These days, betting exchanges are familiar to most gamblers. Many punters couldn’t imagine the betting world without them. But back in the late 1990s, few knew such platforms existed. The rise of betting exchanges dramatically changed the gambling landscape forever.
The Birth of Betting Exchanges
The concept of a betting exchange wasn’t born overnight. It was the result of innovative thinking, industry experience, and a sprinkle of risk-taking.
One of the key figures behind this revolution was Andrew Black, an ex-professional gambler. Inspired by his time working in the stock market, particularly in the US short markets, Black was fascinated by the idea that investors could set their own prices. He realised this same concept could be applied to betting. He started working on the software side of the project, while Edward Wray, impressed by the idea, stepped in as an investor and business partner.
At almost the same time, Flutter.com appeared on the scene. Created by two ambitious Stanford graduates, Flutter quickly raised $30 million in investment—an impressive feat when compared to Betfair’s modest beginnings. Betfair had to rely on friends and family to raise just £1 million to get off the ground.
Flutter vs Betfair: The First Exchange Battle
The early battle for betting exchange dominance was fierce.
Flutter.com launched with fractional odds, a traditional format familiar to UK punters. However, it lacked in-play betting in its early days. Betfair, on the other hand, opted for decimal odds, which many found clearer and easier to understand, especially for international users.
Another key difference? Commission rates. Flutter charged just 2.5% commission, while Betfair’s commission ranged between 4% and 5%.
When it came to technology, Flutter was praised for its smooth, fast, and robust platform. In contrast, Betfair struggled with occasional server issues, which frustrated some early users. Still, Betfair pushed hard, leveraging its unique features and stronger market focus.
According to Andrew Black, Betfair even had a secret tipster nicknamed ‘Tin Man’ who leaked insider updates from Flutter. It became clear that despite Flutter’s sizeable investment, their funds were running dangerously low.
Then came a defining moment: Betfair swooped in with an aggressive strategy. What was framed publicly as a merger was, in reality, a Betfair buyout. Flutter.com was shut down, leaving Betfair as the clear market leader.
The Forgotten Betting Exchange
Few punters today remember the third contender in the early betting exchange wars: Betmart.
Betmart was founded by Stephen Little, a respected on-course bookmaker with a flair for technology. He used his coding skills to build the platform, with hopes of competing against the rising exchanges. Initially, Betmart gained some attention, but it failed to attract major investment from the betting industry.
Like many betting exchanges that came and went, Betmart struggled with one of the biggest hurdles in the business: liquidity. Without enough users placing bets, it couldn’t survive.
In contrast, Betfair thrived, quickly gaining both recreational punters and professional gamblers alike.
Betfair Becomes a Giant
By 2010, Betfair had achieved something no other exchange had. It went public, listing on the London Stock Exchange, and was valued at around £1 billion. In 2016, Betfair merged with Paddy Power to form Flutter Entertainment, now a gambling powerhouse that owns several major brands worldwide.
In the early 2000s, Betfair wasn’t just a tool for casual punters. It became widely used by bookmakers themselves. High-profile figures like Barry Dennis, a well-known rails bookmaker and television pundit, openly admitted to using Betfair to hedge bets. He reportedly traded around £15 million through Betfair in a single year—a staggering amount at the time.
It didn’t take long for major high-street bookmakers like William Hill to follow suit. Many preferred laying bets on Betfair rather than trading with smaller independent bookmakers. It simply made sense from a business perspective.
The Downsides and Challenges
Despite its early dominance, Betfair hasn’t been without criticism.
Its introduction of the controversial Premium Charge—a hefty additional fee levied on highly profitable customers—alienated many serious bettors. As a result, some switched to rival exchanges like Betdaq and Matchbook. Unfortunately, this has caused liquidity to suffer across all platforms.
There are also long-standing concerns about integrity. Some critics claim that betting exchanges encourage dishonest practices, allowing punters to profit from horses losing rather than winning. However, supporters argue that exchanges have added much-needed transparency to the gambling world.
Betting Exchanges Are Here to Stay
Whether you love or loathe them, betting exchanges aren’t going anywhere. They’ve become an essential part of modern gambling.
Betfair’s survival—when many others crashed during the dot-com bubble—is a testament to its resilience and forward-thinking strategy. It remains the benchmark for all betting exchanges.
In the end, Betfair may not have been the very first to imagine the concept, but it was the first to master it.
Photo: JC
