How Sportsbooks Make Money

Sports Insights is a leader in providing innovative sports information and betting systems to help its members navigate the sports marketplace. Sports Insights' founder, Dan Fabrizio, recently came out with a book titled 'Sports Investing: Profiting from Point Spreads', solidifying our position as a leader in the field of sports gambling analysis. Sports Insights focuses on systematic and measurable approaches to capturing value in the sports marketplace. One of the key elements to our approach is our proprietary Betting Percentages, collected from several major online sportsbooks.

To understand exactly how sportsbooks make money, you have to know how sports betting works. However, for the sake of this article's length, we are going to assume you understand that sports. This infograph researched by Joseph Falcehtti, indulges into the sportsbook industry to discover how they make profits and how a certain set of individuals, notably Billy Walters and Bob Volugaris became 7 figure yearly earners through sports betting. Sportsbooks do not always win in the short run but with a proper balance sheet and book, they should always make.

How does a business, and more specifically a sportsbook, view profit and revenue? How do they manage risk? How are sportsbook profit margins managed for greatest gain? How can 'Betting Percentages' help? At Sports Insights, we often use phrases like 'betting percentages' and 'smart money.' With this article, the first of a series, SportsInsights will be studying the workings of the sports investing marketplace. In this article, we take a step back and look at what an actual risk manager at a sportsbook might feel. We'll look at how sportsbooks make lines for games, study how they might shade lines to increase profit margins, and see how public 'betting percentages' can help identify value.

In future articles within this series, we'll take a closer look at why 'smart money' and 'reverse line movement' are telling indicators — and how they work on a more fundamental level. These articles can help us get a better understanding of why 'contrarian investing' works — and how sportsbooks operate. The information on this site is for entertainment and educational purposes only. Use of this information in violation of any federal, state, or local laws is prohibited.

Sportsbooks and Balancing Risk

How Sportsbooks Make Money. Most gamblers have heard the term 'the house always wins.' And in most cases, it's pretty clear why the house wins. In blackjack, the dealer's hole card is hidden, giving the casino the house edge of players being forced to make.

For point-spread sports, the odds are generally around -105 or -110. For instance, you might be able to bet on the favorite in the NFL such as the New Orleans Saints at -10 at -110 odds, or the favorite in an NBA game such as the Boston Celtics -3 at -105 odds. If you wanted the other side of the bet, you could normally take the underdog for the same point-spread (+10 and +3, respectively), and 'receive' the points, instead of 'giving' the points. The odds are typically close to even odds, such as -105 or -110 (which means risking $105, or $110, to win $100). Point-spreads — and moneyline odds — are designed to help sportsbooks balance the risk they have on either side of a bet.

Sportsbook Payouts and the 50%/50% Betting Percentage or 'Balanced Book'

In this example, a casino or sportsbook has taken in 100 bets of $110 each ($110 to win $100), or a total of $11,000. Fifty percent (50%) of the bets (or 50 bets of $110 each, totaling $5,500) are on the favorite and 50% of the bets are on the underdog.

• The sportsbook knows that if the Favorite wins, they have to pay out $10,500 to the appropriate bettors ($5,500 bet plus $5,000 winnings).
• Similarly, if the Underdog wins, the sportsbook also has to pay out $10,500 — to the appropriate bettors.
• The sportsbook is happy because either way, they have profited — since they collected $11,000 in total and need to pay out just $10,500.

This is fairly ideal for the sportsbook's risk manager. The bets are evenly balanced so the sportsbook collects the vig with no risk. The sportsbook will collect $500 on $11,000 worth of action, for a profit margin of 4.5%. The sportsbook has a nicely balanced book of business.

Sportsbook Payouts and the 'Centered Game'

In addition to trying to balance bettors on either side of a bet, sportsbooks seek to price the odds of each bet so that each sporting event is close to a 'centered game,' or a bet whose pricing reflects the actual expected probability of that event to occur. If the bets are priced with the true exact probabilities, bettors will only be able to win 50% of their point-spread bets (and appropriate moneyline winning percentage) — and the sportsbooks will collect the 4.5% profit margin in the long run due to the cushion of the vig. In this example, the actual bets that a sportsbook takes won't matter in the long-run (because by definition, the proper pricing will prevent bettors from making outsized gains).

