# How do casinos make money? **URL:** \ **Category:** Factual Questions\ **Created:** [March 26, 2018, 8:17pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226 "2018-03-26T20:17:51Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [March 27, 2018, 4:37pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/41 "2018-03-27T16:37:17Z")
> [@Stranger\_On\_A\_Train](#): > > Only a terrible businessman could run multiple casinos into the ground. > > Stranger I realize this is a thinly-veiled dig at our President, which is against the rules of GQ. But to be fair, he’s not the only developer or casino owner who has lost money in Atlantic City. AC allowed too many casinos to be built, and there have been closings and bankruptcies on a regular basis. The AC casinos seemed to exist to fleece NJ\< PA and NY residents within a few hours drive, and they seem to take pride in lousy customer service. Traditionally, dealers in AC are often surly and dismissive of the very customers/gamblers they are dealing to. There has always been a huge difference in dealer friendliness between AC and Las Vegas. And now you have widespread gambling in NY, MD and PA, and the town is in even worse shape. But, yeah, as to the OP’s confusion, a casino operates on the long-term edge. They want gamblers to get up, or even win. That makes people return. But, overall, they are glad to take 3 to 10 percent of every dollar bet. It adds up. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 27, 2018, 4:54pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/42 "2018-03-27T16:54:14Z")
> [@septimus](#): > > At this point I don’t know what to say. Except … care to arrange a wager for real money? 🙂 This may have sounded almost snarky. 🙂 Let me demonstrate the conclusion with a simple arithmetic example. Suppose you have $300 and want to walk away with $600 total. Option A) Bet $300 on Red. Win with prob. 18/38 = .473684 Option B) 1. Bet $100 on 1-9. Win with prob. 9/38 2. If you lose first bet, Bet remaining $200 on 1-12. Win with prob. 12/38 For Option B, your net win chance is 9/38 + (29/38)\*(12/38) = .4778393 .4778393 \> .4736842. _Q.E.D._ **Intuition** : With Option A, your entire bankroll is subjected to the 5.26% house vigorish. With Option B, almost a quarter of the time only ⅓ your bankroll is subjected to house vigorish. Making 35-1 bet(s) instead of 2-1 and 3-1 bet(s) increases the effect. ---
**Author:** ![DesertDog](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/desertdog/32/11503_2.png) [@DesertDog](https://boards.straightdope.com/u/DesertDog)\ **Post date:** [March 27, 2018, 5:00pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/43 "2018-03-27T17:00:39Z")
Where was this casino and how big was it? I’ve never seen such a sign in Nevada save something like Up to _ **97% payout!!!** _ over a particular bank of machines. Also, 97% would be unusually high, even for an average. In Nevada, by law a gambling machine has to have a return of 75% In practice, competition is high enough I never saw anything less than 82% and those were on penny slots; even on nickel slots it would be more like 85% OTOH, anything over 90% is going to be on a dollar or higher slot. The club I worked at got in a new bank of dollar slots and we put in a 98% payout sign above them for six months. Then the chips were changed to 92% and we took down the sign. Curious, I compared the reel sheets we kept in the shop between the two. These were IGT Red White and Blue [slots](https://slotmachinesltd.com/shop/slot-machines-categories/igt-red-white-blue), the most popular at the time. The reels each have 11 symbols on them and 11 spaces in between for a total of 22, but these were stepper motor slots. That means each symbol and each space almost always had more than one ‘stop’ associated with it making 64 total for each reel. The differences between the 97 and (2% payout machines were very subtle. The high pays were the sevens and those were identical. Even with the bars, reel 1 was identical, reel 2 had two fewer bars and two more spaces, and reel 3 one fewer bar among the 64 stops. This is not enough of a difference to be noticeable to anyone playing, say, 200 games. > [@Spoons](#): > > You can have a lot of fun at a Las Vegas crap table losing a little, or winning a bit, but only if you fall back on the street game. Heck, I once played “street game pass line with odds” for three hours at a Las Vegas table, and when I cashed out, I was up a whole $20. Yay for me, but I had three hours of fun, and a few free beers besides. But during that time, I watched other players play all the exotics, and blow their bankroll in fifteen minutes. Yes, the exotics are terrible bets, but most casinos will let you take or lay [odds](https://wizardofodds.com/games/craps/basics/) (scroll down a bit). The casino pays true odds so the house percentage is zero. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [March 27, 2018, 5:45pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/44 "2018-03-27T17:45:12Z")
