There are some important differences to keep in mind when comparing sports betting vs casino gambling. For example, many assume that sports bettors play against the house in the same way a casino gambler tries to win money playing slots or blackjack. A losing bet is profit for the house while a winning bet is a loss. The more money they win, the less the house has. This erroneous conclusion comes from a common misapprehension about how sportsbooks and casinos make money. In fact, the two operate in two distinctly different ways.
Below we’ll discuss how sportsbooks and casinos make money from their customers. After, we’ll discuss the differences between the two.
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Table of Contents
How Casinos Make Money
Casino customers wager money playing games. The most popular include slot machines, video poker, and table games like blackjack, craps, roulette, or Pai Gow poker.
There are hundreds of different slot games, including a number of progressive slots that offer jackpot winners substantial sums of prize money.
Similarly, there are number of table game variants that each come with their own rules and features. For example, some casinos offer Spanish Blackjack, Blackjack Switch, or Progressive Blackjack games in additional to traditional blackjack.
Playing Against the House
Customers place a wager before each game, hand of cards, or slot machine spin. The result will determine whether they win, lose, or push.
For example, a customer plays a $1 slot machine. When game ends, a $5 win is credited to their playing balance. Suppose another customer plays a $10 hand of blackjack. They hit their hand and bust, losing $10. The house banks all casino game action. It pays out winners and collect from losers after each game concludes.
Casino customers typically continue until they’ve won enough money to celebrate a victory, or lost enough money to give up. The sum total of losing wagers less winning payouts represents the casino’s net profit. It’s easy to see how much money casinos handle when we scale this up to many hundreds or thousands of customers playing games each day.
So how do casinos stay in business when some customers come out ahead? Surely enough big winners would force them to close their doors?
Payout Percentage
Casinos create a small amount of revenue every time a game is played. The math that they rely on is called a payout percentage. A payout percentage represents the average amount of money returned to a player after each game concludes.
While the exact percentage will vary from game to game, the amount is always less than 100%. Moreover, while proper game strategy and bankroll management can improve an individual players chances of winning money, they cannot move the payout percentage in their favor unless they are cheating.
Payout Percentage Example
Payout percentages will differ depending on the game and house rules. In general, table games like baccarat, blackjack, craps, and some video poker variants have more favorable payout percentages than slot machines. Therefore if you want to beat the house, it’s best to stick to table games.
Let’s assume a slot machine has a 98% payout percentage. That means a player can expect to get 98% of their wager back on average after each game. For every $1 spin, you’ll get 98 cents back on average. That also means for every $1 spin, you’ll lose 2 cents on average.
The same holds for roulette. Suppose a roulette game has a 97% payout percentage. For every $10 wagered, customers can expect to get $9.70 back, losing 30 cents on average per game.
Surely, losing 1%-4% per game isn’t bad, right? Such small numbers allow enough room for the occasional winner while simultaneously keeping everyone else in the game. In reality, this small edge is all a casino needs to be immensely profitable.
Good Payout Percentage
In general, the closer you can get to 100%, the better. Many regulators set the minimum slots payout percentage at 80%. In reality, casinos can offer substantially higher slot payouts and still turn a profit. In fact, you’ll commonly find slot machines with payout percentages of 96%-98% that offer players lengthy and enjoyable experiences while still producing a consistent revenue stream for the house.
Payout Percentages Generate Revenue
That 2% return per game is actually a boon to the casino. Think of the math from their perspective: on average, they’re guaranteed a 2% return per game. It doesn’t matter whether one slot player hits a jackpot, or even an entire table of roulette players win all at once. The casino knows that given enough time, enough people playing their games will produce a consistent revenue stream.
Now think of it as an individual player. Suppose you have a $100 bankroll to play a game with a 98% payout percentage at $1 per wager. That means you’ll lose 2 cents per game on average. This could happen any number of ways. You could lose 100 spins in a row at $1 each. Or you could win a few spins, lose a few spins, and be through in a few hours, or you could come back the next day and lose it all then.