Human Nature, Profit Margins, and Shaded Lines

In the examples above, we show perfect scenarios for the sportsbooks. In real-life, it is difficult for the sportsbooks to perfectly balance the risk on every single bet they take. In addition, it is impossible to know the precise odds of any sporting event to perfectly 'center the odds.'

However, there is one sure thing that rings true: human nature. Bettors have certain tendencies. For instance, on average, bettors like to take favorites. Sports fans also like 'jumping on the bandwagon' and riding the coattails of perennial winners. Sportsbooks can use these biases to shade their lines and increase their profit margins.

We estimated a sportsbook's expected profit margin based on results over a wide range of events (small favorites, heavy favorites, etc.). We analyzed the expected profit margin when shading a team's expected probability for covering the spread by 1%, 2%, and 3%. Note how the left column, 'Public % on Overpriced Side,' affects the overall profits, when shaded by the different percentages. For the purposes of this table, we assumed all bets are the same size.

Table 1: Expected Profit Margin for Shaded Lines based on Betting Percentages

What do the Results Mean?

As you can see in Table 1, above, there is a strong incentive for sportsbooks to shade lines, based on their experience with bettors and human nature. For example, we know that many bettors prefer to bet on favorites. Based on our analysis, if 60-80% of bets are taking the favorite, sportsbooks can improve their profit margins from 4.5% to about 6% by shading their lines 2%! Most games do not get out of whack in terms of public 'betting percentages' to 0%/100% — especially in the opposite direction that sportsbooks expect, so there is virtually no risk for the sportsbooks to shade their lines.

And How Can Betting Percentages Help?

Based on research for this article, we can see that when the public 'betting percentages' get to extremes, it identifies games that sportsbooks have potentially shaded. For example, the Lakers might be favored by -12 points instead of the -10 that the 'centered numbers' dictate. The sportsbooks know that the betting public will lean to the popular teams and heavy favorites. They will make the 'Joe Public' 'pay more' to take the heavy favorites.

In the most lopsided-bet games, as determined by 'betting percentages,' you want to 'Bet Against the Public' and take the same side as the long-term winners: the sportsbooks. Betting against the public has proven to be a good contrarian investment for those who seek value in the sports marketplace.

Disclaimer

We do not guarantee that the trends and biases we've found will continue to exist. It is impossible to predict the future. Any serious academic research in the field of 'market efficiencies' recognizes that inefficiencies may disappear over time. Once inefficiencies are discovered, it is only a matter of time before the market corrects itself. We do not guarantee our data is error-free. However, we've tried our best to make sure every score and percentage is correct.

A sportsbook is the same thing as a 'bookmaker' or 'bookie.' It's a company or individual who accepts bets from individual sports bettors. Most of these kinds of bets are on whether a team (or individual) is going to win a specific sporting event.

Books accept bets on either side of a sporting event. They're able to afford this because of the difference between what a bettor has to wager and what a bettor wins. Most bets at most books require a bettor to wager $110 to win $100, although some require $120 to win $100. (And some discount books only require $105 to win $100.)

Those numbers, by the way, are ratios. You don't have to wager $110. You could bet $55 or $11—you'd just see winnings of $50 or $10 for those bets. It's the ratio that's important, rather than the specific amount. Internet online casino.

Bookmaking in the United States is tightly regulated by the government. Most states don't have legal sports betting, although that's likely to change based on https://www.gamblingsites.org/blog/delaware-becomes-first-state-to-usher-legalized-sports-betting/recent Supreme Court rulings. But the Federal Wire Act outlaws using any kind of wired device (like a telephone or an internet connection) to place sports bets, even with legal books.

Plenty of online companies are willing to accept sports bets from United States customers, though. These books are located offshore and contend that they're doing business in their country, where such activity is legal and regulated.

