What is Liability
As you start your matched betting journey you will hear the word liability mentioned continuously, but just what is it and how does it work?
Liability is the amount of money you stand to lose from a lay bet if that bet is to lose on the betting exchange.
For example, if I place an £8 lay bet at odds of 5 my overall liability for that lay bet will be £32, this is shown in the screenshot below.
Placing A Lay Bet On The Exchange
The liability of any lay bet that you place on the betting exchange will be taken from your balance instantly, as soon as you place your lay bet.
Smarkets or Betfair will then keep your liability until the event that you have your lay bet on has concluded.
In this example, should my lay bet win, the exchange will return my liability of £32 plus credit me with my winnings of £8 from the lay stake.
Alternatively, if my lay bet loses I will not win the £8 lay stake and the exchange will not return the £32 of liability that I tied up as that money will be credited as winnings to the back bettor on the exchange.
Liability will always be regained if any of your lay bets are to lose, you will win the liability into that bookmaker account where you placed your back bet if your lay bet loses and therefore you lose your liability on the exchange.
Note: It’s important to have an adequate amount of money inside your betting exchange balance before placing your lay bets. As mentioned earlier, the liability is taken instantly when a bet is placed on the exchange.
How is Liability Calculated in Matched Betting
Your liability is always calculated using the same basic formula.
Lay Stake
x
Lay Odds
–
Lay Stake
So, using the earlier example, placing an £8 lay bet at odds of 5.0, this would be the calculation:
£8
x
5 .0
– £8
= £32 Liability
When placing a lay bet you essentially take the same role as a bookmaker.
When placing a lay bet you are effectively taking an exchange user’s back bet on the outcome that you are laying and betting against.
If we break it down, if you were to place an £8 back bet with a bookmaker at odds of 5.0 you would expect a return of £40 if that back bet was a winner (£8 of that being your own initial back stake).
When lay betting you are on the bookmaker side of the equation, if your lay bet wins you will keep the back bettors £8 stake as winnings, whereas if your lay bet loses and therefore the back bettor wins their bet you are forced to pay out your liability to them just as a bookmaker would to you if you were betting on the outcome to occur.
Liability is not to be confused with Liquidity – you can read more on that below.