With the Supreme Court’s landmark gambling decision this week, many more Americans might soon be able to place a legal wager on their favorite sport. So what kind of money are we talking about?
The U.S. casino industry says Americans illegally bet at least $150 billion on sports every year. But it’s hard to measure exactly how much of that money might flow into legal establishments as a result of this decision; underground bookies don’t readily publish their balance sheets. But the casinos in Nevada do, and a closer look into the action taken by sportsbooks over the past few decades gives us a window into how Americans bet on sports — and how well they’re doing.
According to data published by David Schwartz of UNLV’s Center for Gaming Research, legal sports gambling has steadily been on the rise. Nevada sportsbooks have shown consistent growth in the number of outlets that take wagers, the wagers handled per outlet and the share of wagers kept (more on that later). In fact, Nevada casinos took in 55.6 percent more sports-betting money in 2017 than they did in 1992.1
Clearly, a lot more people feel confident enough in their sports opinions to put a lot more money where their mouth is.
Unsurprisingly, football has ruled this world. After cracking $1 billion wagered in 1994, in unadjusted numbers, football betting followed the industry’s slow downward trend until 2005, then bounced back upward, growing year-over-year nearly every year since. But the other sports are growing even faster: Nevada casinos’ 2017 basketball handle was $1.48 billion, 84.4 percent of the amount wagered on football take. Baseball is just a little further behind; bettors put down $1.14 billion in 2017, 64.9 percent of the football bets. Back in 1992, those shares were 69.3 percent and 58.9 percent.
But even if our ability to place legal bets is changing, there’s one thing that will probably stay the same: our inability to place good bets. Despite the wealth of information available in 2018, sports bettors aren’t any better at handicapping — in fact, they’re notably worse.
Let’s say you went to Hypothetical University, and you have a friend who went to Hypothetical State. The night before the big game, you go to a casino together and each bet $11 on your respective teams. The next day, Hypothetical U wins and covers the point spread, so your friend is out $11 while the casino pays you $21 — double the money you bet, less the service fee skimmed off of winnings.2 Effectively, $10 of your friend’s lost $11 went into your pocket.
In this case, the “drop” (the money you and your friend dropped on the game) is $22, but the “win” (the amount the casino kept) is $1. This is the ideal: An equal number of dollars bet on both sides guarantees that the casinos’ win rate equals their service fee. But the betting public rarely obliges — and if casinos set the point spread in a way that entices more money to be put on the losing side, their win percentage goes up.
Casinos kept just 2.81 percent of the sports wagers they handled in 1992. But over the next 15 years, casinos set the betting lines in a way to entice lower-information bettors,3 and their win rates soared well above the standard service-fee rate, peaking at a whopping 7.89 percent in 2006. Casinos are still winning in the 4- to 5-percent range over the past decade, with the house taking 5.11 percent of all wagers in 2017.
It really starts to get interesting when you look at how well casinos do on individual sports. On Tuesday, NBC Sports baseball writer Craig Calcaterra caused a stir when he tweeted that baseball is so random that only people with “a problem” would try to bet it:
But since 1992, bettors have done much better against the house in baseball than in football, basketball or the other remaining sports. That’s still true today, 11 years since casinos’ 2006 peak.
Any one out of 2,430 regular-season MLB games a year could have a wildly unforeseen result — but baseball bettors have consistently put more dollars on the winning side over the past 25 years, keeping the average casino win rate below the standard service-fee average of 4.55 percent. It’s a different story in basketball, where casinos have kept 5.4 percent of all money bet on hoops over the past decade. In football, the most heavily wagered sport, casinos have kept very slightly more than the service fee (4.66 percent) over the past 25 years.
Those thinking they’ll outsmart bookies by betting more obscure sports appear to be sadly mistaken; casinos are keeping nearly twice as much of the money bet on “other” sports as good old-fashioned baseball. There was one glaring exception: 1996, when casinos took a bath on Evander Holyfield’s upset of Mike Tyson. Holyfield opened as a 25-to-1 underdog, and so much money came in on him that the line moved all the way to 5-to-1. (Similar action led to similar exposure in last year’s Conor McGregor/Floyd Mayweather fight. Casinos stood to lose millions if McGregor had won, but Mayweather’s victory allowed the casinos to bring in almost twice as much in “other sports” revenue in 2017 as they did the year before.)
Regardless of which sport(s) they’re betting on, though, today’s sports fans are betting, and losing, more than ever.
In 1984, the first year for which Schwartz has data, 51 sports betting locations kept 2.34 percent of the $894.6 million bet, for a total casino win of $20.9 million. In 2017, 192 locations kept 5.11 percent of $4.9 billion wagered, for a total win of $248.8 million.
So, in light of the Supreme Court decision, are Nevada casinos worried about an influx of sportsbooks cutting into their bottom lines? Probably not. In the context of the greater gambling industry, the sportsbook is relative chump change.
According to the Nevada Gaming Control Board, the 24 major Vegas Strip casinos generated $70.3 million in sports betting revenue last year — just 1.26 percent of their $5.56 billion overall gambling revenue. For comparison, slot machines pulled in a whopping $2.8 billion.
Legislators in states where sports betting will soon be legal, may be seeing dollar signs as the dust settles on the Supreme Court’s decision — imagining a $150 billion pot of gold ready to be taxed. But though Americans seem ready and willing to hand their money over to sportsbooks, it remains to be seen just how much money that will be.