This post takes a closer look at the sportsbook business and how it makes a profit from its customers.

What Kinds of Bets Do Sportsbooks Handle?

Most sportsbooks accept wagers on most major sporting events, especially college and professional events. Some online bookmakers expand the kinds of bets they offer to other, non-sporting events, like the results of political elections and/or the Oscars. The action that these books accept varies from book to book.

The most popular sports bets that bookmakers handle include:

• Baseball
• Basketball
• Boxing
• Football
• Golf
• MMA
• Racing
• Tennis
• Soccer

Of course, in the United States, it's hard to imagine two sports getting more action than football and basketball. But in other countries, what we call soccer is called football, and it's the most popular sport to bet on.

Also, when I use the term 'racing,' I mean both horse races and car races. NASCAR betting is hugely popular in the United States.

But you're not limited to betting on just those sports. Depending on which book you're doing business with, you can also bet on smaller and more unusual events, including billiards, bowling, and darts.

No matter what sport you're placing a bet on, the sportsbook has figured out a way to make it profitable for them and unprofitable for you—unless you're exceptional.

This next section covers how they do that:

How Sportsbooks Make Their Money

Bookmakers are like any other business. They exist to generate a profit.

But you can't make money if you're willing to take bets on both sides of the game, can you?

You'd think, if you didn't know better, that books make their money from being on the right side of the games. That's not the case.

The profit comes from what the bookmaker asks you to wager when you place your bet.

Most bookmakers ask you to bet $110 to win $100. (The amounts can change, but the ratio is the same. For example, you could bet $55 to win $50, or $22 to win $20, or $11 to win $10.)

If they get an equal amount of money on either side of the contest, they're guaranteed a profit.

Here's how that math works:

100 people bet on a football game, and 50 of them take the home team. The other 50 take the away team. Assume that the average bet size for each of them on each side is $110.

The bookmaker collects $110 X 100 people, or $11,000.

The winners get their initial $110 back, so 50 X $110 is $5500.

The winners also win $100 each. That's another $5000.

That's $10,500 in payouts, but since they collected $11,000, they make $500 profit—no matter which team loses.

That extra $10 you're risking on the bet?

That's called 'the vig' or 'the juice.'

That's what gives the book its positive expectation. It's comparable to the rake in poker, or the house edge on a casino game.

Bookmakers are good at handicapping teams in such a way that a bet on either side has a 50% chance to win. They're also good at handicapping teams in such a way that both sides see roughly the same amount of action.

Of course, not all bets use that $110 to win $100 ratio. In some books, the ratio is even worse for the player–$120 to win $100. Others discount the juice and only ask you to bet $105 to win $100.

And in some contests, the book doesn't handicap the teams at all. They just create a money line, where a bet on the favorite wins much less money, while a bet on the underdog wins much more money. When they do this, they set the payout odds in such a way that they're still going to make a profit regardless of which side wins.

This business model is ingenious, and it's also hugely profitable. Large bookmakers deal with hundreds of thousands of dollars per game. In the case of NFL football, that's 15 or 16 games per week.

That $500 profit starts to add up fast.

Of course, bookmakers need to be well capitalized. In the short term, anything can happen. They're not guaranteed an equal amount of action on each side. In those cases, they might need funds to compensate.

Over time, the law of large numbers sees to it that the book stays profitable, though.

Are Sportsbooks Legal?

The legality of sportsbooks varies based on the jurisdiction that you're talking about. In the United States, for example, sportsbooks are illegal almost everywhere in the country. A recent Supreme Court decision is catalyzing change in that area.

The underground sports betting industry, though, is tremendous. If you've spent much time at a local bar, you've probably met multiple customers of local bookies. They have a reputation for being part of organized crime, and maybe some of them are, but some of them are just guys who figured out the math behind the business and started taking bets.

Many local bookies use offshore sportsbooks to even out the action on either side of the betting, in order to reduce their risk when the action gets lopsided.

