How Sports Betting Works


A horse betting ticket. See casino pictures.
Photo courtesy Damon Hart-Davis

Sports betting is illegal throughout most of the United States, common throughout much of Europe, and an everyday part of the gambling industry in Nevada. It's difficult to figure out how much money is bet on sports in the United States since the majority of it is done illegally, but experts estimate a "handle" of more than $200 billion annually [ref].

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Simply placing a bet can be a confusing affair -- sports books have their own lingo, and the systems vary. Figuring out how to bet well enough to make some money is another matter entirely. How are the odds determined? Who sets the line? What percentage of the time do you need to win to break even?

In this article we'll explain the important elements of betting and odds making, trace the history of betting in the United States, and show why betting on sports almost always results in losing money in the long run.

Sports Betting Basics

In much of Europe, bookmakers are licensed by the government and have public offices like this one in Glasgow, Scotland.
In much of Europe, bookmakers are licensed by the government and have public offices like this one in Glasgow, Scotland.
Photo courtesy Jim Byrne, Glasgow West End

Different sports have different systems for oddsmaking and betting. There are even different systems for the same sport, depending on what kind of game the bettor wants to play. But to understand any of these systems, you first have to understand the jargon.

Action - Action is simply betting activity. Phrases such as "I want in on the action" or "Show me where the action is" come from this term. Since betting on sports is illegal in many places, you can't always look up your local bookie in the phone book.

Handicap - In sports betting, "to handicap" is to give one team a points advantage in order to level the betting field.

Handle - The handle is the total amount of money wagered on bets. Super Bowl betting generates the biggest handle of the year for most bookies.

Sportsbook - An establishment that takes bets, also known as a book. An individual who takes bets is a bookie.

Juice - This is the percentage of all bets taken by the bookie as profit. The juice is also known as the vig, short for vigorish. Sometimes bookies take a straight percentage of the handle, but more often the vig is figured into the odds.

The spread - The point spread is used in high-scoring sports like football and basketball. It is basically a handicap used to make all games competitive in the eyes of bettors. The spread gives one team an advantage of a few points. Standard notation for the point spread shows the favored team first, followed by a negative number (the actual spread). The home team is shown in capital letters. So if Buffalo was playing against Green Bay in Green Bay, and they were favored to win by seven points, it would look like this:

If someone bets on Buffalo to win, Buffalo would actually have to win by more than seven points for the bet to pay off. It's as if Green Bay were given a seven-point lead at the start of the game.

The money line - In sports like baseball, scoring isn't high enough to use a point spread. The money line is used instead. A money line listing might look like this:

Sometimes the decimal point is left out, so 120 is the same as 1.20. If you want to bet on the favored team, the White Sox, you have to bet $1.20 for every $1 you want to win. If you want to bet on the underdog Astros, you have to bet $1 for every $1.10 you want to win. This is known as the dime line, because ten cents separate the favorite from the underdog. Most bookies offer a dime line, although it can increase to a 20 cent line or greater if one team is heavily favored.

If the money line seems confusing, think of it as a simple pricing system. You want to win a certain amount of money on your bet. Chances are greater that the favored team will win the game, so it costs more to bet on the favorite to win that amount than it costs to bet on the underdog.

Here's an example: Imagine that using the money line above with the White Sox and the Astros, you want to win about $100. If you place your bet on the favored White Sox, you will pay the bookie $120. If you win, you get your $120 back, plus $100 in winnings. If you lose, the bookie keeps your $120 (technically, bookies collect on losing bets after the game most of the time, but for our example we'll assume the bet is prepaid). If you bet $100 on the Astros, you'll get $110 in winnings if they win, and only lose $100 if they lose.

Pick'em - Sometimes money line games will be listed as "pick" or "pick'em." This means that the teams are considered equal, and the line on both teams is -1.10. Betting on either team requires $1.10 per $1 in potential winnings [ref].

