Sports Betting Exchanges USA

Betting exchanges differ from traditional sportsbooks by allowing customers to bet with one another rather than against the house. They offer several distinct advantages over conventional sportsbooks, including lower commissions.

In short, betting exchanges match bettors who want to take the opposite sides of wagers. If one bettor wants to back Team A to win, the exchange matches their bet with someone betting on Team A to lose.

Sports betting exchanges are relatively unknown in the US, but they may become an increasingly viable concept as the US betting industry matures. On this page, BettingUSA will explain how betting exchanges work and discuss the future of the regulated US betting exchange market.

Legal Betting Exchange Sites

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Online Betting Exchanges

The United States is a hotbed for innovation in sports wagering, but it still lags other regulated markets when it comes to exchange betting. Unique challenges presented by the Federal Wire Act and a population accustomed to traditional sports betting have stymied past attempts to establish the exchange betting model in the United States.

However, multiple startups have emerged to offer forms of exchange betting USA fans can easily grasp without discarding everything they know about sports betting.

In addition, several fantasy sports operators have launched DFS exchanges that involve trading shares in athletes based on their potential fantasy point totals. Fantasy sports exchanges offer the advantage of widespread legality, including states that haven’t yet legalized sports betting, but none have managed to achieve significant market share.

Read on for overviews of the nation’s highest-profile betting exchanges.

ProphetX Exchange

• Available in: AK, AZ, AR, CA, CT, DE, FL, GA, HI, IL, IN, IA, KS, ME, MD, MA, MN, MS, MO, NE, NH, NJ, NM, NY, NC, ND, OK, OR, PA, RI, SC, SD, TX, UT, VT, VA, WV, WI, and WY
• Expert Review: ProphetX Review

ProphetX is a sports predictions exchange open in most US states. It was the first exchange to solve the problem of limited availability by leveraging US sweepstakes laws to offer its markets (nearly) nationwide. As a result, ProphetX offers more liquidity than other sports exchanges that only operate in a few states.

ProphetX’s primary selling points include:

• Less commission than standard sportsbooks
• Fans can take “yes” and “no” positions on propositions
• ProphetX does not limit winners
• Sweepstakes sportsbooks like ProphetX are available in most states

Additionally, the ProphetX interface resembles a regular online sportsbook, so fans will find it easy to transition from traditional betting to exchange wagering. Users can browse the odds and make picks like at any other online sportsbook until they’re ready to dive in deeper and set their own prices.

Sporttrade Betting Exchange

• Available in: AZ, CO, IA, NJ, and VA
• Expert Review: Sporttrade Review

While Prophet Exchange emphasizes ease-of-use, Sporttrade is more like trading on the stock market. Every Sporttrade contract expires at either $0 or $100, but bettors can buy into and out of contracts at any time.

For example, a contract on the New York Giants to win their game against an evenly matched opponent may trade at around $50. Bettors can “bet” on that outcome (the Giants Winning) at $50 per contract, with the hope that they can sell it for more later or ride it all the way to a $100 payout.

Sporttrade also solves the liquidity problem by establishing market makers just like a normal stock exchange. Market makers ensure liquidity in every market and are required to provide tight spreads so customers can enter and exit positions with ease at good prices.

Crypto.com Sports Event Trading

• Available in: All 50 states
• Expert Review: Crypto.com Sports Review

Crypto.com is an outlier for several reasons, most notably because it’s legal in all 50 states.

Fans nationwide can use Crypto.com to trade prediction contracts on the outcomes of future sporting events using US dollars, Bitcoin, and 350+ other cryptocurrencies safely and legally.

All Crypto.com prediction contracts expire at a final value of $0 or $100, and customers can trade contracts on the exchange until the underlying event gets underway.

It feels a lot like using other sports exchanges, but the differences end there. Crypto.com is able to operate in all 50 states because it differs from conventional sports betting exchanges in these critical ways:

• Crypto.com is a Designated Contract Market (DCM) registered with the Commodity Futures Trading Commission (CFTC), not an online sportsbook
• Its sports event contracts are financial derivatives, not sports wagers
• Crypto.com is regulated at the federal level by the CFTC, not at the state level by gaming regulators
• Crypto.com is subject to the Commodity Exchange Act (CEA), not state-level sports betting laws
• Crypto.com has far more liquidity than conventional betting exchanges because it’s available nationwide; users can open up to 2,500 positions per sporting event

Betting Exchanges Explained

Betting exchanges are platforms that offer peer-to-peer wagering where customers bet against one another and set their own odds.

Whereas a traditional sportsbook sets the odds and takes wagers from its customers, a betting exchange acts as a matchmaker between bettors who wish to take the opposite sides of bets.

Exchange Bets Involve Two Parties: Backers and Layers

Every bet on an exchange involves two bettors. One side of the wager is the backer who thinks an outcome will happen. On the other side is the layer who thinks the outcome will not happen.

If someone bets on the Chiefs to win the Super Bowl at +800 on an exchange, they’re betting against another customer who has wagered the Chiefs will not win. In exchange betting terms, one person is backing the Chiefs (to win), and someone else is laying the Chiefs (not to win).

The backer on an exchange assumes the role of a typical customer at a standard sportsbook. They simply find the bet they want and choose an amount to wager. For those new to exchange betting, backing is the most intuitive way to get started.

By contrast, the layer assumes the role of the oddsmaker. For example, a bettor on an exchange can lay the Chiefs to win the Super Bowl, which means betting against the Chiefs winning. The layer chooses a price, posts the bet, and the bet is made if someone else comes along to take the opposite side.