Several people have posted the obvious answer - when someone shows up with $100, even if they win back about 97% of it - they keep betting their winnings until it’s all gone. So the casino generally takes all of everyone’s $100, 3% per bet. Some lucky guys will be smart enough to take their winnings and leave, maybe even with a profit - say, 3%. Some will quit when they are down to $50. Most won’t. So short answer is - 97% is “payout of the amount you just bet”. I.e. 10 people bet $100, someone(s) will get $970 in winnings. But of course, in a normal casino, all that $970 will end up on the table again. $943 in winnings result. and so on… Eventually go home with nothing. A week later, when Joe Sucker has scrimped together another $100, he heads to the casino thinking “at one point I won $970! I gotta try that again…” ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [March 27, 2018, 6:01pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/45 "2018-03-27T18:01:58Z")
Hm, it appears I might have spoken too hastily… it looks like that really does work, **septimus**. I’ll have to think a little more about that. > [@](#): > > Quoth **DesertDog** : > > Yes, the exotics are terrible bets, but most casinos will let you take or lay odds (scroll down a bit). The casino pays true odds so the house percentage is zero. Of course, you only have the opportunity to take that bet if you’ve already made some other bet that’s profitable to the house. But assuming that you find variance itself to have some value to you (because if you don’t, then you shouldn’t be gambling in the first place), then it’s still an opportunity to get more variance for the same initial payout. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [March 27, 2018, 6:27pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/46 "2018-03-27T18:27:49Z")
> [@septimus](#): > > Option B) > > 1. Bet $100 on 1-9. Win with prob. 9/38 > 2. If you lose first bet, Bet remaining $200 on 1-12. Win with prob. 12/38 Can you explain what you mean by Bet $100 on 1-9 and $200 on 1-12? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [March 27, 2018, 6:30pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/47 "2018-03-27T18:30:40Z")
> [@Mrdeals](#): > > This sounds like a stupid question, but hear me out. > > The other day on a road trip we stopped at a casino to eat. Posted right on the door it said “The Payout of this Facility is 97%” > > I know there is variation, like they have to pay out 97% over the course of a year and maybe the average day the payout is only 80%, but to simplify things, lets just say everyday they pay out 97%. > > Around this area, i would say an average consumer spends $100 in the casino. This person could cycle thousands of dollars in the machines before they lose the $100. > > If this casino draws 1000 people per day at $100, that would bring in $100,000 revenue, 3% margin, that’s $3,000. A average slot player will put in $1K+, play for hours and lose it all. And once they do, put in more. People who play $10k a visit are by no means rare, and that wont even make them a “whale”. ---
**Author:** ![x-ray\_vision](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/x-ray_vision/32/351_2.png) [@x-ray\_vision](https://boards.straightdope.com/u/x-ray_vision)\ **Post date:** [March 27, 2018, 6:52pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/48 "2018-03-27T18:52:52Z")
> [@Slash1972](#): > > Can you explain what you mean by Bet $100 on 1-9 and $200 on 1-12? Are you asking how betting in roulette works, or are you confused regarding how one can bet $100 evenly on spaces 1 through 9? I’m not familiar with any tables where a single bet can be placed on 1 through 9. You’d have to place separate bets on spaces 1 to 9, but of course you can’t do that evenly with $100. There is a single bet you can make for 1-12. See pic below: [http://www.predictem.com/images/roulette.gif](http://www.predictem.com/images/roulette.gif) ---