Pools, cards, and parlays - A parlay is just a combination bet. Instead of making five separate bets on five different games, the bettor places a single parlay bet, hoping he or she can predict the outcome of all five games. If any one of the games is a loser, the entire parlay is a loser. The payout is better for parlays, because the odds of successfully picking multiple winners are much tougher to beat [ref]. Most people are familiar with parlays through office betting pools or football cards. If you've ever paid $5 to select your winners from a list of that week's football games (sometimes using the spread, sometimes using the straight scores) in hopes of winning the weekly prize, then you have made an informal parlay bet. Office pools don't usually involve actual bookies beyond the person who organizes the pool, and no one takes juice from the pool. All the money is distributed to the winner or winners.

Next, we'll find out how oddsmakers set the line and figure out the spread.

What Are the Odds?

Bets are placed on football (both legally and illegally) at all levels of the game, from the Super Bowl to high school playoffs.
Bets are placed on football (both legally and illegally) at all levels of the game, from the Super Bowl to high school playoffs.
Photo courtesy John Pilge, MorgueFile

The point spread for a football game or the money line for a baseball game are both referred to as "the line." The line is simply the odds for that particular game, translated into whatever system is used. When a big Las Vegas casino issues the first line on a game, it is known as the "opening line." Offshore sports books often issue a line before Vegas does, but the Vegas line is usually considered the most trustworthy.

Setting the line is a matter of intense research, carefully cultivated contacts, years of experience and plain old intuition. An oddsmaker's reputation is based on his accuracy, and he has many variables to consider when determining the odds:

  • The teams' performances this season, in prior seasons, in last week's game, and against each other
  • The playing surface
  • Home field advantage
  • The weather forecast
  • Injuries, especially those of star players
  • Team morale
  • Events in the personal lives of the players

Oddsmakers don't try to predict the outcome of the game when setting point spreads. If a team is favored by seven points, that doesn't mean that the oddsmaker necessarily thinks it will win by seven points. The oddsmaker's goal when setting the line is to keep an equal number of bets on both sides of the game. The betting public's perception of the game can be as important as the actual comparison of the two teams.

Why do oddsmakers try to keep the action even on both sides of a bet? A bookie's worst fear is being "sided." This happens when many bets come in on one side of a game. If that side turns out to be the winning side, the bookie will lose a lot of money. Ideally, half the bettors lose, and their money goes to pay off the other half, who won, with the bookie taking the vig.

Oddsmakers are so intent on keeping the action even that they actually move the line in response to betting patterns. If too many bets are coming in for the underdog, then that team might have been given too many points, so the line is moved. Bets made prior to the move are still counted at the old line. Some bettors will make additional bets after the line moves, on the opposite side of the game. This is known as middling. For example, let's say the opening line on a football game is Tampa Bay -7; SAN FRANCISCO. A lot of people might think Tampa Bay will beat San Francisco by more than seven points, so they all bet on Tampa. The oddsmaker sees this pattern and moves the line, giving Tampa -10. Now, Tampa has to win by more than ten points for bets placed on Tampa to win. A bettor can place another bet with the new line, this time on San Francisco. If Tampa wins the game by eight points, the bettor has middled -- he's won on both bets.

Sometimes a single well-known gambler can force oddsmakers to move the line. When one of these gamblers makes a bet, a lot of people pay attention and bet the same way, because he has a reputation for winning frequently. This can draw so much action to one side of the bet that the oddsmaker must move the line.

Often oddsmakers will move the line independently of the Vegas line in response to local betting patterns. Over time, they gain experience in setting the odds themselves. If they develop a reputation for setting accurate lines, they might be hired by one of the Las Vegas casinos, the only places that can legally hire oddsmakers in the United States.

Next, we'll check out the history of betting on sporting events.

From Thoroughbreds to Super Bowls

A race at Churchill Downs
A race at Churchill Downs
Photo courtesy Kate Bishop, MorgueFile

People have been informally betting on sports just about as long as there have been sporting events. Organized sports betting took off in the United States at the horse racing tracks that sprang up in the 1800s. Betting really caught on in the early 1900s when the pastime became more accessible to the middle and lower classes. At first, an auction system was used. Bettors bid on a lot that represented one horse in a given race. In this system, the bettors themselves automatically set the odds. Each bettor was vying for the full pot, and whoever had the lot for the winning horse got it. Horses that were highly favored to win were auctioned off at much higher prices, since the holder of that lot had the best chance of winning the pot. Lower-rated horses allowed bettors to take a chance at the pot for a smaller bet with a reduced chance of winning.

