Casino, Sports Betting, and Lottery – A Comparison of the House Edge

The house edge, which is the commission that a gambling agent such as a

casino, a sportsbook (bookmaker), or a lottery administrator charges, is a

yardstick that measures how a specific gambling game is fair and reasonable.

It is one of the most important factors that every player should consider whenever he/she is engaged in any type of gambling, inasmuch as it indicates how much of the money wagered goes to the gambling agent’s pocket and how much is redistributed to the winners. Indeed, a house edge cannot be zero since casinos, sportsbooks, and lottery administrators have to make some money in order to cover their expenses, and to make some profit as well. Yet, a high house edge simply means that the players are unnecessarily being ripped-off, and as a result, any gambling game with a high house edge should certainly be avoided by a

knowledgeable gambler.

In this article, we shall compare, in the simplest way

possible, the house edges of a roulette, an evens-odd betting, and a Cash 3

lottery game as representatives of the three major gambling categories.

The Equation

The easiest way to compute a house edge is to compare the actual winnings that are

paid by the respective agents to the winnings that would be paid in a

fair game or bet. A fair game or a fair bet is one in which no commission

is involved; an obvious model is a game between friends. Therefore, in

percentage form, the house edge is obtained by subtracting an actual game winning

from a fair game winning and dividing the result by the fair game winning,

finally multiplying by 100. Thus,

House Edge = [ (fair game winning – actual game winning) / fair game winning ] *

100

Roulette

Because of its simplicity and popularity, we shall consider the roulette as a

representative casino game. A European roulette wheel has grooves marked by the

numbers 0 to 36; the American wheel (also called Las Vegas wheel) has an

additional groove marked as ’00’. So, the European wheel has a total of 37

numbers, while the American wheel has 38. Internet casinos usually make available

the option to select the type of wheel the customer prefers, but the brick and

mortar casinos normally offer only one type. The winning number in a roulette

game is the number corresponding to the groove where a spinning ball lands.

Now, consider a fair game in which 38 friends are playing the roulette at home,

and each one selects a number and places a $1 bet on the number (no two or more

players wagering on the same number). When the ball is spun and lands in a

groove, the number marking that groove will be the winning number.

The person who has selected this winning number collects all the money on the

table thus making him win $37. On the other hand, if the game were conducted in

a casino, the winner would be paid only $35. The difference between the two

winnings applied in the above equation gives us the house edge of a roulette game

as

( 37 – 35 ) / 37 * 100 = 2 / 37 * 100 = 5.4%

This means that every time you spend a $100 on an offline or online casino roulette, $5.40 goes to the casino and the rest is redistributed to the winners. Evidently, there are quite a number of casino games and the house edge varies

from game to game, many of them having a house edge less than that of the

roulette. For obvious reasons, a good gambler always prefers games that have low house

edges, while the casino itself loves those games with high house edges. For example,

the house edge of craps is 1.4% which makes it one of the most preferred casino

games by the players.

Even-odds Sports Betting

Again, because of its simplicity, we shall consider an even-odds betting as a

representative of this category of gambling. By even-odds we mean that the event

(usually a sports game) has equal chances of going either way. An example is a

tennis match between two competitive players each of which has an equal chance

of winning the match.

A fair bet, in this case, is just a simple bet between two friends who just

pick one of the tennis player as winner. If these two friends wager $1 each, the

winner will collect $2, thus winning $1. If instead the bets are placed

through a sportsbook, the winner will collect only $1.91, since the odds of an

evens game at most bookies and online sportsbooks is 1.91. If you are not familiar with the

decimal representation of odds, 1.91 is the same as 10/11 in UK notation and

-110 in US odds notation. Odds of 10/11 mean that you’ll win $10 when you wager $11; and odds of -110 mean that you have to wager $110 in order

to win $100. Anyway, since the winnings paid by a sportsbook is only $0.91, the house

edge of an even-odds betting
will therefore be

( 1 – 0.91 ) / 1 * 100 = 0.09 * 100 = 9%

So, this is how sportsbooks make a living. Since several internet sportsbooks offer odds higher than 1.91 in order to lure

bettors, the house edge could be smaller than 9%, which is one of the things that the bettor should be looking for when searching for a sportsbook. On the other hand, if the bettor is

wagering on parlays the house edge would be significantly higher than 9%; for

big parlays, it could go as high as 40%.

It should be apparent by now that the gambler is better off with casino games

than sports betting. It should also be noted that while the house edge could

be a major factor to consider while selecting a gambling game, it is by no means

the only one. For instance, one should consider the fact that casino games are

mostly games of chance, while sports betting also involves a learned decision in

selecting a pick, consequently leading to a higher probability of winning a bet.

Cash 3

Depending on the state you are in, this lottery game may be known by a

different name such as Pick 3, Play 3, Daily 3, etc. In this game, the player

selects a three-digit number from 000 to 999, and plays the number as a straight

or as a box. A straight play is a prediction that the number will come exactly

as selected while a box is a prediction for the number to come in any order. For

instance, if a player selects the number 672 and plays it straight, he/she will

win if the number drawn is exactly 672. Instead, if the player plays 672 as a

box, he/she will win as long as the drawn number contains a 6, a 7 and a 2, in

any order (276, for example). Obviously, a straight game pays much more

than a box game for the same amount wagered.