In the end, the longer you play the less likely you are to come out ahead. Eventually, the small negative average return catches up to everyone. Accordingly, the sum of all customer loses becomes the casino’s gross gaming revenue. Their net gaming revenue comes from subtracting expenses from gross gaming revenue. And that money is used to operate the business, pay down debt, or build a new tower at your expense.
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How Sportsbooks Make Money
Sportsbook customers wager money betting on the outcome of a sports matchup using the point spread, over-under total, or moneyline. They can also place game or player prop bets, futures bets, or parlays.
Sports bettors choose from one or more sides when placing a bet. Most commonly, they’re picking a team to win against the spread, or a team to win outright on the moneyline. In soccer, a bettor can also choose to bet on a draw as a third possible game result using a 3-way moneyline.
Exotic wagers offer sports bettors the chance to bet on multiple sides at once. For example, a player could bet $10 each on five teams to win the Super Bowl, for a $50 total wager. Another player could place a 3 selection parlay on 2 teams to win against the spread and third team to win on the moneyline.
Playing Against Each Other
When one player takes the Chicago Bulls to win on the moneyline against the Boston Celtics, they are betting against another player taking the Boston Celtics. Remember that a 2-way moneyline means there are two sides to the bet. Only one side can win, unless the game ties resulting in a push. The same thinking applies to 3-way moneyline, with a tie or draw as the third option. With 3-way moneylines, there’s no push in play.
Point spread and total bets work the same. If you’re taking over 6.5 goals in a NHL matchup, you’re betting against the customer betting under 6.5 goals. Similarly, if you’re taking the Buffalo Bills +2.5 against the spread, you’re betting against the player taking their -2.5 opponent.
Risk Management
Exotic bets like parlays work differently. The sportsbook agrees to take your action in exchange for predetermined payout should your wager win.
Booking parlays is a bit like the insurance business. Most customers will pay premiums for services they’ll never need, but the occasional “winning” customer can be paid out from the pool of money the insurer has collected from others. With sports betting, It’s all about risk management at odds favorable to the sportsbook.
Because most parlay bets lose, the sportsbook can easily payout the occasional winner using other players’ losses. In fact, the more selections in a parlay, the less likely it will win. In the rare instance that a player has won a substantial parlay, sportsbooks will happily pay them for positive publicity, knowing full well that the extreme majority of their customers will lose more on parlays than they’ll ever win.
Sportsbooks Are Market Makers
Sportsbooks operate much like a binary options broker or forex broker. A forex broker offers customers various pairs of currency, for example USD/JPY.
The customer then decides whether to buy the USD at a certain price – taking a long position – if they believe the USD will increase in value relative to the JPY. When the customer buys USD, they are also selling JPY, the other side of the pair. Alternatively, the customer could sell the USD at a certain price – taking a short position – if they believe the USD will decrease in value relative to the JPY. When the customer sells the USD, they are also buying the JPY, the other side of the pair.
Sportsbook customers buy and sell teams much like stock traders. Suppose the Dallas Cowboys are -7 -110 against the Cleveland Browns +7 -110. Taking the Dallas Cowboys -7 means you are buying the Cowboys and selling the Browns +7. Similarly, if you take the Boston Red Sox +180 against the New York Yankees -160, you’re buying the Red Sox and selling the Yankees.
Sportsbooks want to balance their action as much as possible. When more wagers pile up on one side of the line than another, they will often change the line or the odds to encourage more bettors to take the opposite side. Line balancing ensures is a risk management tool to ensure they have enough money to payout the winning side.
This is where the mechanics of brokering stocks and setting lines diverge. The market governs the price of the security, with some differences between quotes depending on the broker you’re using. Stock brokers make transactions on behalf of their customers collecting the difference between the bid and ask price, or spread, as profit. They’ll sometimes charge small fees to buy or sell securities as well.
