The US First Sports Betting Exchange Opens in New Jersey
The US Gets Its First Taste Of Sports Exchange Betting After Prophet Launches in New Jersey
Making its New Jersey debut in August 2022, Prophet Exchange is the first and only legal sports betting exchange to enter the regulated US market. Since opening its platform to Garden State bettors, owners Dean Sisun and Jake Benzaquen claim to have over 300 users already.
Prophet Exchange launched in 2018. It is a peer-to-peer sports betting site where users lay bets against each other instead of a bookmaker. At a betting exchange, users can create odds for other bettors to wager on or place bets on already available odds. Prophet is licensed to operate in New Jersey by the New Jersey Division of Gaming Enforcement.
Exchange betting is hugely popular in the UK. In the US, the Wire Act of 1961 – which prohibits the transmission of gambling information across state lines – has been a consistent obstacle to American exchange betting. Betting pools are restricted to in-state only, so there would need to be enough players in one state willing to wager at an exchange to make it worthwhile.
Other exchange sites have attempted a foray into the US gambling scene. UK-based Betfair, one of the world’s first and most prominent exchange betting sites, operated a horse racing exchange in the Garden State but withdrew from the market in 2020.
Similarly, Kiwi political exchange PredictIt has its headquarters in Washington D.C., and has been active in the US for almost a decade. However, the “stock market for politics” will cease operations in February 2023 after failing to comply with US market regulations.
The arrival of exchange betting is nothing new to the US. While Prophet isn’t reinventing the wheel, it is the first time in US gambling history that Americans will be able to lay bets against their peers on sports events.
Exchange Betting Explained
Exchange betting works by pitting users against each other. Instead of bookmaker vs. bettor, exchange betting uses a peer-to-peer platform where the users determine the odds. Though it seems like a relatively new concept, exchange betting was first launched around the turn of the century.
When launching Betfair in the UK in 2000, its owners marketed the exchange as “the death of the bookmaker.” However, there are many aspects of exchange betting that bookmakers have utilized to improve their sites. In-play betting, the cash-out feature, and mobile betting were all pioneered by Betfair and have been implemented at online sportsbooks across the US.
Odds at a betting exchange are set by the users themselves. If you believe that a bookmaker’s odds are too high, you have the freedom to ignore them and set your own at an exchange site. Alternatively, you can browse through odds set by other bettors (known as ‘layers’) and match the bet that suits you most.
Exchange Betting Vs. Traditional Sportsbooks
One of the most significant differences between exchange betting and sportsbook wagering is the ability to bet against an outcome. At a bookmaker, you can only ‘back’ the winner. However, betting exchanges allow you to ‘lay’ an outcome and bet on the losing side.
Unlike traditional sportsbooks, Prophet’s profits are generated exclusively from successful bets. Whereas a bookmaker will shave a fraction off its odds to make a profit, a betting exchange acts as an intermediary between bettors who place the bets themselves. There is no financial risk for the exchange, so it can offer “true” odds and give bettors more value for money.
Prophet also takes a smaller commission than a traditional sportsbook. Whether you’re posting a bet for others to match or matching a bet yourself, the risk falls on the shoulders of the bettors involved. Prophet doesn’t need to recoup any payouts, so it can charge much lower commissions. Bookmakers typically take a 10% vig (or cut) of a successful bet, while Prophet keeps just 2% of your winnings.
You may find multiple ‘layers’ offering independent bets on popular events. In order to find a willing taker in a highly competitive market, these ‘layers’ may feel pressured to offer lower and fairer prices. You can often find better prices on exchange betting sites than online sportsbooks.
On the other hand, high-rolling players can make or accept bets that are far beyond the scope of a traditional sportsbook. The lack of financial involvement means that Prophet can facilitate bets with no upper limits; as long as you can find a willing taker, you can wager as much as you want.
Exchange Betting Limitations
Exchange betting has many advantages. Prophet Exchange lists several of these benefits on its site, including “+100 odds on spreads and totals”, “low juice on moneylines,” “zero limiting of players,” “market making capabilities,” and “ability to request.” However, there are also some challenges attached to exchange betting.
Betting on an exchange platform isn’t particularly user-friendly. If you’re not already aware of how odds work, it may take longer to learn on a betting exchange than at a traditional sportsbook. Finding users willing to match your bets on smaller, more niche sports markets may also be difficult.
Cross-state limitations mean that exchange betting may not be suitable for smaller states. In a recent interview, Mark Miscavage (an executive at London-based Smarkets) cited a lack of liquidity as the main barrier preventing Smarkets’ expansion into the US. “The biggest hurdle for us would be able to pool liquidity,” he said, unsure whether a single state could provide the “liquidity and volume needed to run an effective exchange.”
What’s Next For Prophet?
While Prophet’s entry into the New Jersey betting market has been four years in the making, co-founders Dean Sisun and Jake Benzaquen are already planning their next expansions. The betting platform will open in Indiana in 2023, with the intention of expanding to more and more states over the coming years.