Spread betting is any
of various types of wagering on the outcome of an event, where the pay-off
is based on the accuracy of the wager, rather than a simple "win or lose"
outcome, which is known as money-line betting. A spread is a range of
outcomes, and the bet is whether the outcome will be above or below the
spread. Spread betting has been a major growth market in the UK in recent
years, with the number of gamblers heading towards one million. As with all
gambling, however, spread betting carries a high level of risk. In the UK,
spread betting is regulated by the Financial Services Authority rather than
the Gambling Commission.
The general purpose of spread betting is to create an active market for both
sides of a wager, even if the outcome of an event may appear a priori to be
biased towards one side or the other. In a sporting event, for example, a
strong team may be pitted against a historically weaker team. Persons
betting on the event normally would be likely to favour the better team, to
such an extent that there would be very few, if any, betting on the team
perceived to be worse.
The use of a "point spread" evens out the market towards an equal number of
participants on each side of the wager. This allows a bookmaker to make a
market by accepting wagers on both sides of the spread. The bookmaker
charges a commission and acts as the counterparty for each participant. As
long as the number of participants on each side is roughly equal, the
bookmaker is unconcerned with the actual outcome; profits instead come from