Betting exchanges operate as intermediaries where users can place bets on an event's outcome, and other users can accept or match those bets. This system allows for more competitive odds since users set their own prices. The exchange takes a commission on winnings but does not participate in the betting itself. Users can also lay bets, meaning they can act as the bookmaker and offer odds to other users who are backing an outcome. This creates a peer-to-peer betting environment that is distinct from traditional fixed-odds betting.