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