How do Sportsbooks Make Money?

With sports betting becoming legal across the country in more states, it’s important to understand sportsbooks and their practices to become a sharp bettor. Understanding how sportsbooks are making their money can give you an advantage over those who don’t, as well as the books themselves.

How do Sportsbooks Make Consistent Profit?

Of course, the obvious answer to this question is they make their money when someone places and loses a bet. Anyone betting at under a 50% rate for the average straight bet (or higher odds) is going to be profitable for the sportsbooks. Simply put, bettors who lose more than they win generate profit for sportsbooks.

While sportsbooks would love for everyone to have low-winning percentages, that isn’t plausible. As a result, the books have implemented a number of practices to ensure their own profit, regardless of a bettor’s winning percentage.

Understanding the Vig

The vigorish, or vig, is the primary way sportsbooks can generate a profit regardless of the outcome. In what is also referred to as “the juice,” the vig is essentially a small additional charge for your bet.

For example, the standard line for spreads and total bets is typically -110. Since the sportsbooks set the spreads and totals themselves, the implied odds of a -110 bet are often 50%. However, -110 means a bettor must pay $110 to win $100, which is not equivalent to 50-50 odds. +100 would be the actual line value for anything that had a 50% chance of hitting.

That extra $10 on the betting line is how the sportsbooks can make a profit off the line as a whole. There are absolutely times when the sportsbook loses a great deal of money on a certain bet, but they can control the lines for a profit most of the time. In the long run, it’s an extremely profitable method for the books.

The vig is placed in every bet, regardless of the odds. Using tools like the OddsJam No-Vig Calculator and Positive EV betting can help you find lines that have the lowest possible vig. Finding profitable lines and

Shifting Lines and Changing Odds

Lines and odds change are constantly changing as a means of securing profits for the sportsbooks. Odds are influenced by factors that relate to the sport or event, such as an injury to a key player. Lines also change based on how bettors are taking them throughout the week.

Let’s take the -110 example from above. If a large number of people are taking a specific bet with those odds, the books will move it to -120 or -130 to keep their profit margin in place. If it’s a bet like a spread or total, they may also move the actual totals around.

If a specific bet of over 40 points was being taken in large quantity, the books may change the line to 41 points. They can go as high as the market allows them to, with games often shifting multiple points between their release and right before the game starts. Sportsbooks make a huge profit by shifting totals and moving the betting line at the same time.

For another example, consider an NFL game between the Arizona Cardinals and the Minnesota Vikings. When the line opened on Monday, the Cardinals were considerable underdogs at +210 (bet $100 to win $210). By the end of the week, they were all the way down to +150, as bettors were taking that Cardinals line in high quantities, which caused the sportsbooks to move the lines for their profit.

Between the opening of that line and just before kickoff, there is a $60 per bet difference for every bettor who bet on the Cardinals to win the game. Getting profitable lines before they change, such as the Cardinals at +210, is how bettors make money in the long run.

Of course, the long run is always the play. In our example, the Cardinals did not win the game. However, consistently getting better odds, like our $60 difference example is profitable in the long run.

Setting Profitable Odds

While betting lines are almost certain to change, the sportsbooks typically do a good job of setting profitable lines for themselves to begin with.

Let’s say, for example, the Milwaukee Bucks are -200 to win a game against the Los Angeles Lakers. Mathematically speaking, that means the Lakers should be +200 to win the game. Of course, that is not the case. The Lakers would probably be in the ballpark of +150, which is still a nice line if you win.

Lines like these are how the books continuously make a profit even when a large number of bettors win a heavy underdog bet. Of course, the lines are never going to be exactly 50-50 or fair, as that wouldn’t generate any profit for the books. However, being a sharp sports bettor can monitor and take profitable odds to exponentially increase their long-term winning chances.

Generating Profit Regardless of Outcome

Combining our examples above, you’ll often see spreads or totals that change both the betting odds and lines simultaneously. For example, there may be a line with the following:

Bills -3 (-105) at Chiefs +3 (-120)

In this case, not all betting odds for spread bets are the same. In this example, there is likely an increase in the number of players betting on the Chiefs, so the line moves to -120. That is done to ensure profit for the sportsbooks, for if they kept the line at the standard -110 with more bettors on the Chiefs, they run a huge risk of a net loss.

If the sportsbooks did not move the odds in our example above and the Chiefs (who had a higher number of bettors on them) won, the books would either lose money or not make very much.

