How betting exchanges work: laying, liability & commission

A sourced explainer on how exchanges match backers with layers, what a lay bet can cost, & how Betfair, Smarkets & Betdaq take commission.

What a betting exchange is

A betting exchange is a marketplace where bettors bet against each other rather than against a bookmaker. Betfair’s guide to placing a lay bet says there are two sides to every bet. One is someone betting on an outcome to happen, a back bet, & the other is someone betting on it not to happen, a lay bet.

Betfair explains that bookmakers typically represent the lay side, offering customers odds they are willing to lay. On its Exchange, customers can both back & lay themselves, with bets matched against fellow bettors, not the bookmaker.

According to Sporting Life’s guide to Betfair commission, the Exchange ‘relies on backers and layers being matched against each other’. It describes this as the point where supply (layers) meets demand (backers). Instead of building a margin into its prices, Betfair makes its income from commission, a small percentage taken from net winnings.

Laying & liability

Betfair’s guide puts it simply: ‘Lay betting means betting on something not to happen.’ If you lay a football team to win, the bet is settled as a winner if the team loses or the game ends in a draw, so two outcomes are in the layer’s favour.

In horse racing, a layer who bets against a horse wins if any other horse in the race comes first. If the horse they bet against wins, they must pay the backer’s winnings, which Betfair notes ‘could be a lot more than the stake’.

This is why the exchange uses the word liability. Betfair defines it as ‘the amount you could lose in your worst-case scenario’, while the return from a winning lay is effectively the backer’s stake, minus commission.

Sporting Life gives the example of a £10 bet at 10.0, which returns £100 before commission: £90 in winnings plus the £10 stake.

Betfair gives two lay examples. Laying £10 at 1.5 means ‘you are liable for £5 and will win £10 if the bet lands’. Laying £10 at 3.5, which Betfair’s converter shows as 5/2 in fractional odds, means ‘you are risking £25 for the chance to win £10’.

Betfair says a lot of people prefer to lay at odds-on, meaning a short price such as 1.5, because liability is reduced. It also states that it will only let a customer risk as much as is in their account.

Why exchange prices can beat a bookmaker’s

Sporting Life explains that most fixed-odds bookmakers build a profit margin, or over-round, into their prices. By compiling their own books, it says, bookmakers ‘can guarantee themselves a profit’ regardless of the outcome.

The same guide says bookmakers’ prices can also carry extra margin to cover concessions such as best odds guaranteed, each-way terms & headline promotions. In its view, this means a sportsbook price does not give a true reflection of a horse’s chance of winning.

Because the Exchange matches backers with layers, Sporting Life says ‘margins are kept very small, and the price you get is very often a better one’. It claims that commonly over 90% of horses are best-priced on the Betfair Exchange & that, over the last 10 years at Cheltenham, the Exchange was best priced on 94% of runners after commission. These figures are Sporting Life’s own claims in a guide to the Betfair Exchange.

Commission & Betfair’s rates

According to Sporting Life, Betfair takes commission from net winnings on every settled bet, & ‘there’s no commission paid on the returned stake’.

The rate depends mainly on which My Betfair Rewards package a customer has chosen. It can also be affected by a discount based on Betfair Points & by the customer’s country of residence.

Sporting Life says Betfair Exchange customers in the UK & Ireland who do not opt in to My Betfair Rewards are placed on the standard Rewards package & ‘will pay a maximum of 5% on their net winnings’. Customers can choose to pay 8%, 5% or 2% through the Rewards+, Rewards & Basic packages, & can switch package once a month, at the start of the month.

Its worked example is a £10 back bet won at 10.0 (9/1), which wins £90 before commission. At 8% the deduction is £7.20 & the total return is £92.80. At 5% it is £4.50 & £95.50 comes back, & at 2% it is £1.80 & £98.20 comes back.

Betfair Points still apply in some places, Sporting Life notes. They are used to calculate commission in international territories not using My Betfair Rewards & on events taking place in Australia, such as the Melbourne Cup.

Betfair’s Expert Fee

The Racing Post reported that from 6 January 2025 Betfair would introduce a new commission structure called the Expert Fee, replacing its premium charge. The fee is based on ‘gross profit over a rolling 52-week period, rather than lifetime profitability’.

Exchange users with a 52-week gross profit under £25,000 do not pay the fee. The rate is 20% for those winning between £25,000 & £100,000, with a top rate of 40% for those winning more than £100,000 in that period. Users can move up & down the structure depending on their success.