**Author:** ![DavidwithanR](https://avatars.discourse-cdn.com/v4/letter/d/3bc359/32.png) [@DavidwithanR](https://boards.straightdope.com/u/DavidwithanR)\ **Post date:** [March 27, 2018, 6:56pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/49 "2018-03-27T18:56:31Z")
> [@Chronos](#): > > Only if enough people leave, and aren’t replaced by other people, that the casino is doing less business. If the casino is staying full, then they don’t give a damn if people leave as soon as they’re up. Because not everyone can leave as soon as they’re up, because not everyone will ever be up at all. You’re right, of course. My example was “if every single player who ever found themselves up, even marginally, decided to call it a day”. We all know that isn’t going to happen. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [March 27, 2018, 6:58pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/50 "2018-03-27T18:58:37Z")
> [@x-ray\_vision](#): > > Are you asking how betting in roulette works, or are you confused regarding how one can bet $100 evenly on spaces 1 through 9? > > I’m not familiar with any tables where a single bet can be placed on 1 through 9. You’d have to place separate bets on spaces 1 to 9, but of course you can’t do that evenly with $100. > > There is a single bet you can make for 1-12. See pic below: > > [http://www.predictem.com/images/roulette.gif](http://www.predictem.com/images/roulette.gif) Yeah, I didn’t know what he meant by bet 1-9. Individual numbers or split the $100 or what. There are no 3-1 bets on a roulette table. ---
**Author:** ![DavidwithanR](https://avatars.discourse-cdn.com/v4/letter/d/3bc359/32.png) [@DavidwithanR](https://boards.straightdope.com/u/DavidwithanR)\ **Post date:** [March 27, 2018, 7:09pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/51 "2018-03-27T19:09:35Z")
Maybe I said something useful without realizing it. The house only has to win on average. The players, psychologically speaking, need to feel like they’ve won. In a casino, feeling like you’ve won is in fact not what real winning feels like. (Real winning in a casino sounds boring, except perhaps for the excitement that you risk being found out.) And you wanting to **feel** like you’ve won is how casinos make money, because your effort to get that winning feeling is exactly what makes you lose. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 27, 2018, 8:19pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/52 "2018-03-27T20:19:10Z")
> [@Slash1972](#): > > Can you explain what you mean by Bet $100 on 1-9 and $200 on 1-12? Oops! Just multiply all the dollar amounts in that post by 0.9 and bet $10 on each of nine numbers. Or, better yet, take your money to the craps or baccarat table where your odds are better! 🙂 ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [March 27, 2018, 8:44pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/53 "2018-03-27T20:44:12Z")
> [@septimus](#): > > Oops! Just multiply all the dollar amounts in that post by 0.9 and bet $10 on each of nine numbers. > > Or, better yet, take your money to the craps or baccarat table where your odds are better! 🙂 Oh ok. Was just trying to understand what you meant. Thanks! I’ll stick with poker and Blackjack 🙂 ---
**Author:** ![DSYoungEsq](https://avatars.discourse-cdn.com/v4/letter/d/c6cbf5/32.png) [@DSYoungEsq](https://boards.straightdope.com/u/DSYoungEsq)\ **Post date:** [March 27, 2018, 11:45pm UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/54 "2018-03-27T23:45:03Z")
> [@Chronos](#): > > Of course, you only have the opportunity to take that bet if you’ve already made some other bet that’s profitable to the house. But assuming that you find variance itself to have some value to you (because if you don’t, then you shouldn’t be gambling in the first place), then it’s still an opportunity to get more variance for the same initial payout. Yeah, the trouble with playing the free odds is that it cycles through your money much more quickly. Thus, if you have $250 to play with and you’re at a $5 craps table (do they even have such tables in Vegas anymore?), you can bet $5 on the pass or don’t pass line and take forever to lose significant money, but if you start taking the 3x free odds, the money can disappear much more quickly. And if you are playing money on every roll (every roll, you bet pass/don’t pass or come/don’t come), it Hoovers up your bankroll at almost the same rate that the Browns suck at being a pro football team. 😛 I gave up on gambling when I realized that I wasn’t losing by losing, but rather losing by winning. This, of course, I should have realized when my dad advised me to learn that gambling was governed by the laws of Thermodynamics, but the young are hard to teach. :rolleyes: ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 28, 2018, 12:00am UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/55 "2018-03-28T00:00:21Z")
