Definition
Commission is the fee that betting exchanges (such as Betfair, Smarkets, or Betdaq) charge on your net winnings. Unlike traditional bookmakers who embed their profit in the odds via a margin, exchanges facilitate peer-to-peer betting and take a percentage cut of the winner's profit instead.
How It Works
When you win a bet on an exchange, the platform deducts a commission from your net profit. Standard rates range from 2% (Smarkets) to 5% (Betfair standard). Some exchanges offer loyalty programs that reduce commission as your volume increases. You only pay commission on winning bets -- there is no charge when you lose.
Example
You back a selection at odds 3.00 with a $100 stake on an exchange with 5% commission:
- Bet wins: gross profit = $200
- Commission: 200 x 0.05 = $10
- Net profit: 200 - 10 = $190
At a 2% commission exchange, your net profit would be $196 -- saving $6 on a single bet, which compounds over hundreds of bets.
Why It Matters
Even though exchanges charge commission, the odds are typically better than at traditional bookmakers because there is no built-in margin. The effective margin on an exchange is usually 1-3% after commission, compared to 4-8% at standard bookmakers. When choosing an exchange, the commission rate matters as much as the available odds. A lower commission rate directly increases your long-term profitability.
Factor commission into your expected value calculations. A bet with positive EV before commission may become negative EV after a 5% cut.