EXCHANGE WAGERING APPROVED IN CALIFORNIA
Exchange wagering was approved two years ago by the California Legislature and last year by the New Jersey Legislature. In both states, the Governor signed the bills into law. Recently, the California Horse Racing Board unanimously approved the new betting scheme. BetFair the company that operates Exchange Wagering, internationally, has an agreement with Churchill Downs and its ADW, Twin Spires, to implement exchange wagering in California.
There is no indication when New Jersey will implement exchange wagering.
The concept is simple, yet very complex. A bettor may place a wager on a race. He/she is called the backer. It can be of any determined amount and type allowed. In order for the bet to be accepted it is required to be matched by a lay bet ---someone betting against the backer. This is the simple concept---individual bettors betting against each other with the transaction managed by an intermediary, the "bookie". These bets are backed and laid over the internet and the bookie's computer rapidly tries to match backers' and layers' wages. The odds for individual bets are fixed by the backer at the time of the bet and accepted by the layer regardless of how many other similar wagers are placed. Each matched bet is an individual transaction. For more information about the exchange wagering process take a look at BetFair's website and tutorials.
Exchange wagering is different than pari-mutual wagering in many ways. The most obvious is that in pari-mutual wagering, all bettors are playing against each other in a co-mingled pool and the odds change depending on how much is bet on each horse or wagering option. This is why a bet placed early on horse with 5-1 odds may actually pay 2-1 at post time when the windows are closed --- all betting stopped.
Proponents of exchange wagering believe it will offer new life to horse race wagering. It will bring a new betting audiences to horse racing. As such more revenue will accrue to support racing. How this revenue is used will need to be monitored carefully.
Horsemen have expressed concern that the exchange wagering will reduce the subsidy current afforded them through the pari-mutual system.
Others worry that the system is fraught with potential corruption and illegal activity. Since backers and layers are allowed to make many different array of bets, these bets may have different implications for the integrity of the sport and not be easily regulated. For example, under exchange wagering it is possible to bet on a horse " to lose." Although this could be a wonderful hedge opportunity for live Pick-4 or Pick 6 tickets, it could also be a wonderful opportunity for race fixing schemes.
Fans need to be aware of the potential of exchange wagering on their current wagering paradigms. Studying the complexities of exchanging wagering, now, is a good place to start.