Issues Magazine

Against All Odds

By Guy Nolch

How do casinos and bookmakers rig the odds in their favour?

Not long after I first learned to read I became puzzled by a page near the back of the daily newspaper. None of the words made sense and there was no story attached to this complicated list. When I asked my mother what it was she explained that it was the racing form guide. Horses race against each other? From that moment I was hooked, and the form guide joined Enid Blyton as my favourite reading material.

While the Melbourne Cup remains one of the best betting opportunities in the year, these days I know that the odds are stacked against me. After all, bookmakers and casinos don’t stay in business by losing. They rig the odds in their favour.

For instance, the roulette table has 18 red numbers, 18 black numbers and one green number. All up there are 37 numbers, so on average you’d expect to win every 37 spins. While a fair winning payout would therefore be $37 for each $1 gambled, the casino only pays winners $35. This does not sound like much of a difference but it adds up to a healthy 5% commission. So, for every $100 you bet on roulette you can expect to receive only $95 back.

Roulette also allows you to bet on just the black or red numbers, or just the odd or even numbers. In a fair bet you’d expect to win $1 for every $1 bet, but don’t forget that the little green zero number comes up every 37 spins, swinging the odds a few per cent in the casino’s favour.

The great Aussie game of two-up also has an inconspicuous little device that earns money for the casino. In two-up, punters bet that two heads or two tails will be thrown by the spinner, and will win $1 for every $1 bet. Sounds fair, right?

While heads or tails will eventually come up in equal proportions, in 50% of cases one head and one tail will come up. This is known as “odds”. If five “odds” are thrown in a row the casino takes all the money wagered on that spinner. This may not seem often, but on average five odds will be thrown in a row once every 32 bets, bringing a 3% return to the casino.

Of course, roulette and two-up are complete games of chance. What about a game of skill like blackjack?

The aim of blackjack is to draw cards totalling as close to 21 but not exceeding 21. If you score higher than the casino’s dealer you will win an amount equal to your bet.

The late Ernie Tuck, a mathematician from the University of Adelaide, devised a strategy to maximise your fortunes at the blackjack table. Tuck’s strategy relies on the fact that the dealer must continue to draw a card until he reaches at least 17. For instance, if the dealer’s first card is a six it is quite likely that he will be stranded on a low score of 16 or less and have to take another card – and hopefully bust. So if you also have a low score, like 12, it is safer not to take another card rather than to risk busting yourself.

The rules of Tuck’s strategy are too detailed to list here, but even if you are able to follow it correctly you will lose 7¢ for every $10 bet. Of course, not many people play the percentages as well as that so the casino still makes a nice profit at blackjack. 

Probably the worst return for your money comes from the lotteries. For each game of Lotto you need to select six of the 45 balls in the machine, so the odds of winning are more than eight million to 1. However, at about 70¢ per game even a $1 million dividend is well short of these odds. 

But let’s head back to the races. While the totalisator works out the dividends simply by dividing up the betting pool among the winners and then subtracting a 16.5% commission, bookmakers set their odds according to probability.

For example, imagine a race between two evenly matched horses. If we ran this race 100 times each horse would register 50 wins, so the probability of each horse winning is 50% and fair odds would add up to 100%.

However, bookmakers will generally set their odds at about 130%. For instance a horse paying $3 for every $1 bet (1/3) would represent 33% of the total payout, a $5 chance (1/5) would represent 20% and a $50 chance (1/50) would represent 2%. Add up these proportions for each runner in the race and it will come to about 130% in the bookies’ favour when the betting opens.

But the betting ring is a marketplace, with a number of bookies competing for your wagering business, so if one bookie is giving slim odds you can always go to another bookie offering better odds. Therefore, as betting proceeds the bookies have to adjust their margins closer to 110% to attract the punters. Hence, for any horse you want to bet on you can often pick your moment in the betting ring and get better odds than on the tote.

The exception is a race like the Melbourne Cup, when once-per-year punters put their play money on slow horses with nice names. As a result, the good chances in the race pay better dividends on the tote.

Now, how do we know which are the better chances? It used to be the case that the Melbourne Cup winner would have previously run a place in the Caulfield Cup or finished strongly, but not necessarily run a place, in the Mackinnon Stakes on Derby Day.
But these days the Cup has attracted large fields of runners from overseas, many of which haven’t started in Australia so it’s difficult to know if they’ve acclimatised and are ready to win.

Once again, the odds have swung against the common gambler!