The House Edge and Why it Matters

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Although gambling games are also known as “Games of Chance”, when it comes to Casino games, this is not an entirely accurate description. After all, casinos are businesses. And most of them are incredibly profitable.

Casinos make money because they have a built-in advantage over the player, known as the house edge. This edge gives them a better chance of winning, and means that over time they will make more money than the player.

What is the House Edge?

If you’re betting on a coin flip, you have a 50/50 chance of winning. There are two sides to every coin, and each one is equally likely to come up. In other words, the odds of winning are even.

Now imagine you’re playing a game of Roulette. You decide to place a bet on the ball landing on black. The Roulette wheel has 37 pockets, numbered 0-36. Eighteen of those pockets are red, 18 are black, and 1 is green (the zero). And remember, to win the bet, the casino does not need the ball to land on red; they only need it to NOT land on black.

So, if you bet on black, you have an 18/37 chance of winning (or a 48.6% chance).

The difference between your chances of winning and the casino’s chances of winning is what’s called the house edge. In Roulette, the house edge is 2.7%. This means that for every $100 you bet, you can expect to lose an average of $2.70 over time.

The house edge is different for every game, but it’s always present. Blackjack has one of the lowest house edges at around 0.5%, while games like Keno and Slots have some of the highest, ranging from as high as 20% to 7%, depending on the game. This applies to land-based games. On the other hand, the best online slots offer a much lower house edge of between 5 and 3%.

What is RTP?

The house edge can also be expressed as RTP, or Return to Player. This is the percentage of all the money wagered on a game that will be paid out to the players over time. So, if a game has an RTP of 97%, this means that the house edge is 3%.

Added House Advantage

Another vital thing to remember is that the house edge is a theoretical figure. It is based on the assumption that the player actually knows what they’re doing and is playing with optimal strategy. In reality, most players are not that savvy and will make mistakes that increase the house edge.

For example, in Blackjack, there are several different choices the player has to make. And each option has a different expected value. Some preferences will result in a higher chance of winning, but a lower payout. Other choices will have a higher payout but a lower chance of winning. The optimal strategy is to make the choice that results in the highest expected value. But most players don’t know the optimal strategy and will make sub-optimal choices that increase the house edge.

Casino profitability

The bottom line is that casinos are businesses, and like all businesses, their ultimate goal is to make a profit. They do this by offering games that have a built-in house edge. And while some players will get lucky and win in the short term, over time, the house always wins.

This is why it’s so important to remember that gambling is a form of entertainment. It’s not a way to make money. The only guaranteed winner in gambling is the casino. So, if you’re going to gamble, do it for fun and with money that you’ve specifically set aside for the purpose. And never bet more than you can afford to lose. Good Luck!


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