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How do Sportsbooks Make Money on the Moneyline?

October 22, 2010 by  
Filed under General Information

The moneyline does not offer sportsbooks the same opportunity to make a profit as the point spread. In a standard favorite/underdog scenario, the sportsbook will make money only when the favorite loses. That’s because the difference between the odds on the favorite and the odds on the underdog are normally at least 10 points. For example, the favorite might have moneyline odds of (-130). The underdog facing them would have moneyline odds of (+120). The only exception to this would be the unusual circumstance where neither team was the favorite and the point spread was thus zero. The moneyline would probably be (-110) for both teams in that case.

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In the example above, a loss by the favorite would give the sportsbook $130 from a bettor who was wagering on the favorite. They would need to make a payout of $100 to a $120 wager on the underdog, and the result is a $10 profit. If the favorite wins however, they would owe the winner $100 on a $130 wager, and would collect $100 from the loser who was hoping to win $120. The sportsbook makes no money in that event.

In the article How Sportsbooks Make Money on a Point Spread we discussed the need for sportsbooks to get the right amount of money wagered on both teams. Usually they are able to, but sometimes the sportsbooks are not successful in their attempts to do this. One memorable example of that is the stunning defeat handed to the New England Patriots by the New York Giants in Super Bowl 42. The Las Vegas sportsbooks are said to have lost $2.6 million that day, the first time in more than ten years that the betting houses lost money on the Super Bowl.

The simple reason for the sportsbooks losing money from a Giants victory was the high volume of bets placed on the Giants. The Patriots were a huge favorite to win the championship that day. They were 18-0 coming into the game and were considered by many to be the best team in the 40 year history of the NFL. But Vegas grossly underestimated the public desire to bet on the underdog. Bettors placed wagers on the Giants in numbers far in excess of what the sportsbooks had expected.

The bad news for the sportsbooks was not the volume of bets on the Giants, but the fact that a similar amount of money was not being wagered on the Patriots. In order to encourage more bets on the Patriots, the point spread for New England dropped more than 2 points during the week before the Super Bowl. The point spread had started out at 14 and then dropped as far down as 11½ points. But it seems that it hadn’t dropped far enough The fans apparently didn’t think that New England would win by such a wide margin and they bet on the Giants +11½ points instead.

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The moneyline however is where the sportsbooks really took the biggest hit, as again the sportsbooks lacked volume on the Patriots. The moneyline on the Giants which had been as high as (+475) dropped to around (+350). The Patriots meanwhile had a moneyline of about (-425), and speculation abounds that the lack of a decent return kept people from betting for New England on the moneyline. To make a profit on the moneyline, the sportsbooks would have had to collect bets such that the amount of money being risked on the Patriots equaled the amount that would be won in the event of a Patriots defeat.

For example let’s say that the moneyline was (+400) on the Giants and (-420) on the Patriots. If one moneyline bet was placed on the Giants for every moneyline bet placed on New England the sportsbooks would have made a profit on that segment. That’s because a win by the Giants would have resulted in a $400 payout while the income would have been $420 from the losing bet on the Patriots. Even if the Patriots won however, the sportsbook would only pay $100 to a winning wager while collecting $100 from wagers on the Giants. They would have at least broken even.

But 60 to 70% of the money the public wagered was placed on the underdog Giants. Had the Patriots won the game even by less than the 12 points the sportsbooks would have had to pay off those bettors who bet on the Giants using the point spread odds. But they would still have collected a lot from players who bet on the Giants using the moneyline. With a Giants victory however their betting distribution was completely unbalanced, and the result was a huge loss for the sportsbooks.