How A Sportsbook Stays In Business
What if everyone puts their money on one team and that team ends up winning?
Couldn’t that bankrupt the sportsbook? Yes that scenario could bankrupt a sportsbook. But a sportsbook would never let the betting public put too much money on any one side of a bet.
The way sportsbooks stay in business and consistently make money is by splitting the total amount bet on an event evenly between both sides of the bet.
Cowboys +6 at Patriots -6 Total Score: 51.5
A sportsbook wants 50% of the bets to go on Dallas and 50% to go on the Patriots. The same is true for the total line. They want bets to be split 50/50, half on the under, half on the over.
With a little bit of math they can keep the odds forever in their own favor.
Cowboys +6 (-110) at Patriots -6 (-110) Over 51.5 (-115) Under 51.5 (-105)
You very rarely, if ever, get an even money bet. The -110 that’s now next to the lines, called the vig, represents the percentage of money you’ll receive back if you bet $100. At –110 you’ll receive $90 for every $100 that you bet. If it were +110 it would mean that you would receive $110 for every $100 that you bet.
Now imagine you and your friend have differing opinions of how this game will go. You think the Cowboys will win so you put a $100 bet on it. Your buddy thinks the opposite so he puts $100 down on the Patriots. The sportsbook has just collected $200 in bets. But will only have to pay out $190 to the winner. With zero risk on who wins the game the sportsbook has captured $10 from your combined bets.
This is the elegance of the sportsbook business model. Sit in the middle of bettors and facilitate betting but take no sides. By not taking sides they can assure a win for themselves. It’s a small win but at volume that $10 adds up very fast.¹
Keeping the bets split 50/50 is the whole key to this. It’s why betting lines move during the time leading up to an event.
When lines for an event first come out the sportsbook doesn’t know for sure that they got it right. They make a guess based on experience and algorithms. But what they’ll do is adjust the line, the vig, or both in…