How Much Money Do Sportsbooks Make

The Wire Act makes it illegal to take sports bets over the phone or the internet, but it's a rare local bookie that gets prosecuted for this. I've never seen any reports of a bookie's customer getting arrested or prosecuted for placing a bet.

Of course, in other, more enlightened countries, bookmaking is completely legal and regulated. The UK is an example of a country with this kind of attitude.

The advantages of legal and regulated bookmaking are obvious. For one thing, legal, regulated businesses pay taxes. For another, consumer protections exist for customers of legal, regulated businesses.

The amount of tax money the United States is leaving on the table because of the current legal status of sports betting is staggering. In fact, enormous amounts of money fly offshore every day because of customers using online sportsbooks. That money could be kept in the United States economy if sports betting were legal and regulated.

What's the Difference between a Traditional Bookmaking Operation and a 'Betting Exchange?'

A betting exchange is similar to a bookmaker, but the differences are significant enough that they have another name and business model. It's more of a marketplace model, where customers can buy and sell either side of the action.

This is more or less what a traditional bookmaker does, but with a betting exchange, the customers set the odds themselves. The betting exchange doesn't care about how good or bad the bets are, because they charge a small commission to the winning side of each bet.

The biggest example of a betting exchange is Betfair. You can both back and lay bets there. With a traditional bookmaker, you can only back a bet.

Here's what that means:

When you bet with a bookmaker, you bet that something will happen. The bookmaker wins if it doesn't happen. That's backing a bet.

With a betting exchange, you can play the part of the bookmaker and bet that something won't happen. That's laying a bet.

All you have to do is find another customer who's willing to take the other side of the bet at the odds you like.

This creates opportunities for trading and arbitrage that would be almost impossible when dealing with bookmakers. Smart bettors can find plenty of opportunities to take advantage of inequities in the marketplace of a betting exchange and guarantee themselves a profit.

Some traditional sportsbooks criticize betting exchanges for stimulating corruption in sports. It's easier to rig an event to not happen than it is to rig an event to happen. And traditional books like Ladbrokes and William Hill suggest that giving individuals that opportunity to profit will result in more events being fixed.

How Betting Lines Work

The most common types of sports bets are:

• Spread bets
• Moneyline bets
• Totals
• Prop bets

Spread bets are bets on a team to win by a certain number of points, or for a team to cover a certain number of points if they lose. The books use handicappers to predict the outcomes of the games. Based on this handicapping, they set a point spread.

A favorite must win by a minimum number of points for a bet to win. An underdog can win even if the team loses. All they must do is cover the point spread.

The spread is set up to do 2 things:

1. Create a roughly 50/50 chance of winning
2. To stimulate roughly the same amount of action on either side of the bet

A moneyline bet, on the other hand, doesn't take a point spread into account. Instead, the amount you win is adjusted by the likelihood that a team will win or lose. If you bet on an underdog, you'll win more money if they win. (They're expected to lose.) If you bet on a favorite, you'll win less money than you've risked. (They're expected to win.)

The amounts are determined by how big a disparity there is between the teams. You might bet $100 on a favorite but only win $20 if they win the game. Or you might bet $100 on an underdog and win $150 if they win the game.

Totals are also called 'over/under' bets. These bets pay off if the total scores for the 2 teams are over or under the predicted total. The handicapper sets these totals in the same way they calculate the point spread. They want to create a 50/50 chance of winning, but more importantly, they want to get equal amounts of action on both sides of the contest.

Proposition bets are bets you can make on any kind of random event during a game. This might be something as random as who'll win the coin toss in a football game. Or it might have some element of skill, like a prop bet on who's going to score the first touchdown in a game.

All of these available bets are called 'betting lines.' They're created by the mathematicians and statisticians working for the books using software and experience. This is the most important job at a sportsbook, and good handicappers can make or break a business.

Different sportsbooks have different handicappers, so it should be no surprise that the betting lines at one book can differ from the betting lines at another book. Shopping lines for the best opportunities is one way smart sports bettors profit from these companies.

How Sportsbooks Handle Bets on Different Sports

The kinds of bets available usually vary from sport to sport. For example, in contests like golf or auto racing, you bet on who's going to win the race or the golf tournament. The payout is based on how likely it is for your pick to win.

