Jimmy Boyd in 
The world of sports betting has seen significant evolution over the years, with betting exchanges being one of the most innovative developments. Popular in regions like the UK and parts of Europe, betting exchanges allow punters to bet against each other rather than against a bookmaker. This is great because bettors won’t get limited like they do at sportsbooks.
However, despite their popularity abroad, betting exchanges have not made a significant mark in the United States. Let’s explore the reasons behind this absence.
Regulatory Challenges of Betting Exchanges
The primary reason for the absence of betting exchanges in the US is the complex regulatory landscape. Each state has its own set of gambling regulations, and many have been slow to adapt to new forms of betting. Betting exchanges, being a relatively new concept, face challenges in fitting into existing regulatory frameworks.
Thanks to the Federal Wire Act gambling information can not be transmitted across state lines. That is why each state has to legalize gambling, and then why the annoying geolocation services is so sensitive if you are close to the border of the state (or why you can’t bet when you are in another.)
Each state could have its own exchange, but then you run into the problem of liquidity. It would be much easier to match across the country than the limited population of a single state.
Dominance of Traditional Sportsbooks
The US sports betting market has long been dominated by traditional sportsbooks. Brands like DraftKings, FanDuel, and MGM have established strong footholds, making it challenging for new entrants, especially those with a different betting model, to gain traction. Instead of keeping a significant hold, they would only be making a lower commission on each trade.
Lack of Familiarity
Betting exchanges are a departure from the traditional betting model. For many American punters, the concept of laying a bet or trading odds in real-time is unfamiliar. This lack of familiarity can act as a barrier to adoption, as bettors might prefer to stick to what they know.
Concerns Over Integrity
One of the concerns raised about betting exchanges is the potential for match-fixing. Since users can bet against outcomes (laying bets), there’s a fear that this could incentivize match-fixing. While measures can be put in place to mitigate these risks, the perception remains a hurdle.
This is a pretty weak argument though in my mind. There isn’t as much liquidity and it’s pretty easy to see who is laying and backing the most bets. I actually think it would be a good way for the leagues themselves to get involved.
They don’t have to worry about the integrity part because they don’t lose money if everyone and their brother is heavily betting on on side, they just get a commission on the action.
They don’t have to worry about setting their own lines and having sharps kill them, because with peer-to-peer other users are going to help them set the lines.
Competitive Market Environment
The US sports betting market is fiercely competitive. With numerous sportsbooks vying for a share of the market, new entrants need significant resources and a unique value proposition. Betting exchanges, while offering a different betting experience, would need to invest heavily in marketing and education to carve out a niche.
I think that if an exchange were ever to get started, they’d have to partner with one of the existing books. Betfair did this in England, and I think it would make some sense if DraftKings or someone else did the same in the United States. But again, is that going to cut into their profit margins on the traditional side?
Fragmented Gambling Markets
Unlike countries with a unified regulatory approach, the US sports betting market is fragmented, with each state setting its own rules. This fragmentation means operators need to navigate a patchwork of regulations, making nationwide expansion a complex endeavor.
Cultural Differences
Betting exchanges have thrived in regions with a strong betting culture and history, like the UK. The US, while having a vibrant sports culture, has a different relationship with betting, which might not align as seamlessly with the exchange model.
We’ve kind of seen this with live betting. It’s extremely popular in Europe, but in the United States it hasn’t taken off to be near as popular.
Conclusion
While betting exchanges offer a unique and dynamic betting experience, their absence in the US can be attributed to a combination of regulatory, market, and cultural factors. As the US sports betting landscape continues to evolve, it remains to be seen if betting exchanges will find their footing. However, for now, traditional sportsbooks remain the dominant force in American sports betting.