Buy some shares in a company quoted on the Stock Exchange and the world views you with respect as an ‘investor’. Never mind that you selected your shares by throwing darts at the share price page of your newspaper five minutes earlier, the transaction is still called an ‘investment’.
Put the same amount of money on Accrington Stanley to beat Morecambe in a Tuesday night League Two fixture on a Betting Exchange and the world views you, with no respect, as a gambler. Never mind that you have diligently kept records all-season and spotted a price that was clearly wrong, the transaction is still called a ‘bet’.
Both transactions are gambles. The outcome of both is unknown. [Gambling has a specific economic definition, referring to wagering money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods].
Perhaps the old stereotypes are beginning to fade as Betting Exchanges become better understood, and given how long the Stock Exchange has been around this mindset will take a long time to overturn, but can anyone really justify the respect that the Stock Exchange has over Betting Exchanges any longer? 
I have invested in shares, options and commodities on and off for about 30 years now. In those years, I have learned that despite what all the books say about efficient markets, the trading of individual shares is not efficient. There are always people trading with better (usually) or worse information than you, and there are always people trading on their emotions rather than with logic. Sound familiar? Watch the markets on a sporting contest and prices over-react to news in exactly the same way as the Stock Exchange does.
So which road should the smart guy take for the best returns – Wall Street or Las Vegas? (I don’t mean Las Vegas literally of course – the house edge on every game will beat you in the long run, with the possible exception of poker, occasionally Blackjack, or the sports-books where, in theory at least, you may have an edge). My question is whether there are better opportunities for ‘investors’ in the financial markets or in sports betting?
Trade shares and you pay your broker commission. Trade sports and you pay the exchange commission. No difference there.
I’m not a tax expert, but one of the (many) problems I had with day-trading was the impact of taxes on any profits. I think it is fair to say that the Betting Exchange wins hands down on this issue.
What about the risk of insider trading on the Stock Exchange? How often have we read about a financial scandal involving insider trading? There are always going to be company insiders who have critical information. The nature of the beast is that these are the men and women who are making the very decisions that the market will react to. Of course there are always going to be leaks, it is unrealistic to expect otherwise despite the best efforts of the regulatory authorities.
What about Insider trading on sports? Certainly there will always be insiders who have privileged information, but when you think about betting on sports, there really is far better information about sports teams available than there is about any company. The media covers every team in depth every day. Match reports, press conferences and interviews with players.
There is far more information out there on any sports team than you will ever see about BP or Imperial Tobacco (and I suspect far more interesting and comprehensible to most of us). Not only do public companies not disclose material information on a daily basis, but they massage the numbers so that their actual performance is hidden by the use of ‘fuzzy math’.
Want to know about suspensions or injuries? These are all public knowledge. Are statistics your thing? Check the Internet – every stat you could possibly want is out there somewhere!
Those close to the team will always know first, but for the most part I would suggest that Betting Exchanges offer a more level playing field (please excuse the pun) for trading than does the Stock Exchange.
I no longer trade commodities or currencies. How did I ever think that I could beat people who trade these for a living day after day from my desk in Croydon? I no longer trade shares either for that matter. I buy and hold shares, knowing that trying to beat the market by trading wildly is futile. I have no edge. I’m a small fish in a big pond.
But sports are different. I am watching the same game at the same time as everyone else. The information is there for all of us to see. We all know the rules (presumably, although reading some of the ramblings on the Betfair Forum one does sometimes wonder). The challenge is to interpret this information, spot value, and act quickly on it. To my way of thinking, the Betting Exchange offers ‘sharp minds’ a far better, and more entertaining and exciting, opportunity to making money than the Stock Exchange does.
Of course, never forget that in sports, nothing is guaranteed. Players are human, and make mistakes. They miss shots, drop catches and have bad days, but the share price of companies is likewise impacted by unpredictable events. A terrorist attack or a natural disaster, and financial markets around the world have a bad day. In sports, the game is postponed. No money is lost. Try again later.
A losing sports bet expires worthless as soon as the game or event is over just like millions of options that are traded, but never exercised, on shares, commodities and other assets around the world every day.
What do we look for when we buy shares? If we’re smart, we put away the darts, and look for bargains — shares selling well below their asset values due to temporary circumstances — and we hold them until they appreciate to what we consider is their true worth.

 

What do we look for when we want a sports bet? We look for bargains – teams or a player available at a price that exceeds our valuation, and hold it until we can offset the bet at what we consider the true price. Sound familiar?

 

How about entertainment value? Well, no contest really. Unless you are an accountant or actuary, the idea of poring over balance sheets is unlikely to beat the excitement of watching a sporting contest unfold.

 

I think I’ve made my point. Betting Exchanges offer a fairer deal to the average Joe than does the Stock Exchange. I’m not suggesting that there isn’t a place in your portfolio for shares and bonds, (there most certainly should be), but for those looking for the best short-term use of a little spare cash, open an account with a betting exchange, research those sports or events that interest you and perhaps you have some expertise in, and feel no shame whatsoever in your choice of investment type.