expecting to lose their stake while enjoying the process. But for others it can cause real problems when it gets serious. People can lose control, damage their finances, and hurt the people around them. Recent accusations involving professional athletes and gambling have raised new concerns about the scope of the problem. To add, mobile apps have made sports gambling so easy - available 24/7 - increasing risk for impulsive bettors.
Some Definitions First
A bettor is a person who places a wager on a sporting event. A sportsbook is a business, either a physical location or online platform, that accepts wagers on sporting events, sets odds, takes bets, and pays winners. Book is short for sportsbook. A parlay is a single bet linking two or more individual wagers where all selections must win for the parlay to pay out. It offers higher payout than individual bets but requires all picks to be correct.
The house refers to the sportsbook itself, the entity running the betting operation and collecting the edge. The term comes from casino gambling where "the house" means the casino. Vig is short for vigorish, the commission or fee the sportsbook charges for accepting a bet. Handle is the total amount of money wagered with a sportsbook over a specific period. Action refers to total betting activity, and balanced action means roughly equal money on both sides of a bet.
The Vigorish Model
It’s all about the vig and here is how it works. Standard point spread bets require you to risk $110 to win $100, expressed as -110 in American odds. You must win 52.38% of your bets to break even. Win exactly 50% and you lose money steadily. Here's the math: win 1 bet and you gain $100, lose 1 bet and you lose $110, netting negative $10 after 2 bets at 50% win rate. To break even, you need to win 110 divided by 210, which equals 52.38%. The 10% commission creates an automatic house edge of 4.5% when action balances on both sides.
When a sportsbook takes $110,000 on Team A at -110 (better bets $110 to make $100 with a win) and $110,000 on Team B at -110, the total handle is $220,000. If Team A wins, those bettors receive $210,000, which is their $110,000 stake plus $100,000 profit. Team B bettors get nothing. The sportsbook collected $220,000 and pays out $210,000, keeping $10,000 regardless of outcome. That's a 4.5% margin on balanced action.
The sportsbook doesn't care which team wins. It wants equal money on both teams, collecting vig from losers while paying winners with other bettors' money. Oddsmakers adjust lines in real time to balance action, not predict outcomes. When too much money comes in on one side, the book faces risk. If $200,000 comes in on Team A and only $50,000 on Team B, the book loses $150,000 if Team A wins. They'll move the line from Patriots -3 (Patriots favored to win by 3 points) to Patriots -3.5 (Patriots favored to win by 3.5 points,) then to Patriots -4 (Patriots favored to win by 4 points) if needed, until action balances or they accept the risk.
Parlay Mathematics
Parlays are a whole other ballgame, appearing attractive to bettors because they offer higher payouts than single bets. A $100 two-team parlay pays $264 while two separate $100 bets only win $200 total. But the math reveals the trap. For a two-team parlay assuming two 50/50 bets, the true probability of winning is 25%. Fair payout at 3 to 1 would give you $300 profit on a $100 bet. Actual payout at 2.6 to 1 gives you $260 profit. The house keeps $40 per winning parlay, creating a 13.3% house advantage. Compare this to the 4.5% edge on straight bets.
A four-team parlay has true odds of 15 to 1, meaning a 6.25% chance of winning. Fair payout would be $1,500 profit on $100 bet. Typical payout is 12 to 1, giving you $1,200 profit. The house keeps $300 per winning parlay, a 20% house advantage. A ten-team parlay has true odds of 1,023 to 1, a 0.0977% chance. Fair payout would be $102,300 profit on $100 bet. Typical payout is 600 to 1, giving you $60,000 profit. The house keeps $42,300 per winning parlay, a 41.4% house advantage.
Most bettors don't calculate true odds. A 10-team parlay paying 600 to 1 sounds generous, but true odds are 1,023 to 1. You're getting 58.6% of fair value on a bet that already has a 0.0977% chance of winning.
Who Wins and Who Loses
Research on millions of bets shows professional bettors in the top 1% win 54-56% on straight bets with 2-5% ROI on total money wagered. Recreational bettors in the bottom 90% win 45-48% on straight bets with -8% to -12% ROI on total money wagered. At 45% win rate with standard -110 odds, you lose approximately 10% of total money wagered.
Over 100 bets at $110 each, you wager $11,000 total. With 45 wins, you profit $4,500. With 55 losses, you lose $6,050. Net result is negative $1,550, a 14.1% loss rate. Even at 48%, which is better than most recreational bettors, you still lose 8.4% of total wagered. You need 52.38% just to break even.
I’ll cover prop and exotics bets in my next post. These push margins higher.
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