The auction system was limited because you could only take bets for the number of horses in each race. While some bookies opened multiple auctions on a single race, they still missed out on a lot of handle. The solution was to offer odds on each horse. Longer odds (like 50-1) meant a higher payout but a lower chance of winning. Horses given better odds were more likely to win but paid out at a lower rate (5-1, for example).

A similar system was used in other sporting events, such as boxing and early football games. It was hard for oddsmakers to set the odds accurately, and when a long-shot team came up with an upset win, bookies lost a bundle. Around World War II, the point spread concept was developed [ref]. This made betting on sports even more popular. The broadcast of sports on TV kept the cycle going -- sports became more popular, which made betting more popular, which made some people enjoy sports more.

Next we'll learn about some of the betting scandals that have plagued sports.

Scandals

1919 Chicago White Sox
1919 Chicago White Sox
Photo courtesy UMKC School of Law

Some people oppose sports betting because it can have an effect on the games themselves. The number of scandals related to gambling in the 20th century alone numbers in the dozens.

Before point spreads, it was risky for a gambler to attempt to manipulate a game. He had to find a player who was willing to lose the game in return for a bribe. But although it was risky, manipulation happened often. In the early 1900s, gambling was a well-known, if not well-liked, part of professional baseball. Gamblers gathered in one section of the stands, placing bets on everything from the winner of the game to the outcome of the next pitch.

This control came to the public's attention in 1919, when the Chicago White Sox lost the World Series to the inferior Cincinnati Reds. By the start of the next season, it was revealed that eight White Sox players had been bribed up to $10,000 each to make sure that their team lost the series. These eight players became known as the "eight men out." Although they were eventually acquitted of criminal charges, none of them ever played professional baseball again.

Point spreads lead to a more subtle kind of manipulation -- point shaving. College basketball is particularly susceptible to this practice. If a team is favored by eight points, gamblers don't have to bribe players to lose the entire game. They just have to convince them to win it by less than eight points.

Football has been the target of point shaving efforts as well. It has long been rumored that the final outcome of the 1958 NFL championship game was affected by substantial bets (as much as $1 million) that the owner of the Baltimore Colts had placed on his team. The Colts were favored by three or four points. In overtime, the team was in a position for an easy field goal, which would have won them the game by three points. Instead, they kept trying for a touchdown, which they eventually made, winning the championship and covering the spread [ref]. No real evidence was ever found that the owner actually influenced the plays called on the field.

One of the most famous betting scandals of recent decades involved former all-star baseball player and successful manager Pete Rose, who compiled a 412-373 won/loss record managing the Cincinnati Reds. In 1989, investigations revealed that he had made dozens of bets for up to $10,000 on baseball games, including betting on his own team. He was subsequently banned from baseball for life.

For lots more information on sports betting and related topics, check out the links on the next page.

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Sources

  • Abram, Richard O., and Davies, Richard G. Betting the Line: Sports wagering in American life. The Ohio State University Press, 2001. 0-8142-5078-5.
  • Bell, RJ. "Explaining How Betting Lines are Made." About.com, 2004. http://sportsgambling.about.com/od/sportsgamblingbasics/a/line_making.htm
  • Linder, Douglas. "The Black Sox Trial: An Account." Famous Trials, UMKC School of Law, 2001. http://www.law.umkc.edu/faculty/projects/ftrials/blacksox/blacksoxaccount.html
  • Martin, Jeremy. "Sports Betting: Past, Present and Future." Doc's Sports. http://www.docsports.com/sports/betting/history/vegas/sports/betting/1.html
  • Orkin, Mike. Can You Win? W.H. Freeman and Company, 1991. 0-7167-2155-4.
  • Reber, Arthur S. The New Gambler's Bible. Crown Trade Paperbacks, 1996. 0-517-88669-3.
  • "Types of Wagers." MVPsportsbook.com, 1997. http://www.mvpsportsbook.com/sportsbook_gambling_wager_types_parlay_.html