What Is Peer-to-Peer Betting?
Peer-to-peer betting is also known as trading binary options. This means that you buy contracts where each contract is worth a portion of $1, e.g. $0.40, with a “yes/no” resolution. If the $0.40 contract wins, it resolves at $1, which means you get your stake of $0.40 back plus $0.60. If it loses, you lose the stake just like with a regular wager.
Peer-to-peer betting is used on a huge number of prediction markets. It poses an interesting challenge to established sports betting providers, which are far more heavily regulated and whose business model hasn’t been challenged for many years.
How Does Peer-to-Peer Sports Betting on Prediction Markets Work?
Peer-to-peer betting is different from odds determined by a sportsbook, where the odds are set manually based on the sportsbook’s calculated likelihood of how likely an event is to happen, and odds are adjusted to ensure the sportsbook gets its take.
The other main difference in peer-to-peer betting is that odds are determined by the market. So, for example, you could buy 100 contracts at $0.70 for a “yes” result, but if someone else buys a huge volume of contracts for a “no” result, contracts for “yes” will go down in purchase price accordingly (e.g. to $0.40). You can then buy more “yes” contracts at the lower price, but the market-determined odds add an element of jeopardy to timing your purchase.
You can buy any number of contracts, all potentially worth $1 or $0. Your wager scales based on the number of contracts.
How Does Sports Betting on Prediction Markets Compare to Using Sports Betting Sites?
So will prediction markets upset established sports providers? That remains to be seen - prediction markets are rapidly expanding, but sportsbooks have an established hegemony and many bettors would rather stick to what they know. So the most important question is, should you make peer-to-peer sports wagers or stick to sportsbooks? Here are the main differences.
More Diverse Odds
One of the main reasons people use prediction markets is that you often get better odds for outcomes than betting on traditional sportsbooks. This is because the market is determined by the people buying contracts rather than by the sportsbooks.
Traditional betting platforms tend to offer fairly similar odds across the board - it’s rare to find significantly different odds even if you check 10-20 platforms. For that reason, if you think you’re very confident about the outcome and you find that a prediction market is offering better returns than sportsbooks, you might choose to buy contracts at a better rate.
Prediction markets may also be more vulnerable to sharp swings than traditional platforms, so if you have time, you can keep an eye on markets close to the event and time your purchases with swings. The market will react quickly to breaking news.
More Flexible Range of Betting Options
Traditional platforms tend to have a fixed range of markets, e.g. final result, next to score, points total. Sports prediction markets may offer more exotic options, as all they require is for a market creator to set up a wager and create enough liquidity for the market to go live.
If you’re interested in unusual predictions, this is an advantage of prediction markets. However, it is also worth questioning highly unusual predictions with enticing odds. One of the biggest concerns about prediction markets is that the lack of regulation opens the door to insider trading.
Less Regulated
Prediction markets are not classified as gambling in the US, and are regulated federally rather than at state level. This means there’s significantly less regulation than the significant federal and state level restrictions on traditional sportsbooks.
This makes prediction markets far less reliable than regular sportsbooks. If there’s no major advantage in terms of odds, it’s almost always safer to bet on a regulated sportsbook. Sportsbooks also have much better protections against insider trading.
Lower House Edge
The phrase “the house always wins” doesn’t just apply to casinos. Regardless of the result, sportsbooks always take a significant cut of the overall pot for a wager.
This means that even if the probabilities are the same on a sportsbook and a prediction market, you’ll actually get more money back based on your wager if you use the prediction market.
However, prediction markets still have to make their money somehow, and that’s usually via a transaction fee. You’ll need to account for any fees when you’re working out how much profit you’re set to make on a win.
Fewer Bonuses
Sportsbooks run regular promotions and bonuses. Taking advantage of these is one of the best ways to make money - using bonuses on relatively safe bets is a solid betting strategy. You’re much less likely to find wager-specific bonuses on prediction markets, so this is a definite advantage of sticking to sports betting sites.
Peer-to-Peer Sports Betting on Prediction Markets - Verdict
While peer-to-peer wagering on sports is a big emerging market, traditional sportsbooks still have a lot going for them. The most important thing is that they’re better-regulated and less vulnerable to insider trading. If prediction markets get better regulation, they could be a major disruptor to traditional sportsbooks.