There is also another side to this. Sportsbooks manipulate what lines bettors take in order to secure their profit, again regardless of the outcome. Notice how in this example, the Bills are -105. That is a much more attractive line than -120, which encourages sports bettors to side with Buffalo.

A sportsbook that efficiently generates profit regardless of outcome is known as a balanced book. By correctly setting mathematically profitable lines, sportsbooks can always secure their earnings.

As a sports bettor, it’s important to remember and pay attention to line movement like this. It can heavily change your pick and give you better insight as to what other bettors are taking and how the sportsbooks are responding.

What is a Balanced Book?

The ultimate goal of sportsbooks is to, of course, make money. As we’ve discussed, the most effective books make a profit regardless of the outcome of a bet.

A balanced book is the definition for our example above, in which the books move lines accordingly to ensure a guaranteed profit. If many bets are being placed on one side of the line, those odds will increase to discourage more people from taking the line while increasing the price.

On the other hand, sportsbooks will increase the odds of a bet if it isn’t receiving enough bets to keep the books balanced. Other bettors will then see the increased payout from the higher odds and enthusiastically take that bet.

This is the easiest example of a balanced book, one that generates profit regardless of outcome.

A Real Example of this Process

The knowledge of how sportsbooks work and experience betting is what turns a bettor into a sharp bettor. Of course, we could preach this all day but new bettors are going to want to know real examples of how these strategies play out.

In Week 11 of the 2022 NFL season, the Minnesota Vikings were home underdogs against the Dallas Cowboys. Minnesota had just won the game of the year on the road against the Buffalo Bills, meanwhile, the Cowboys blew a 14-point lead in the fourth quarter to lose in overtime to the Green Bay Packers.

Remember our example about sportsbooks setting higher odds to entice bettors into taking a line? There is no better example than the Vikings in this situation. The hype was swirling around the team after the thrilling win, yet the odds held firm at around +110 to +105 on the moneyline.

The odds being set at +105 was a blatant “trap” by the oddsmakers, who left it around plus odds as an enticing number for sports bettors. There were countless bettors being so shocked at the Vikings being home underdogs that they took the line without hesitation.

Sharp bettors were all over the Cowboys in this matchup. While there were certainly plenty of winners who won because they think Dallas is better than Minnesota, there are also those who took them solely based on reading what the oddsmakers are telling us.

Granted, there are undoubtedly scenarios where this strategy loses. Unfortunately, sharp sports bettors lose plenty of bets, however, they have a much greater chance of earning a long term profit by reading and interpreting what the sportsbooks are saying.

Reading into the Public

Sportsbooks make money based on having a balanced book that is centered around what bets are being placed. As a result, another key part of being a sharp bettor is reading where the majority of the best are going.

Some sportsbooks will show the basic data behind where most of the bets are going. For example, it could say that 70% of the overall bets for a game are on the Kansas City Chiefs and 30% are on the Chargers. A sharp bettor may look at that trend and choose to bet on the Chargers solely based on this info.

Another example from Week 11 of the 2022 NFL season was a matchup between these two teams. The vast majority of the public was betting on the Chiefs, which likely means the spread of -5, as the moneyline is far too high to generate much profit.

It’s easy to want to pick the popular team like the Chiefs in this example, but betting against trends can be profitable, as they did not cover the spread despite the winning result. While this strategy isn’t always enough on its own, it’s important to understand where the money is going to make your most calculated decision.

Can Sportsbooks Lose Money?

The short answer is yes! If the sportsbooks are not constantly on top of line movements or changes in game status, they can lose money on certain lines.

There’s also the scenario in which a bet pushes, which can lose money for the books. A push is when a bet stake is returned without winnings due to a tie or the exact outcome of a particular bet.

For example, say you placed a bet on the Dallas Cowboys at -7, meaning they needed to win by 7 or more to win the bet. If the final score is 27-20, your bet would push because they did not win by more than 7.

A more simple example is a tie on a moneyline bet. This is more common in sports like hockey or soccer as opposed to American football. Should an English Premier League game end in a tie (and your bet doesn’t include payout for a tie), you would receive your money back.

So, why would sportsbooks lose money on this? Well, the effort and resources to keep lines moving for profitability would be null in a bet that pushes. They’d essentially have wasted time on a bet that pushes and lose whatever cost it to keep that bet live up until the start of the match.

Be it employee wages or the money it takes to keep the computer-based line movement systems up and running, Vegas can actually lose!

Remember, OddsJam is all about getting you profitable lines and taking advantage of errors or incorrect sportsbooks lines using the Positive EV tool. Remember, the only way to guarantee a profit in sports betting is mathematically with sharp lines.