Now consider 1000 friends (maybe in a club) selecting a number as a straight,

each for $1, so that all the 1000 possible numbers are covered. When the winning

number is drawn, the person who has selected that lucky number will be deemed a

winner and will cash in all the $1000 collected, so making him win $999. This is

a fair game. In the case of state lotteries, however, the winner will be paid

only $500 in most states. Some states may pay a little bit less, others may pay

a little bit more, but $500 is more or less the standard. The winner therefore

wins $499. The house edge for a Cash 3 game will therefore be

( 999 – 499 ) / 999 * 100 = 500 / 999 * 100 = 50%

This house edge applies not only to the Cash 3 game but also to all state

lottery games such as Play 4, Cash 5, Mega, Fantasy 5, Lotto, Power Ball, etc.

So, whenever you are playing the state lottery, remember that you are wagering

only half of your money on the actual lottery; the other half, you are

just giving it away. Where this other half goes is not the gambler’s concern,

since his/her main objective is to win some money in order to pay the ever

present bills, or to get out of a miserable life, or to change his/her

20-year-old car. As regards contributing to education and other noble causes,

there are other means of collecting money called taxes and charities.

Unfortunately, many states do not allow casino games, and furthermore,

sports betting is illegal in the United States. The player is therefore left

with no choice but to cross state borders in search of a casino, or more

recently, to engage in online sports betting through the several offshore

internet sportsbooks. Nowadays, there is a plethora of trustworthy online

casinos and sportsbooks operating from Canada, the UK, Antigua, Costa Rica, and

so on.

The Conclusion

As far as the house edge is concerned, it has been shown that casino games

are the best choice for the gambler. On the other end, any state lottery is a

pretty miserable game to play. Nevertheless, besides the house edge, there is

also the possibility of winning to consider.

Casino games, like lotteries are mostly games of chance; the player just

selects a number or numbers and waits to see what luck brings him/her. There is

absolutely no basis to prefer one number to others. Some people try to analyze

previously drawn numbers in order to see the trend and predict the next numbers.

This strategy may work a few times, but not always. Keep in mind that it is the

players, and not the machines, who remember the previous numbers. In short, the

possibility of winning a roulette or the lottery entirely depends on luck.

While there is little or nothing that a roulette or a lotto player can do to

initially select a possible winning number, the situation could be quite

different in the case of betting. With a lot of information and some assistance from

sports handicappers, it is possible to predict the outcome of a sports event

with more certainty than predicting a Cash 3 number.

The House Edge – A Guaranteed Win for the Casinos

Here’s why it’s important to know the house edge, which is the amount of money the casino expects to win from you over time when you play the games. The bigger the edge, the more they win. The smaller the casino advantage the longer your money may last. You are at risk for a quicker loss on any type of bet within a game that has a house edge of more than 2%.

Here is the house edge, AKA casino advantage, for some of the most popular gambling games in casinos today:

Roulette

There are 38 numbered positions that players can wager on in a number of ways. Betting a single number and winning will net you a payoff of 35 to 1. Therefore the casino makes a 2 unit profit for each win. 2/38 = 5.26% advantage for the house. Your expected loss over time is $5.26 for every $100 wagered. on a single number.

Craps

Type of bet Edge

Pass Line 1.4%

Place 6, 8 1.5%

Any Seven (one roll wager) 14.36%

Baccarat

Bet Bank. 1.06%

Bet Player 1.24%

Bet Tie 14.38%

Basic Blackjack

By far the best table game as long as the player uses correct basic strategy and the house offers favorable rules such as:

Blackjack pays 3 to 2

Dealer stands on soft seventeen

Double after splitting pairs

Double on any 2 cards

Re-split pairs

Surrender allowed

Look for these rules and you’ll enjoy a house edge of about 0.5%.

It’s worth noting that many casinos have switched to hitting soft 17. This increases the edge to 0.7% but it’s still a good game. Be aware of games that pay only 6 to 5 for a player blackjack instead of the customary 3 to 2. Simply put, a 3/2 game nets a player $15 for a $10 bet, whereas a 6/5 game only pays $12. That’s a -$3 loss for every blackjack! Not good. Unfortunately, the Vegas strip is converting to 6/5 games.

Blackjack Variants

Two low edge blackjack variants are:

Spanish 21. 0.7%

Blackjack Switch 0.6%

Carnival Games

Remember the infamous words of the carnival showman P.T. Barnum? ” There’s a sucker born every minute”. A number of games are dubbed carnival games because of a higher house edge than the traditional offerings of blackjack and baccarat. They are:

Texas Holdem Bonus 2.0%

Three Card Poker 2.3%

Ultimate Texas Holdem 2.5%

Four Card Poker 2.8%

Casino War 2.9%

Crazy 4 Poker 3.4%

Let it Ride 3.5%

Mississippi Stud Poker 4.9%

Caribbean Stud Poker 5.2%

Also, be mindful of the optional bonus or side bets at the tables. Most games have them, including those with a low edge.The winning payout amounts look very attractive and players can win even if the original wager is lost to the house. However the house edge jumps to double digits on most of these wagers.

Sports Gambling

When betting on sports games, the house takes a “vig”, slang for vigorish, when bettors make an even money wager. For example, a $10 bet on the Buffalo Bills, vs. the Miami Dolphins will cost $11. Player wins $10, the house keeps $1.

Slot Machines

It seems the everybody loves the penny slots these days. Multi-coin, multi-line with striking themes, graphics and bonus features. Players can wager as little as fifteen cents up to three or four dollars per spin. the edge on the pennies ranges between 10 & 15%! The hold on dollar and higher machines is much lower, ranging from 2 to 5%. If you’re going to bet max on the pennies, you’re better off playing the bucks.

If you like machines study up on video poker. Learn how to read the pay tables that are posted on each machine. There is a skill element to video poker. Choosing the right game can drop the house edge to less than 1%. Good Luck!