Laying is unique to betting exchanges because it makes every bet a two-way street and allows bettors to set their own prices. Laying adds a great deal of flexibility in that regard, and the only limitation is that someone else must be willing to accept the layer’s odds.

With that in mind, betting exchanges function like the stock market. Layers name their prices, and backers accept or reject their offers. Assuming adequate liquidity, market forces ultimately determine the prevailing price for every wager on the exchange.

Betting Exchange Pros

Betting exchanges eliminate the conflict of interest inherent in traditional sports betting because they have no stake in who wins any wager. As a result, exchanges can afford to offer lower commissions, take bigger bets, and have no incentive to limit winning bettors.

• Less Commission: Betting exchanges have less overhead because they don’t have to hire oddsmakers to form the odds and deal with risk management. Where a typical sportsbook may offer -110 on an even-money bet, bettors on exchanges can often find -101 or even true +100 odds.
• Higher betting limits: Because betting exchanges have no interest in who wins or loses any particular bet, they don’t have to worry as much about risk management. Betting exchanges support higher betting limits and do not need to limit winning bettors.
• More flexibility: Customers on a betting exchange can either place bets like they would at a traditional sportsbook or set their own prices for other users to take.
• Can bet against outcomes: Sportsbooks tend to only offer bets for outcomes, such as betting FOR Team A or FOR Team B in a matchup. Exchanges turn every wager into a two-way street, allowing bettors to wager for or against any outcome happening.
• Can sometimes find better odds on long shots: Bettors can often find excellent value on long-shot futures at exchanges. While a sportsbook may hesitate to offer massive odds on a particular NFL team to win the Super Bowl because it needs to mitigate risk, a layer on an exchange may be willing to shoulder the risk and offer better odds.

Betting Exchange Cons

Betting exchanges are not without their drawbacks:

• Liquidity is a concern: A bet only occurs on an exchange if there is a bettor on each side of the wager. Liquidity is usually not an issue for popular markets such as NFL point spreads and totals, but it can be a problem in niche markets such as player props or Russian table tennis. If a market lacks liquidity, bettors struggle to find wagers at reasonable odds.
• Can be confusing for newbies: Betting exchanges have a steeper learning curve than sportsbooks for inexperienced sports bettors. Newbies should consider starting with either a traditional sportsbook or backing bets at an exchange as they familiarize themselves with the ins and outs of wagering.
• No parlays: Bettors can expect to find few if any parlays at exchanges due to the lack of liquidity needed to maintain markets involving specific combinations of wagers.
• Infrequent bonuses: Betting exchanges are low overhead, low margin businesses that provide value by taking less commission rather than by offering frequent bonuses. Low commissions are great for high-volume bettors, but recreational bettors may be better off taking advantage of deposit bonuses and free bets.
• Not always cheaper: Betting exchanges can be cheaper than sportsbooks, but that’s not always the case. For one, exchanges can charge upwards of 5% commission on winning bets. Additionally, illiquid markets may subject bettors to worse odds than they would find at a traditional sportsbook. If few people are willing to lay a particular outcome, the backers have to take what they can get or visit a sportsbook for better odds.

Wire Act and Liquidity Issues

All exchanges face one significant challenge: liquidity. The exchange model requires a user on both sides of every wager. If an exchange doesn’t reach a critical mass of users necessary to maintain active markets, it will inevitably fail. The obvious solution to the liquidity problem would be for an exchange to launch in multiple states and attract as many customers as possible.

However, the Federal Wire Act complicates the issue because it prohibits “information assisting in the placing of bets or wagers” from crossing state lines, which is why mobile sportsbooks in every state use geolocation technology to limit access to in-state users only.

Even if an exchange receives the go-ahead to launch in multiple states, customers in each state would be ring-fenced from each other, and liquidity would remain a challenge.

Until the Wire Act is repealed or exchange operators find a creative way to get around its restrictions, exchange betting will face an uphill battle in establishing a foothold in the US market.

Prophet Exchange exemplifies the challenges facing the exchange betting model. Less than two years after its launch, Prophet Exchange announced a temporary operations pause. Later, it relaunched as ProphetX, available in many more states but operating on a legally-uncertain sweepstakes gambling business model.

Ultimately, the answer to the liquidity problem may come from outside the US sports betting industry. The launch of sports event trading contracts at Crypto.com may have opened the floodgates to CFTC-regulated exchanges offering financial derivatives (event contracts) and sidestepping the Wire Act entirely.

However, it’s too early to call CFTC-regulated event trading a solution because pending court cases and future regulatory actions still pose serious threats to the business model.

The Future of US Betting Exchanges

The Wire Act issue will probably be resolved one way or another as state and federal lawmakers, regulators, courts, and industry stakeholders grapple with the varying business models that have shouldered their way into a form of wagering once relegated exclusively to licensed sportsbook operators.

If the Wire Act issue is solved, sports exchange trading platforms will still have to educate bettors and attract enough of them to reach the critical mass of liquidity needed to sustain an active trading platform over the long term.

Generally speaking, US bettors are still far more accustomed to fixed-odds betting, but that’s also not an unsolvable problem. Exchange betting was once a new concept in regulated European markets, and it is now massively popular in Europe.

Legal betting exchanges will never replace traditional sportsbooks because liquidity concerns limit the variety of bets they can offer, particularly in-game wagers, but their biggest issues are realistically solvable.

In short, there’s still significant upside for legal US betting exchanges.

Exchange Betting FAQ