These kinds of bets are straightforward enough. Each golf tournament participant or each driver has a payoff associated with him or her. For example, you might win 4 to 1 if Jeff Gordon wins a race. Or you might win 5 to 1 if Tiger Woods wins the golf tournament.

In addition to bets on the individuals participating, you can also place bets on 'the field.' This is a bet that someone other than the individuals listed wins. This could be any number of people.

Bets on boxing and the MMA are similar, but of course, there's only a single winner in any fight. These are moneyline bets. You pick a winner, and you get paid off based on the likelihood that you're right.

Bets on games like baseball and soccer usually use a moneyline approach. You bet a certain amount of money, and the amount you can win depends on how well the team is favored (or how badly the oddsmakers think the team will lose.)

Sometimes baseball includes a run line, which is similar to a point spread, but the run line is always 1.5. It doesn't change based on the relative strength of the teams. Further changes based on the strength of the teams are calculated into the moneyline.

The most popular way to bet on football, though, is spread betting. The point spread in football is so popular that major publications report on it, even though betting on NFL game is theoretically illegal in most parts of the United States.

We estimated a sportsbook's expected profit margin based on results over a wide range of events (small favorites, heavy favorites, etc.). We analyzed the expected profit margin when shading a team's expected probability for covering the spread by 1%, 2%, and 3%. Note how the left column, 'Public % on Overpriced Side,' affects the overall profits, when shaded by the different percentages. For the purposes of this table, we assumed all bets are the same size.

Table 1: Expected Profit Margin for Shaded Lines based on Betting Percentages

What do the Results Mean?

As you can see in Table 1, above, there is a strong incentive for sportsbooks to shade lines, based on their experience with bettors and human nature. For example, we know that many bettors prefer to bet on favorites. Based on our analysis, if 60-80% of bets are taking the favorite, sportsbooks can improve their profit margins from 4.5% to about 6% by shading their lines 2%! Most games do not get out of whack in terms of public 'betting percentages' to 0%/100% — especially in the opposite direction that sportsbooks expect, so there is virtually no risk for the sportsbooks to shade their lines.

And How Can Betting Percentages Help?

Based on research for this article, we can see that when the public 'betting percentages' get to extremes, it identifies games that sportsbooks have potentially shaded. For example, the Lakers might be favored by -12 points instead of the -10 that the 'centered numbers' dictate. The sportsbooks know that the betting public will lean to the popular teams and heavy favorites. They will make the 'Joe Public' 'pay more' to take the heavy favorites.

In the most lopsided-bet games, as determined by 'betting percentages,' you want to 'Bet Against the Public' and take the same side as the long-term winners: the sportsbooks. Betting against the public has proven to be a good contrarian investment for those who seek value in the sports marketplace.

Disclaimer

We do not guarantee that the trends and biases we've found will continue to exist. It is impossible to predict the future. Any serious academic research in the field of 'market efficiencies' recognizes that inefficiencies may disappear over time. Once inefficiencies are discovered, it is only a matter of time before the market corrects itself. We do not guarantee our data is error-free. However, we've tried our best to make sure every score and percentage is correct.

A sportsbook is the same thing as a 'bookmaker' or 'bookie.' It's a company or individual who accepts bets from individual sports bettors. Most of these kinds of bets are on whether a team (or individual) is going to win a specific sporting event.

Books accept bets on either side of a sporting event. They're able to afford this because of the difference between what a bettor has to wager and what a bettor wins. Most bets at most books require a bettor to wager $110 to win $100, although some require $120 to win $100. (And some discount books only require $105 to win $100.)

Those numbers, by the way, are ratios. You don't have to wager $110. You could bet $55 or $11—you'd just see winnings of $50 or $10 for those bets. It's the ratio that's important, rather than the specific amount. Internet online casino.

