Prophet Exchange has become the first peer-to-peer sports betting exchange in the United States, after its launch in New Jersey on Aug. 29, 2022.
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In an exchange, sports bettors can place wagers with the middle man (a traditional sportsbook) removed from the equation. Instead of paying a “vig” of say -110 on each bet, the customer gets at minimum +100 on their wager. Because a wager is only placed in an exchange, if another bet takes the opposite side of the bet, customers benefit from an 8-10% edge as opposed to the same bet with a sportsbook.
The New Jersey Division of Gaming Enforcement approved Prophet, which is owned by Stake Trade, Inc., clearing the way for the company to offer exchange betting for the first time in the U.S. In 2018, the U.S. Supreme Court struck down a federal ban on state authorization of sports betting. Since, more than 30 states and the District of Columbia have legalized sports betting. New Jersey was one of the first to do so.
“In terms of handle, I think 20-25% is a fair expectation for market share to be occupied by exchanges,” Prophet Exchange CEO Dean Sisun told Gaming Today.
How a Betting Exchange Works
A betting exchange offers no-vig straight bets in a marketplace without a sportsbook taking its cut of the action.
Bettor A places a $25 wager on the Yankees to win a specific game. The exchange matches that bet with Bettor B, who wagers on the Yankees opponent to win the same game. With a match in place, the wager is set. The winning bettor collects, just as they would with a sportsbook-placed bet, except no “vig” is carved out for the operator.
Essentially, in a sports betting exchange marketplace, two or more bettors are betting against each other. Since both sides are putting the same amount at risk, the market always breaks even.
With an exchange model, the “price” of betting is marginally lower. In most cases, bettors will see 8-10% less for the cost of wagering on sporting events.
How are odds set on a Betting Exchange?
The odds for sporting events in a betting exchange are set the bettors themselves. One bettor makes a bet offer and waits for another bettor to take the other side. Sometimes, odds are offered by the exchange based on a third-party, to spur betting activity. But each wager still requires one or more bettors to take opposite sides.
Are Prop Bets Available on a Sports Betting Exchange?
As of now, Prophet Exchange does not offer player props or futures bets, but there are plans to do so in the future. Parlay bets, due to their complexity, are not expected to be offered by Prophet.
According to its website, Prophet is a place where “users can set prices for others to bet on, or place bets on the prices already available.”
Who Do I Bet Against in a Sports Betting Exchange?
By law, sports betting information cannot be transferred across state lines. For that reason, exchanges must pair bettors with other bettors in the same state. Participants in an betting exchange in New Jersey will bet against other people in New Jersey.
Who Will Use a Betting Exchange?
A sports betting exchange like Prophet appeals to cost-conscious consumers who do not want to pay the “fee” or “vig” that goes to the house (the sportsbook). An exchange would also be popular among bettors who strictly wager on outcomes of sporting events, as opposed to prop and futures bets.
A sports betting exchange may also be attractive to “sharp” bettors whose success gets them banned from sportsbooks.
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