paying 2% is also preferable to the higher margin. The table below is similar to the one above but shows the winnings based on both 5% and 2% commission from a successful £10 bet.
| Odds | Bookie Winnings | Exchange Winnings (minus 5% commission) | Exchange Winnings (minus 2% commission) |
|---|---|---|---|
| 1.30 | £3 | £2.85 | £2.94 |
| 1.80 | £8 | £7.60 | £7.76 |
| 2.50 | £15 | £14.25 | £14.55 |
| 4.00 | £30 | £28.50 | £29.10 |
| 8.00 | £70 | £66.50 | £67.90 |
| 20.00 | £190 | £180.50 | £184.30 |
| 50.00 | £490 | £465.50 | £475.30 |
You might look at the info above and think it doesn’t make a huge difference. For occasional punters who bet with relatively small stakes it probably won’t be the difference between a retirement in Barbados and one in Burnley. However, if you bet regularly, especially with large amounts of cash, things will soon add up.
What’s more, even if the amounts are small, why bother putting money in the pockets of the bookie or exchange when you could have it yourself? Winning at betting is hard and for most, impossible over a long period of time. However, what every single punter can do, if they can be bothered to check the odds and commission, is make sure that when their wagers do come in, they win the most money possible.