Sports Betting Needs Balanced Markets
Sportsbooks essentially set their own markets in an attempt to balance their action in order to payout the winning side. Though their lines and odds do get influenced by competitors and other external factors, they are ultimately only interested in creating a market that produces revenue when the game is over.
Imagine a sportsbook collected $2,000 in handle for the Golden State Warriors -3 vs the Miami Heat + 3. In this case, $2,000 handle for a balanced market means $1,000 from customers on the Warriors and another $1,000 from other customers on the Heat. If the Warriors win, the sportsbook uses the $1,000 collected from the losing Heat customers to pay the winning Warriors customers. $1,000 – $1,000 = 0. The sportsbook ends up breaking even, making $0 for their service.
Let’s say the $2,000 handle came from an unbalanced market. For example, the sportsbook collected $1,500 from customers on the Warriors and $500 from customers on the Heat. If the Warriors win, the sportsbook will be short $1,000. $500 – $1,500 = -$1,000. They’d take a $1,000 loss and need to come up with the money from another game. However, this imbalance could also work in their favor. If the Heat win, the sportsbook will be up $1,000. $1,500 – $500 = +$1,000.
Vigorish, Vig, or Juice
Sportsbooks charge vigorish, or juice, on straight bets in order to create revenue. Without juice, a sportsbook would go broke.
Now let’s say the sportsbook sets the odds, or price, of the 3 point Warriors/Heat line at -110 for each side. -110 odds means the customers risk $100 to win $90.91. So if someone takes the Warriors -3 -110, a successful bet would produce a $90.91 win. Here the customer who took the Heat +3 -110 would lose $100 wager entirely.
Notice that the sportsbook paid the winning customer less than they wagered. The $9.09 difference ($100 risked – $90.91 won) is the sportsbook’s fee for taking or “booking” the action on the game.
Now let’s return to our imaginary $2,000 handle for a balanced Golden State Warriors -3 vs Miami Heat +3 matchup with -110 odds for each side. If the Warriors win, the sportsbook would take the $1,000 collected from losing Heat customers, minus the juice, to payout the winning Warriors customers in the amount of $909.09. Now sportsbook has been compensated for its efforts: $1000 – $909.09 = $90.91.
Note that sportsbooks don’t charge juice on exotic wagers like parlays. Instead, they simply pay customers amounts less than the risk the customer assumed. The correct payout is known as “true odds”, calculated from each parlay selection. But the sportsbook often pays just short of true odds. Thus, the difference between the true odds and payout and actual amount paid out becomes additional profit for the sportsbook. It also reduces their risk as well.
Sportsbook Hold
The vigorish earned from making a market becomes the sportsbook’s hold. On average, a properly managed sportsbook will hold between 4%-5% per betting market.
Using our example from above, if a sportsbook makes $90.91 for $2,000 handle charging -110 odds, it would end up holding 4.5% ($90.91 vigorish / $2,000 handle).
In that vein, the sportsbook’s hold is like the total service fees a stock broker collects when trading securities on behalf of its customers. It’s their reward for making a market and servicing their customers. As long as a customer can post up money to place bets, the sportsbook will profit in the long run as the juice charged on each wager slowly accumulates into a consistent revenue stream.
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Sports Betting vs Casino Gambling
Wrapping up, the following are the key differences between sports betting and casinos. Refer to the explanations above for more elaboration and detail regarding each point:
- Casino customers wager money playing games. Sports betting customers wager money on the outcome of a sports matchup. Sportsbook customers can also place exotic wagers like parlays, props, or futures bets.
- Casino customers play against the house. The casino banks any slot machine or table game wager. Sports betting customers play against each other. Sportsbook customers placing exotic wagers are paid out based according to house rules varying with the risk they assumed.
- Casinos earn revenue based on an individual game’s payout percentage. Sportsbooks earn revenue charging customers vigorish, or juice, to take their straight bets. Sportsbooks make money on exotic wagers like parlays when customers lose, or by paying winning customers a little less than true odds, or the exact risk they assumed when placing the wager.
