How Do Sportsbooks Make Money?

by Chris Vasile - 4/18/2019

Some people refer to sportsbooks as a sanctuary; a place they can go where they do their best thinking and enjoy the games and atmosphere. Some people refer to them as utter chaos, and other than placing their bets at one, do everything in their power to get out before the games actually start. Whether you are one side of the fence or the other, as long as the sportsbooks have your money tied up with them, they have you right where they want you. For those of you who are new to the betting industry, a sportsbook is often another name for a bookmaker, although this is the more common term in the United Kingdom. A 'bookie' is a single person who accepts bets on sporting events, like a sportsbook is a legal establishment where wagers can be made. Their sole purpose is to make as much money as possible, and oh are they ever doing that.

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How Do Sportsbooks Operate?

The simple answer to this question is that the sportsbooks are free to operate however they see fit. Each sportsbook has a different set of rules that constitutes what is considered a winning bet. Some facilities offer your money back when a push occurs against the spread, while some consider that a loss on a parlay ticket. Sportsbooks can also set their own lines and odds and adjust them however much they want in order to avoid a big loss, while still attracting action on both sides of the event. While sportsbooks try to be unique, the similarities between them are obvious. All of them offer up the same types of bets - moneyline , point spread , totals , parlays, teasers, game-specific prop bets, and future bets. However, the juice or vig you will have to pay in order to come out ahead is very different from book to book.

What is Vig?

The main technique bookmakers use to put the odds in their favor is the inclusion of vigorish (aka Vig). It is built into the odds bookmakers set to help them make a profit. In essence, it's a commission charged for laying bets. To best explain vig, let's look at a simple coin flip.

The toss of a coin has two possible outcomes, and each is equally likely. There is a 50 percent chance of heads and a 50 percent chance of tails. If a bookmaker were offering true odds on the toss of a coin, they would offer even money. This is 2.00 in decimal odds, +100 in money line odds, and 1/1 in fractional odds. A successful $10 bet at even money returns $20, which is $10 profit plus the initial stake back.

Let's say a bookmaker had 100 customers all betting $10 on the toss of a coin, with half of them betting on tails and half of them betting on heads. The bookmaker would stand to make no money at all in this scenario.

Now, with the inclusion of vig, a sportsbook is guaranteed to make money regardless of the outcome. When two outcomes are equally likely, it is common for them to use odds of 1.90 (-110 in money line).

Continuing with the coin toss example, the odds-on heads and tails would still both be the same, but they would now be at 1.90. This means that a successful $10 would return a total of $19.09 ($9.09 in profit, plus $10 original stake).

As you can see, the change in odds makes a big difference, and the bookmaker is now making a guaranteed profit on every toss of the coin. The total amount they pay out is always going to be $954.50 against the $1,000 they have received in total wagers. They have found a way to make a profit margin of $45.50 on the vigorish.

This is a very simplified example, but it' just goes to show you how bookmakers set the odds to give them an advantage. Things get a little more complicated when it actually comes to sports events, as the possible outcomes aren't usually equally likely. This is why you have to pay a premium on point spread lines that land on key numbers. Sportsbooks are simply protecting their bottom line and doing everything in their power to make sure the action is equal on both sides.

Most Popular Sportsbooks

Since very few places recognize gambling as being legal, the most popular sportsbooks are in Las Vegas, Nevada. This is the betting capital of the world, and during events like the NFL playoffs or March Madness it is incredibly hard to find a seat in these facilities to enjoy the games. Tourists from outside of Nevada flock to Sin City in hopes of turning a couple bucks into much more. If you ask 10 people which sportsbook their favorite is, they will likely all tell you a different answer. Some of the more notable "sportsbooks" in Las Vegas include Westgate, Caesar's Palace and the MGM Mirage.

In today's day and age, online sportsbooks are becoming more and more prominent. These are sportsbooks that have a physical location outside of the United States but accept clients from all over the world. These kinds of sportsbooks are also referred to as an offshore book. The concept is basically the same as a normal sportsbook except everything is done online with a few clicks of your mouse or taps of your fingers on your phone. Some of the more popular online sportsbooks are 5Dimes, Bovada and Bookmaker.

How to Choose the Best Sportsbook For You

In order to get the best bang for your buck while betting on sports, you must shop around and find the best lines. This is money-management 101, but you'd be surprised at how many bettors have only one sportsbook to wager with. As I mentioned, sportsbooks are free to set the odds however they see fit, which means some will have better odds than others. The Chicago Cubs may be -180 at one book and -190 at another. The difference of .10 cents won't break your bankroll right on the spot, but it adds up down the line.

If you like to play parlays, find a book that offers good returns for a winning parlay bet. Some books offer a percentage on top of your winnings depending on how many teams are in that parlay. If you are a big point spread player, some sportsbooks offer up lines higher or lower (depending on what side you're playing) than other sportsbooks and some sportsbooks have a points rewards system. If you look hard enough you will find something that fits your style of play.

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How Do Sportsbooks Make Money?

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