Taking odds should not increase the speed of losing your money. It’s pure varianc, and the house has no additional advantage on the odds bet. So long as your bankroll is large enough, that is. When you are playing negative expectation bets, variance is your friend. In fact, it’s your only friend. Or consider it this way: If you want to play $10 per roll, you are much better off putting $1 on the passline and playing 10x odds than playing $10 on the passline alone. You put the same money into action at much better odds. Mind you, I never play negative expectation bets at all. I have no real interest in gambling when I don’t have the edge. I just came back from Vegas, and never went near a slot machine or any other game that had a built in house advantage. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [March 28, 2018, 12:55am UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/56 "2018-03-28T00:55:57Z")
> [@](#): > > Quoth **DavidwithanR** : > > You’re right, of course. My example was “if every single player who ever found themselves up, even marginally, decided to call it a day”. We all know that isn’t going to happen. It sounds like you’re saying that not everyone is going to pursue that strategy. But that’s irrelevant: Even if everyone did pursue that strategy, the casino wouldn’t care (as long as they stay full). The problem isn’t with people not pursuing the strategy; the problem is that, even if you intend to pursue that strategy, it doesn’t always work. ---
**Author:** ![Arrendajo](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@Arrendajo](https://boards.straightdope.com/u/Arrendajo)\ **Post date:** [March 28, 2018, 2:04am UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/57 "2018-03-28T02:04:50Z")
I’m going to a casino tomorrow night to teach my wife to bet craps the “right way” which is what a poster above described as street craps. She’s never been in a casino, and craps is the funnest game to play, IMHO. I’ll check back tomorrow and let you know how we did. ---
**Author:** ![glowacks](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/glowacks/32/5548_2.png) [@glowacks](https://boards.straightdope.com/u/glowacks)\ **Post date:** [March 28, 2018, 2:30am UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/58 "2018-03-28T02:30:17Z")
> [@Sam\_Stone](#): > > No, this is just wrong. Gambler’s ruin has nothing to do with a casino’s profits, other than if the gambler is busted he can’t keep giving the casino money. The casino has no additional advantage over the player by having a giant bankroll. > > It’s also not true that the bigger bankroll will always get your money. Proportional betting via the Kelly Criterion will protect you against gambler’s ruin, and if you have an edge and infinite time you will eventually take all the casino’s money. > > Again, the casino’s profit’s are fully explained by taking the total amount of action multiplied by the house’s advantage per transaction. There’s no other factor. Gambler’s ruin (either by the house or the player) is a totally different phenomenon that might change the distribution of wins and losses or take someone out of the game completely, but does not change the essential profit equation while the game is being played. > > Maybe you meant to say that it’s to the advantage of casino owners to make sure that they have a big enough capitalization that a run of bad luck won’t bankrupt them. That’s certainly a good idea, but it doesn’t change the nature of the game between the casino and the players. > > This has nearly happened. Even Casinos can take huge losses when high rollers get lucky. There are people around who are happy to bet $100,000 on a single hand of blackjack. The Mirage once had a quarterly profit drop by two thirds because of an unusual run of good luck at the tables, almost certainly by a small number of very big players. Some of them have bankrolls larger than the casinos. I’m pretty sure if you read what I wrote closely, you’ll see I’m saying the exact same thing as you with different words. I did not make a single argument that you are refuting. Let’s go paragraph by paragraph: 1. I apparently said that the house edge and the gambler’s ruin phenomenon were the same or similar. Incorrect. I said that the house had _an_ advantage with a higher bankroll, but it is merely an advantage to not be ruined by a streak of bad luck, and the house odds advantage is what gets them long-run profit. 