Bookmaking in the United States is tightly regulated by the government. Most states don't have legal sports betting, although that's likely to change based on https://www.gamblingsites.org/blog/delaware-becomes-first-state-to-usher-legalized-sports-betting/recent Supreme Court rulings. But the Federal Wire Act outlaws using any kind of wired device (like a telephone or an internet connection) to place sports bets, even with legal books.

Plenty of online companies are willing to accept sports bets from United States customers, though. These books are located offshore and contend that they're doing business in their country, where such activity is legal and regulated.

This post takes a closer look at the sportsbook business and how it makes a profit from its customers.

What Kinds of Bets Do Sportsbooks Handle?

Most sportsbooks accept wagers on most major sporting events, especially college and professional events. Some online bookmakers expand the kinds of bets they offer to other, non-sporting events, like the results of political elections and/or the Oscars. The action that these books accept varies from book to book.

The most popular sports bets that bookmakers handle include:

• Baseball
• Basketball
• Boxing
• Football
• Golf
• MMA
• Racing
• Tennis
• Soccer

Of course, in the United States, it's hard to imagine two sports getting more action than football and basketball. But in other countries, what we call soccer is called football, and it's the most popular sport to bet on.

Also, when I use the term 'racing,' I mean both horse races and car races. NASCAR betting is hugely popular in the United States.

But you're not limited to betting on just those sports. Depending on which book you're doing business with, you can also bet on smaller and more unusual events, including billiards, bowling, and darts.

No matter what sport you're placing a bet on, the sportsbook has figured out a way to make it profitable for them and unprofitable for you—unless you're exceptional.

This next section covers how they do that:

How Sportsbooks Make Their Money

Bookmakers are like any other business. They exist to generate a profit.

But you can't make money if you're willing to take bets on both sides of the game, can you?

You'd think, if you didn't know better, that books make their money from being on the right side of the games. That's not the case.

The profit comes from what the bookmaker asks you to wager when you place your bet.

Most bookmakers ask you to bet $110 to win $100. (The amounts can change, but the ratio is the same. For example, you could bet $55 to win $50, or $22 to win $20, or $11 to win $10.)

If they get an equal amount of money on either side of the contest, they're guaranteed a profit.

Here's how that math works:

100 people bet on a football game, and 50 of them take the home team. The other 50 take the away team. Assume that the average bet size for each of them on each side is $110.

The bookmaker collects $110 X 100 people, or $11,000.

The winners get their initial $110 back, so 50 X $110 is $5500.

The winners also win $100 each. That's another $5000.

That's $10,500 in payouts, but since they collected $11,000, they make $500 profit—no matter which team loses.

That extra $10 you're risking on the bet?

That's called 'the vig' or 'the juice.'

That's what gives the book its positive expectation. It's comparable to the rake in poker, or the house edge on a casino game.

Bookmakers are good at handicapping teams in such a way that a bet on either side has a 50% chance to win. They're also good at handicapping teams in such a way that both sides see roughly the same amount of action.

Of course, not all bets use that $110 to win $100 ratio. In some books, the ratio is even worse for the player–$120 to win $100. Others discount the juice and only ask you to bet $105 to win $100.

And in some contests, the book doesn't handicap the teams at all. They just create a money line, where a bet on the favorite wins much less money, while a bet on the underdog wins much more money. When they do this, they set the payout odds in such a way that they're still going to make a profit regardless of which side wins.

This business model is ingenious, and it's also hugely profitable. Large bookmakers deal with hundreds of thousands of dollars per game. In the case of NFL football, that's 15 or 16 games per week.

That $500 profit starts to add up fast.

Of course, bookmakers need to be well capitalized. In the short term, anything can happen. They're not guaranteed an equal amount of action on each side. In those cases, they might need funds to compensate.

Over time, the law of large numbers sees to it that the book stays profitable, though.

Are Sportsbooks Legal?

The legality of sportsbooks varies based on the jurisdiction that you're talking about. In the United States, for example, sportsbooks are illegal almost everywhere in the country. A recent Supreme Court decision is catalyzing change in that area.

