Spread betting companies make money mainly by widening the buy and sell prices they quote beyond the true market spread, charging overnight holding fees, and in many cases betting directly against clients who tend to lose. Understanding these mechanics helps explain why the practice is legal in the UK but banned in the United States.
In Brief
- Brokers build a markup into every quoted price, so the buy price always sits above the sell price.
- Clients get sorted into an A book or a B book, and B book traders are often bet against directly.
- Roughly 82 percent of traders lose their deposits, which makes the B book model unusually profitable for brokers.
- Overnight holding fees add a second, quieter revenue stream on top of the spread.
- Spread betting is legal in the UK but illegal in the US, where similar directional bets are made through options instead.
What Spread Betting Actually Is
Spread betting looks a lot like gambling because you're not buying or owning an asset at all. You're simply predicting whether a price will rise or fall over a set window, based on the buy and sell prices your broker offers. Guess right and move with the market far enough, and you profit. Guess wrong, and the broker keeps your stake.
This structure doesn't exist in the United States, where financial spread betting is illegal. American traders looking for the same kind of directional exposure typically turn to the options market instead, using strategies on optionable securities. It's a more roundabout path to the same basic bet, and because option spreads tend to be narrow, it appeals mostly to traders who already know what they're doing.
Where the Money Actually Comes From
The core profit engine is the spread itself. A stock trading in the open market at $100 to buy and $101 to sell might show up on a spread betting platform as $99 to sell and $102 to buy. That gap is wider than the real market spread, and the difference goes straight to the broker. Because the buy price is always set above the sell price, the firm collects that markup no matter which way the trade goes for the client.
Layered on top of that is the A book and B book system. Traders with a history of losing money get placed in the B book, meaning their trades never actually reach the market. Instead, the broker takes the other side of the bet directly. When the client loses, the broker wins, and given that around 82 percent of traders lose their deposits, this arrangement tends to work heavily in the broker's favor.
There's a catch for brokers running this model: risk limits. If too many B book clients pile into the same direction, the broker's exposure grows past what it's comfortable holding, forcing it to hedge in the real market. That hedge costs money too, since it means paying for another spread, so brokers try to avoid it unless the imbalance gets too large to ignore.
A book clients work differently. These are traders who trade often enough, or with enough size, that the broker trusts them to take on market risk rather than betting against them. They typically pay a premium spread or a separately negotiated fee, and because their volume is steadier and less risky to the broker, they represent a more predictable income stream than B book clients.
Not every firm frames it this way. IG Group, a UK based spread betting company, says on its website that it doesn't profit from clients losing trades. Instead, it describes a model where client positions largely offset one another, so when one client buys a lot of an asset, another client selling the same amount effectively covers that position. Under that setup, IG says its profit comes purely from the spread rather than from taking the opposite side of a client's bet.
The Overnight Fees Nobody Talks About
Spread betting platforms let clients trade continuously from the Asian market open through the New York close, five days a week. That convenience comes with a cost: holding a position overnight typically triggers a fee.
New traders often fixate on how tight or attractive a spread looks and overlook these recurring charges, which quietly chip away at profits the longer a position stays open. That dynamic also shapes broker incentives. Since holding fees generate steady revenue, brokers have little reason to nudge clients toward closing positions quickly.
Regulation adds another layer worth understanding. The European Securities and Markets Authority enforces rules that restrict certain types of financial betting, and in 2018 it upheld a ban on selling binary options to retail customers, a move that reshaped some investor interest in adjacent products like spread betting.
Comparing a Few Established Brokers
Picking the right broker matters more than most beginners expect, since the difference between a good and bad experience often comes down to the platform rather than market conditions. Before committing money, it's worth asking what markets a broker covers, how responsive its support is, how competitive its spreads are, and whether it offers a demo account to practice with first.
IG Group started in 1974 purely as a spread betting business and is based in the United Kingdom. It has since expanded into forex and share trading, offers demo accounts, and reports more than 178,000 clients worldwide.
Intertrader launched in 2009 and operates under Entain, a publicly traded sports betting and gaming company. It describes itself as a fully market neutral broker, meaning it never takes the other side of a client's trade, and it offers forex and CFD trading alongside spread betting, plus a risk free demo account for newcomers.
ETX Capital traces back to 1965 in London and covers spread betting, forex, options, commodities, equities, and bonds. Like the others, it offers a demo account so new traders can test strategies before risking real money.
Choosing Wisely Before You Bet
Online comparison tools make it easier than ever to line up spreads, fees, and broker reputations side by side before opening an account. But no amount of comparison shopping replaces understanding how a given broker actually makes its money, whether that's through spreads alone, through betting against B book clients, or through some blend of both. The traders who last in this space tend to be the ones who picked their broker as carefully as they picked their trades.