A betting exchange is a financial escrow service. A user bets on a result of an event, with 20% probability of the event happening. This means that someone (of

A betting exchange is a financial escrow service. A user bets on a result of an event, with 20% probability of the event happening. This means that someone (often a market maker) is willing to bet with 80% probability of that same event not happening. User waged £10, and if they win, expect to net £40. That "other" £40 came from the counterparty. A betting exchange facilitates this. It sets aside ("escrows") the funds from both parties' accounts, and once the results of the event are known, settles the trades. Funds from escrow, minus the commission, are credited to winner's account. The basic premise really is that simple. Now, running an exchange is anything BUT simple.