- Casinos do not need to setup wagering markets. A sufficient number of games being played by enough customers will produce a steady stream of revenue. Sportsbooks need to first make a market and then charge customers for their service.
- Casinos do not to balance their action. Sportsbooks need to balance their action to reduce risk of failure, however it’s not always necessary to have a balanced market to be profitable if the winning customers are owed substantially less than what the losing customers lost.
- Casino payout percentages aren’t influenced by market forces or wagering action on the game itself. Sportsbook lines and odds can change from their opening value as the sportsbook tries to balance its action before game begins.
FAQs on Sports Betting vs Casino Gambling
No, sportsbook customers do not play against the house. Sports betting customers play against each other. Sportsbook customers placing exotic wagers are paid out based according to house rules varying with the risk they assumed. Casino customers play against the house because the casino banks each game and players are subject to each game’s payout percentages.
Casinos create a small amount of revenue every time a game is played. The math that they rely on is called a payout percentage. A payout percentage represents the average amount of money returned to a player after each game concludes.
In general, the closer you can get to 100%, the better. You’ll commonly find slot machines with payout percentages of 96%-98% that offer players lengthy and enjoyable experiences while still producing a consistent revenue stream for the house.
The longer you play the less likely you are to come out ahead. The sum of all customer loses becomes the casino’s gross gaming revenue. Their net gaming revenue comes from subtracting expenses from gross gaming revenue. And that money is used to operate the business, pay down debt, or build a new tower at your expense.
The vigorish earned from making a market becomes the sportsbook’s hold. On average, a properly managed sportsbook will hold between 4%-5% per betting market. This value can occasionally be higher or lower depending on the amount of money and wagers placed on each side.
Casinos earn revenue based on an individual game’s payout percentage. Sportsbooks earn revenue charging customers vigorish, or juice, to take their bets.
Sports Betting Resources
- How to Read Sports Betting Odds – Our helpful tutorial explains what the numbers mean for point spread, moneyline, total, and Asian Handicap bets.
- Sports Betting Questions and Answers – Common sports betting questions and answers, a simple quick reference for beginners.
- Sports Betting vs Casino Gambling – Learn how sportsbooks and casinos make money, and the important differences between each business model.
- How to Read NFL Odds – Short and sweet guide to NFL point spreads, totals, and moneylines. We’ve got live example bets from upcoming NFL matchups.
- Point Spread Bet – Understanding the point spread is key to betting on football and basketball. Learn how the point spread bet works with our tutorial video and text.
- Over-Under Total Bet – Bet over or under the sportsbook’s line. We explain how to place this bet with easy examples, a video, and text explainer.
- Moneyline Bet – Whether it’s a 2-way or 3-way moneyline, we’ve got you covered. Moneylines are available for almost every major sport league, including football, basketball, baseball, hockey, soccer, tennis, and combat sports.
- Teaser Bet – A teaser is a modified parlay that lets you buy points to shift point spread and total lines in your favor. Our fun tutorial video and detailed text article explain how to place this bet.
- If Bet Win-Only – Sequence multiple bets together in an if-then sequence. Your next bet only sees action if the previous one wins. Ideal for bettors with small bankrolls.
- Futures Bet – We explain what a futures bet is, how it works, and when to bet on a future sporting event. Common futures bets include the winners of the Super Bowl, Final Four, Stanley Cup, World Series, and NBA Finals.
- Parlay Bet – Combine multiple selections into one bet that returns a huge payout if all your selections were correct. We explain how parlay bets work and provide common parlay payout tables.
- Progressive Parlay Bet – Also known as a “Close Call Parlay”, this parlay variant can win even if one or more of selections lose. Our article describes this bet in detail.
- Parlay Card Betting – Parlay cards are issued by major sportsbooks midweek, allowing bettors to make multiple point spread, total, and prop bet selections that can return big payouts. Not to be confused with an “off the board” parlay!
- Prop Bets – We explain what a prop bet is, how to place a prop bet, and provide an expansive list of sports leagues with plenty of props to bet on right now.