The underground sports betting industry, though, is tremendous. If you've spent much time at a local bar, you've probably met multiple customers of local bookies. They have a reputation for being part of organized crime, and maybe some of them are, but some of them are just guys who figured out the math behind the business and started taking bets.

Many local bookies use offshore sportsbooks to even out the action on either side of the betting, in order to reduce their risk when the action gets lopsided.

How Much Money Do Sportsbooks Make

The Wire Act makes it illegal to take sports bets over the phone or the internet, but it's a rare local bookie that gets prosecuted for this. I've never seen any reports of a bookie's customer getting arrested or prosecuted for placing a bet.

Of course, in other, more enlightened countries, bookmaking is completely legal and regulated. The UK is an example of a country with this kind of attitude.

The advantages of legal and regulated bookmaking are obvious. For one thing, legal, regulated businesses pay taxes. For another, consumer protections exist for customers of legal, regulated businesses.

The amount of tax money the United States is leaving on the table because of the current legal status of sports betting is staggering. In fact, enormous amounts of money fly offshore every day because of customers using online sportsbooks. That money could be kept in the United States economy if sports betting were legal and regulated.

What's the Difference between a Traditional Bookmaking Operation and a 'Betting Exchange?'

A betting exchange is similar to a bookmaker, but the differences are significant enough that they have another name and business model. It's more of a marketplace model, where customers can buy and sell either side of the action.

This is more or less what a traditional bookmaker does, but with a betting exchange, the customers set the odds themselves. The betting exchange doesn't care about how good or bad the bets are, because they charge a small commission to the winning side of each bet.

The biggest example of a betting exchange is Betfair. You can both back and lay bets there. With a traditional bookmaker, you can only back a bet.

Here's what that means:

When you bet with a bookmaker, you bet that something will happen. The bookmaker wins if it doesn't happen. That's backing a bet.

With a betting exchange, you can play the part of the bookmaker and bet that something won't happen. That's laying a bet.

All you have to do is find another customer who's willing to take the other side of the bet at the odds you like.

This creates opportunities for trading and arbitrage that would be almost impossible when dealing with bookmakers. Smart bettors can find plenty of opportunities to take advantage of inequities in the marketplace of a betting exchange and guarantee themselves a profit.

Some traditional sportsbooks criticize betting exchanges for stimulating corruption in sports. It's easier to rig an event to not happen than it is to rig an event to happen. And traditional books like Ladbrokes and William Hill suggest that giving individuals that opportunity to profit will result in more events being fixed.

How Betting Lines Work

The most common types of sports bets are:

• Spread bets
• Moneyline bets
• Totals
• Prop bets

Spread bets are bets on a team to win by a certain number of points, or for a team to cover a certain number of points if they lose. The books use handicappers to predict the outcomes of the games. Based on this handicapping, they set a point spread.

A favorite must win by a minimum number of points for a bet to win. An underdog can win even if the team loses. All they must do is cover the point spread.

The spread is set up to do 2 things:

1. Create a roughly 50/50 chance of winning
2. To stimulate roughly the same amount of action on either side of the bet

A moneyline bet, on the other hand, doesn't take a point spread into account. Instead, the amount you win is adjusted by the likelihood that a team will win or lose. If you bet on an underdog, you'll win more money if they win. (They're expected to lose.) If you bet on a favorite, you'll win less money than you've risked. (They're expected to win.)

The amounts are determined by how big a disparity there is between the teams. You might bet $100 on a favorite but only win $20 if they win the game. Or you might bet $100 on an underdog and win $150 if they win the game.

Totals are also called 'over/under' bets. These bets pay off if the total scores for the 2 teams are over or under the predicted total. The handicapper sets these totals in the same way they calculate the point spread. They want to create a 50/50 chance of winning, but more importantly, they want to get equal amounts of action on both sides of the contest.

Proposition bets are bets you can make on any kind of random event during a game. This might be something as random as who'll win the coin toss in a football game. Or it might have some element of skill, like a prop bet on who's going to score the first touchdown in a game.

All of these available bets are called 'betting lines.' They're created by the mathematicians and statisticians working for the books using software and experience. This is the most important job at a sportsbook, and good handicappers can make or break a business.