1. I apparently said that a larger bankroll will always mean you will win. Incorrect. I said a larger bankroll increases the chance you are not ruined by a streak of bad luck. 1. I apparently said that the casino’s long-term profit was something other than the house edge. Incorrect. I explicitly stated that the short-term gambler’s ruin was not the source of their long-term profit, but that the house edge was. 1. I apparently said something other than that the large bankroll means there’s less chance for the house to be ruined by a long streak of luck. Incorrect. Such a thing was exactly what I said. In conclusion, I believe you have simply skimmed my post for keywords and processed it without actually reading what it said. Such a thing does not surprise me at all, because all my life I have always run into trouble when people hear certain words out of my mouth and assume I’m talking about one thing and fail to actually listen to the argument I was making. It even got me fired from a job. No one seemed to care that the argument I was making was perfectly reasonable and not at all offensive; the fact that I used certain words together in a certain context apparently made it prima facie offensive even if a more nuanced understanding of what I was exactly getting was absolutely the opposite of what they accused me of arguing. To conclude: You can play a positive expectation game (that’s what the casino does) and be ruined by having too small of a bankroll. That’s why there are maximum bets - because they can’t afford people having runs of good luck with bets comparable to their total equity. With maximum bet sizes, the player’s potential larger bankroll than the casino is irrelevant, because they don’t get the ability to leverage it in potentially wiping the casino out, and they can’t grind the casino out of money because of the house odds advantage. On the topic of bankrolls and games with positive expected value, I feel it’s appropriate to bring up the [St. Petersburg Paradox](https://en.wikipedia.org/wiki/St._Petersburg_paradox), where the expected value of a ticket for the game in question is entirely a function of how large a bet the house can possibly pay out. It grows very slowly with increasing bankroll as can be seen in a chart on that link. Hopefully this post was long enough so that you actually take it seriously, because the previous one you seemed to dismiss without a second thought, or indeed without even actually reading it. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [March 28, 2018, 4:12am UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/59 "2018-03-28T04:12:08Z")
> [@Sam\_Stone](#): > > Blackjack is by far the easiest of the three, but it’s also the one the casinos watch very carefully. So if you’re going to learn to count cards, you either need to play low limits where no one cares, or you need to get to the next level and start learning techniques to camouflage your play. Honestly, no one is really watching you at cheap blackjack tables. You can count cards at the $10 table and unless you up and say you’re doing it, no one will notice. I’ve been counting cards at blackjack for years at basically two casinos and ne’er a word has been said to me, because they don’t really pay attention to something that subtle when your monster bet is $20. If I was playing $300 a hand, they’d notice. ---
**Author:** ![MichaelEmouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/michaelemouse/32/101_2.png) [@MichaelEmouse](https://boards.straightdope.com/u/MichaelEmouse)\ **Post date:** [March 28, 2018, 4:15am UTC](https://boards.straightdope.com/t/how-do-casinos-make-money/811226/60 "2018-03-28T04:15:36Z")
> [@RickJay](#): > > Honestly, no one is really watching you at cheap blackjack tables. You can count cards at the $10 table and unless you up and say you’re doing it, no one will notice. I’ve been counting cards at blackjack for years at basically two casinos and ne’er a word has been said to me, because they don’t really pay attention to something that subtle when your monster bet is $20. If I was playing $300 a hand, they’d notice. Presuming you do the counting in your head, how would they notice you from someone being lucky? [Previous page](https://boards.straightdope.com/t/how-do-casinos-make-money/811226.md?page=2) [Next page](https://boards.straightdope.com/t/how-do-casinos-make-money/811226.md?page=4)