Is Hedge Betting Legal?

Yes, hedge betting is completely legal in the UK. It may come as a surprise to some people, as hedge betting can, in the right circumstances, guarantee you a profit from sports betting, but there’s nothing at all legally questionable about placing hedge bets.

If you’ve contemplated trying out hedge betting but been put off by concerns about its legitimacy, you can rest assured that it’s a perfectly legal strategy.

But are there any circumstances in which hedge betting isn’t legal?

Is it ever in breach of bookie terms?

And does it have any effect on your tax position?

In this article, we’ll answer any questions you might have about the legality and legitimacy of hedge betting, so that you never have to worry about whether you might be doing anything wrong.

What Is Hedge Betting?

Hedge betting is the practice of betting on more than one outcome on an event, either to mitigate losses or to guarantee profits. Because odds will always change over time, it can sometimes be possible to bet on two or more outcomes at different times and lock in a guaranteed profit no matter the outcome.

It’s important to make clear that there’s no way to guarantee in advance that hedging a bet will allow for a guaranteed profit, as the odds have to work in your favour, which you cannot be certain of when you place your initial bet.

However, even if you can’t guarantee yourself a profit, you may still be able to minimise any potential loss.

As an example, we’ll imagine a Premier League football final.

Early in the season, you might have placed a bet of £100 on Chelsea to come out the eventual winners.

At the time, Chelsea were a definite long shot, and so the odds were at 25/1 (26 in decimal odds), meaning you’d stand to make a return of £2600 if they did indeed go on to win. By the time Chelsea make it through to the final, you’d be feeling quite excited - but also very nervous.

What if, after all their unexpected success, they fall just short of the title?

In that situation, you’d be in a fantastic position to hedge your bet. If Chelsea play Manchester City in the final, and Manchester City are the favourites, the odds are extremely likely to fall in such a way as to allow you to profit from a hedge bet.

If Manchester City are at odds of 1/2 (1.5 in decimal odds) to come out the winners, you could hedge your original bet by placing £1000 on Manchester City to win.

If Chelsea went on to win, you’d still make a profit of £1500 (£2600 minus your original stake on Chelsea and your £1000 stake on Manchester City), and if Manchester City won, you’d have a profit of £400 (£1500 minus your £1000 stake and your £100 stake on Chelsea).

Of course, this tactic relies on placing a bet and having subsequent events go in your favour.

If, in our above example, Chelsea had failed to make it through to the final (and making it to the final is very unlikely for most teams), we’d never have been in a position to hedge the bet at all; it would simply have been lost.

For this reason, hedge betting is normally just one tactic among many used by experienced bettors, and certainly not something you can rely on in the normal course of events.

Hedge betting can be a useful tool for horse racing bettors as well. If, for example, you’d placed an accumulator bet on four horses to win their respective races, and the first three all went on to win, you could be in a good position to hedge your bet.

You might decide to place a hedge bet on the favourite, or even on every single runner, depending on the odds, to ensure that, no matter the outcome, you come out in profit.

Is Hedging Bets Legal?

Hedge betting isn’t treated any differently from any other type of sports betting, from a legal perspective - so yes, it’s definitely legal in the UK.

From the government’s point of view, it doesn’t really make any difference what kind of betting you engage in - so long as the bet you’re placing is legitimate (i.e. you’re not engaged in any kind of illicit activity, such as match-fixing), it doesn’t matter if it’s a hedge bet or not, it’s definitely legal.

It’s worth noting that betting generally is not legal in all countries, so if you’re an international bettor you’ll need to check on your local laws. In the USA, for example, gambling isn’t permitted in many states - so naturally, if gambling isn’t legal, hedge betting wouldn’t be legal in those states either.

Sources Of Confusion

Finance

Hedge betting is a principle that has crossed from the gambling to the financial world, and there is scope for confusion as a result. In finance, hedging follows similar principles - you’re offsetting the risk of potential losses by placing money on an opposing position.

The finance world is subject to far more stringent rules than those imposed on casual sports bettors, so in some circumstances it’s quite possible that a financial hedge might not be legal. However, so long as you’re not actually mixing up hedge funds with sports betting when placing a stake, this isn’t something you’re likely to need to worry about.

Professional athletes

Another possible source of confusion is the fact that any professional sportsperson is subject to strict regulations regarding any betting activity. Footballers cannot bet on football, tennis players cannot bet on tennis, and so on. This is due to the possibility of taking advantage of insider knowledge, and also the risk of a player attempting to throw a match to win their bet.

It would therefore be against the rules for a professional athlete to place a hedge bet on their sport - but only because it would be a breach of their professional obligations for them to place any bet on their sport.

Does Hedge Betting Affect Your Tax Position?

Many people are aware that sports betting winnings (along with all other gambling winnings) are tax free in the UK, but it’s common to assume there must be exceptions in certain circumstances. If you’re making a living from gambling, surely you must have to pay tax? What about if you’re making a profit through Matched Betting? Or through hedge betting?

In all these cases, the answer is no: you don’t have to pay any tax on your winnings, even if you’ve put yourself in a position where you can’t lose. The government has been very clear that strategic betting that results in predictable profits is still subject to the same tax rules as casual, riskier betting:

‘The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.’

Source: HMRC Business Income Manual

So all in all, there’s definitely no need to worry - you don’t have to pay any tax on profits made through hedge betting.

Is Hedge Betting A Breach Of Bookmaker Terms?

Hedge betting may be legal, but that doesn’t mean a bookie will approve of it. Bookie terms do vary, but many include clauses that prohibit customers from taking any actions to mitigate or eliminate risk.

Even bookies that don’t explicitly prohibit hedge betting will often restrict or ban customers who win too consistently - and if you’ve hedged a bet to guarantee a profit, that does mean you’re guaranteed a win.

For this reason, we recommend that you avoid placing a hedge bet with the bookie you placed your original bet with, regardless of whether the bookie in question prohibits hedging in its terms.

Especially if you’re also Matched Betting, it’s important to avoid drawing attention to yourself through your betting activity. Spreading any hedge bets around between several bookies should mean that you aren’t winning too consistently with any one bookie, which is likely to extend the life of your accounts.

Summary

As we have (hopefully) established clearly by now, hedge betting is completely legal in the UK. However, that doesn’t mean that bookmakers will approve of hedging activity, so if you decide to get into hedge betting, you should be careful to spread your bets between different accounts to avoid drawing attention to yourself.

An alternative, more reliable way to guarantee profits through sports betting (so long as you do it right) is Matched Betting. To find out more, take a look at our complete guide to Matched Betting, or alternatively check out our free trial to get immediate access to over £850 worth of profit from bookie offers.