Different sportsbooks have different handicappers, so it should be no surprise that the betting lines at one book can differ from the betting lines at another book. Shopping lines for the best opportunities is one way smart sports bettors profit from these companies.

How Sportsbooks Handle Bets on Different Sports

The kinds of bets available usually vary from sport to sport. For example, in contests like golf or auto racing, you bet on who's going to win the race or the golf tournament. The payout is based on how likely it is for your pick to win.

These kinds of bets are straightforward enough. Each golf tournament participant or each driver has a payoff associated with him or her. For example, you might win 4 to 1 if Jeff Gordon wins a race. Or you might win 5 to 1 if Tiger Woods wins the golf tournament.

In addition to bets on the individuals participating, you can also place bets on 'the field.' This is a bet that someone other than the individuals listed wins. This could be any number of people.

Bets on boxing and the MMA are similar, but of course, there's only a single winner in any fight. These are moneyline bets. You pick a winner, and you get paid off based on the likelihood that you're right.

Bets on games like baseball and soccer usually use a moneyline approach. You bet a certain amount of money, and the amount you can win depends on how well the team is favored (or how badly the oddsmakers think the team will lose.)

Sometimes baseball includes a run line, which is similar to a point spread, but the run line is always 1.5. It doesn't change based on the relative strength of the teams. Further changes based on the strength of the teams are calculated into the moneyline.

The most popular way to bet on football, though, is spread betting. The point spread in football is so popular that major publications report on it, even though betting on NFL game is theoretically illegal in most parts of the United States.

And, of course, all these bets are set up so that the bookmaker can lay bets from both sides and guarantee a profit. Sometimes this is as simple as requiring you to wager $110 to win $100, but with moneyline bets, the vig is 'baked into' the payout odds.

What Do Sportsbooks Do about 'Sharps?'

A 'sharp' is a skilled bettor—an 'advantage gambler.' By shopping lines and doing a better job of handicapping games than the oddsmakers at the books, a sharp bettor makes a consistent profit by identifying and taking advantage of opportunities in the marketplace.

As with any advantage gambler, books don't like dealing with them. You've probably seen movies or TV shows where casinos 'backed off' card counters by telling them they were too skilled to be playing blackjack at their casino. Books sometimes do something similar.

When a sportsbook realizes they're dealing with a sharp bettor, they'll sometimes refuse to accept more action from that bettor. They might take a softer approach and limit the amount of action they'll accept from such a bettor.

How Sportsbooks Make Money

This has become such a problem for some professional sports bettors that they're forced to employ multiple runners to place bets on their behalf to stay in action.

How Much Money Did Sportsbooks Make

Even though books are supposed to be able to make a profit regardless of who bets on which side, large bets—especially at the last minute—can 'unbalance' the action at the book. This can create negative expectation situations for the books.

And no gambling company wants to accept any kind of negative expectation situation. That's not how they stay in business at all.

Conclusion

Sportsbooks, bookmakers, or bookies… they're all the same thing. These companies provide a much-desired service for people who like to bet on the outcome of sporting events. In some respects, a sportsbook is much like a marketplace.

Newer sportsbook models ('betting exchanges') are even more like marketplaces. You could almost think of them as being the equivalent of Wall Street, only for sporting events instead of companies.

How Do Casino Sportsbooks Make Money

If you take nothing else away from this post, know this:

Books make money by instituting small price inequities into the marketplace. One of the more obvious ways of doing this is asking you to risk $110 to win $100 on a 50/50 wager. To profit consistently at sports betting, you must win more than 53% of the time.

The legality of bookmaking in the United States is changing rapidly. At one time, the only legal place to bet on sports in the USA was in Las Vegas. But Delaware just legalized sports betting, and more states are sure to follow.

How Much Do Sportsbooks Make

But for a lot of Americans, offshore books that operate online are the most convenient option to bet on sports. Neighborhood bookies probably aren't going out of business anytime soon, either.

How To Sportsbooks Make Money