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Casino, Sports Betting, and Lottery - A Comparison of the House Edge
by:

Melkam Dirset

The house edge, which is the commission that a gambling agent such as a casino, a sportsbook (bookmaker), or a lottery administrator charges, is a yardstick that measures how a specific gambling game is fair and reasonable. It is one of the most important factors that every player should consider whenever he/she is engaged in any type of gambling, inasmuch as it indicates how much of the money wagered goes to the gambling agent's pocket and how much is redistributed to the winners. Indeed, a house edge cannot be zero since casinos, sportsbooks, and lottery administrators have to make some money in order to cover their expenses, and to make some profit as well. Yet, a high house edge simply means that the players are unecessarily being ripped-off, and as a result, any gambling game with a high house edge should certainly be avoided by a knowledgeable gambler. In this article, we shall compare, in the simplest way possible, the house edges of a roulette, an evens-odd betting, and a Cash 3 lottery game as representatives of the three major gambling categories. The Equation The easiest way to compute a house edge is to compare the actual winnings that are paid by the respective agents to the winnings that would be paid in a fair game or bet. A fair game or a fair bet is one in which no commission is involved; an obvious model is a game between friends. Therefore, in percentage form, the house edge is obtained by subtracting an actual game winning from a fair game winning and dividing the result by the fair game winning, finally multiplying by 100. Thus, House Edge = [ (fair game winning - actual game winning) / fair game winning ] * 100 Roulette Because of its simplicity and popularity, we shall consider the roulette as a representative casino game. A European roulette wheel has grooves marked by the numbers 0 to 36; the American wheel (also called Las Vegas wheel) has an additional groove marked as '00'. So, the European wheel has a total of 37 numbers, while the American wheel has 38. Internet casinos usually make available the option to select the type of wheel the customer prefers, but the brick and mortar casinos normally offer only one type. The winning number in a roulette game is the number corresponding to the groove where a spinning ball lands. Now, consider a fair game in which 38 friends are playing the roulette at home, and each one selects a number and places a \$1 bet on the number (no two or more players wagering on the same number). When the ball is spun and lands in a groove, the number marking that groove will be the winning number. The person who has selected this winning number collects all the money on the table thus making him win \$37. On the other hand, if the game were conducted in a casino, the winner would be paid only \$35. The difference between the two winnings applied in the above equation gives us the house edge of a roulette game as ( 37 - 35 ) / 37 * 100 = 2 / 37 * 100 = 5.4% This means that every time you spend a \$100 on an offline or online casino roulette, \$5.40 goes to the casino and the rest is redistributed to the winners. Evidently, there are quite a number of casino games and the house edge varies from game to game, many of them having a house edge less than that of the roulette. For obvious reasons, a good gambler always prefers games that have low house edges, while the casino itself loves those games with high house edges. For example, the house edge of craps is 1.4% which makes it one of the most preferred casino games by the players. Even-odds Sports Betting