The premium charge it replaced was introduced by Betfair in 2008, eight years after the exchange launched. The Racing Post says a higher charge followed three years later, with a fee of up to 60% for some customers with historically high profitability who used the product frequently.

Betfair told the Racing Post the new fee would be paid by ‘a very small number of the most profitable customers’ & would result in ’80 per cent of players seeing a reduction in fees, with 50 per cent no longer paying any additional fees at all’. Those are the company’s own figures.

The paper set the change against falling liquidity, meaning the amount of money bet on events. It reported that the average traded in win markets on British horseracing had fallen every year since 2016, & that affordability checks had been put forward as one reason.

Other exchanges & their commission

Smarkets explains in a guide dated 29 November 2022 that ‘The default rate of commission on Smarkets is 2%’, paid on net winnings on each market rather than on each winning bet.

Its example is three bets on one market that win £5, win £7 & lose £2, giving net winnings of £10. A 20p commission is charged, leaving an overall profit of £9.80. Smarkets also lists a Pro tier at 1% & a Select tier at 3%.

Wikipedia’s entry on Betdaq describes it as ‘an Irish gambling company founded in 2000’. It says Betdaq charges commission ‘set at 2 percent of the net winnings for most markets’, though this can vary depending on the amount of commission paid.

The same entry records that Betdaq was sold to Ladbrokes for €30m in 2013 & sold back to its original owner, Dermot Desmond, in November 2021. It also states that Betdaq was sold to rival exchange Matchbook in October 2026.

Who licenses exchanges

For Great Britain, a notice on Betfair’s lay-betting guide states that for customers in the United Kingdom, PPB Counterparty Services Limited & TSE Malta LP are licensed & regulated in Great Britain by the Gambling Commission, under account numbers 39439 & 39561. This reflects the notice on that page, not a permanent arrangement.

In Ireland, the Gambling Regulatory Authority of Ireland was established under the Gambling Regulation Act 2024 & became operational on 5 March 2025, according to Wikipedia. It issues business-to-consumer, business-to-business & charitable licences, & the industry comes under its remit as operators are licensed over time.

In the United States, Wikipedia describes Kalshi as a prediction market platform, a site where people trade on the outcomes of future events. It is based in Manhattan & launched in July 2021. Wikipedia says it is used primarily for sports betting, which makes up more than 90% of site activity.

Kalshi gained a licence from the Commodity Futures Trading Commission in November 2020 as a designated contract market, Wikipedia says. It has also been involved in controversies & lawsuits over the legality of its sports & election markets.

Risks of laying

The main risk is that a lay can lose much more than it wins. In Betfair’s own example, laying £10 at 3.5 risks £25 to win £10.

Betfair’s guide advises: ‘Ensure you monitor how much you are liable for and be very watchful of where you put the decimal point.’ It warns that laying at 42 instead of 4.2 ‘will be an expensive mistake should your selection win’.

Costs also come off returns. Commission is deducted from net winnings, & from 6 January 2025 Betfair’s most profitable users may also pay the Expert Fee of 20% or 40%.

Volatility is another factor. The Racing Post quoted professional gambler Neil Channing, speaking in August, as saying a professional layer on Betfair needs ‘a big balance as there will be volatility and swings’.

Questions

What is the difference between backing & laying?

According to Betfair, backing means betting on something to happen, while laying means betting on something not to happen. A layer wins if the selection does not win, for example if a football team loses or draws.

How do I work out my liability on a lay bet?

Liability is the most you could lose if the selection wins. In Betfair’s examples, laying £10 at 1.5 carries a £5 liability & laying £10 at 3.5 carries a £25 liability, each for the chance to win £10.

How much commission does Betfair charge?

Sporting Life says UK & Ireland customers can choose 8%, 5% or 2% packages, with standard customers paying a maximum of 5% on net winnings. No commission is charged on the returned stake.

Who pays Betfair’s Expert Fee?

The Racing Post reported that from 6 January 2025 the fee applies only to users with 52-week gross profit of £25,000 or more. The rate is 20% between £25,000 & £100,000 & 40% above £100,000.

Is Smarkets commission charged per bet?

No. Smarkets says its default 2% is charged on net winnings on each market, so £10 of net winnings costs 20p.

Sources

• betting.betfair.com
• sportinglife.com
• racingpost.com
• news.smarkets.com
• en.wikipedia.org
• betfair.com
• en.wikipedia.org
• en.wikipedia.org

Sources checked 30 October 2026. Information only. 18+.