Originally appeared March 2001

Casinos Make Their Money from Winners?
By
Dale S. Yeazel

I read some interesting statements in “Scarne’s Complete Guide to Gambling” by the man I consider to be the father of modern gambling knowledge, John Scarne. He asserts that casinos make their profits from winning gamblers, not losing ones. In casinos, losing gamblers do not pay a percentage to the house for the privilege of using its facilities. The money collected from losing bets is used to pay winning bets and hasn’t earned the house any profit. The house’s profit comes from paying winning bets at less than correct odds. “It is the winners that pay for the privilege of gambling, not the losers.”

The house percentage on winning bets are the reason winning gamblers leave with less money than they should have. It would be safe to say that all gamblers are aware of house percentage, but few of them understand the mechanics of it. “But as most of them can’t calculate it, they never know how powerful it is and because it works so smoothly and quietly, they forget most of the time it is even there.”

Computing the house percentage (edge) is sometimes not as complicated as one might think. This is especially true when it comes to roulette and the proposition bets in craps. All that is required is the ability to calculate the true odds against winning a bet and learning how to compare that to the odds you are paid.

A player that makes a bet on the “hard six” is betting that a hard six (3-3) will be thrown before an “easy six” or a seven. That means there is one combination that will cause the bettor to win (3-3) versus ten combinations that will cause him to lose (1-5, 5-1, 2-4, 4-2, 1-6, 6-1, 2-5, 5-2, 3-4 and 4-3). This means the chances against the hard six bettor is 10 to 1, ten losers versus one winner.

If the casino paid true odds on a bet that is 10 to 1 against the player, the player could bet $1, get paid $10 and collect a total of $11 by taking his winning bet down. In real life, the bettor is paid $9 dollars for his $1 hard six and can collect a total of $10 “and down.” The simplest method of computing HP (house percentage) is this: divide the difference a bet is paid and what it should be paid, by what the bet would pay “and down” if the bet had paid true odds. In this case: the bet should have been paid $11 and down but was only paid $10 and down so the difference is $1. Now divide $1 by what the bet should have paid and down ($11). 1/11 = .0909 to covert this to the more recognizable percentage, we merely multiply times one-hundred or move the decimal point two places to the right and we get 9.09%. You will get the same results regardless of the size of the bet you choose to use in the example.

On a 0-00 roulette table there are thirty-eight compartments, the numbers 1-36 and the 0 and 00. This means the chances against the player betting one number is 37 to 1, 37 losers versus 1 winner. The player that wins a $1 bet on a straight up bet on a number is paid $36 dollars and down, when true odds would have paid him $38 dollars and down. The difference then is $2. 2/38 = .05263 = 5.263%.

Suppose you find a casino that not only doesn’t charge a player the 5% vig on a buy bet on the four or the ten unless it wins but only charges $3 for a $75 buy bet (instead of $3.75 or $4). You might be hard pressed to find a book that would tell you the HP on that particular bet. But why look, when you can easily compute it yourself? $75 should pay $225 and down, but you only get $222 and down: 3/225 = .01333 = 1.333%.

Now, computing the HP on the pass line or field is a bit more complicated and computing the HP in blackjack requires a mind like John Scarne. But I hope you can use this lesson to gain an understanding of how to compute house percentage on many of the bets offered by casinos.

Some people gamble for pleasure and have no regard for house percentage. Some people learn enough about the mechanics of the games to give them delusions about being able overcome house percentage. The well adjusted gambler still gambles for fun, doesn’t believe anything can be done to overcome house percentage but doesn’t think a little education prevents him from having a good time and maybe makes his bankroll last a little longer.