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The House Always Wins: What Does That Really Mean?

A term that’s wrongfully feared by some, known to confuse quite a number, and terribly misunderstood by most! But what does it really mean? 

Does it mean that gamblers are destined to lose? Does it mean that gamblers are being duped by casinos (including online casinos) and perhaps lottery administrators…? Should we all be worried about this “house always winning business”? Why on God’s green earth should we continue gambling if we’re going to lose to the house anyway…?

Let’s take a quick detour down logic lane and look at this issue from a more sober perspective. In retrospect, the last time I checked, casinos (and or lottery administrators) are not some sort of charity organizations dishing out (free) money to the public; these guys are in it for some serious profit… in the long run! So, what does this mean for the average gambler; both in the short-term and in the long-run…?

 

Understanding the Casino Business

Casinos make their profit through the house edge and some bit of help from the odds. However, they also lose money by paying their employees, investing (or re-investing) in their casino businesses, and paying government taxes (plus licensing fees); they never lose money to gamblers per se. 

If you buy two lottery tickets every week worth $2.50 (each) for a year, then that means you end up spending (52 weeks by $5 for two tickets) $260 annually; regardless of the odds offered, wins, or the house edge. If you play continuously for 5 years without changing your mode of weekly play, then that becomes $1, 300 for the entire 5 years of non-stop gambling.

Now, let’s assume that you land a jackpot win at the end of the five years (January 1st, on the sixth year)… say $1 million. This basically means that your (pre-tax) profit in the five years of committed gambling is approximately $998, 700. The final bank-able amount will largely depend on your country of residence and the laws (or regulations) regarding taxation or other reductions on jackpot wins such as lump sum fees or shared jackpots.   

That’s just about as simple as it can get from the perspective of a single (average) player buying only 2 weekly tickets for 5 years… 

Warning: The rest of this article may contain some mathematical and statistical assertions that may (or may not) challenge your logic… but you can try your best to follow as closely as you can (whichever side you’re on)… hope I haven’t lost you already…

So here goes…

Taking our example above, supposing there are 100, 000, 000 lottery tickets sold during the week of our assumed jackpot win, keeping all other standard factors constant, this means the $5 you pay for your two tickets that week become part of a collective figure amounting to $250, 000, 000. Therefore, considering that the lottery administrators in our example uphold regular lottery odds and the 50-50 house edge, then $125, 000, 000 automatically remains with lottery administrators (or company) as gross profit (to pay salaries and taxes, as well as financing government projects and special programs). The other half ($125 million) is distributed to all lottery winners according to the set prize tiers; including our assumed jackpot prize of $1 million. 

This also means that, theoretically, a sizeable chunk of these two $125 million portions could very easily end up back in the lottery’s Trust Account for future payments to lottery winners in the next draw (and the draw after that… and so on…), and as pure net profit. That’s depending on the lottery company’s actual expenditure or the number of winners (plus the amounts won) in each particular draw… 

Interlude: For the purpose of keeping things clear… please note that (1) the above assumption only shows what a single lottery player spends playing every week for 5 years; (2) the 100 million tickets sold and the $250 million total figure (after ticket sales) only represent what to expect in a (hypothetical) single week; and (3) if the average number of lottery tickets sold every week is 100 million for the 5-year period, then this means the lottery administrating body gets to bank $125 million every week! In five years, that amounts to a total of… okay do the math... But yeah, that’s something close to $32, 500, 000, 000 (that’s $32.5 billion)! 

So, going back to our previous example… this means that the gambler spends a total of $1, 300 in five years, wins a $1 million jackpot at the end of the 5 years making a pre-taxed profit of approximately $998, 000… but the lottery company has collected a total of $32 billion during the same period. And that’s why (well managed) popular casinos or lotteries will never go under!

FYI: This is how jackpot rollovers in lotteries are financed. Casino games, especially online casino video slots with progressive jackpots, also work under similar principles but with slight variations on the odds and RTP ratio (Return-To-Player percentage); which represent the house edge. Please note that all casino games are designed with a small advantage (edge) for the house. 

 

The Odds and House Edge for Most Casino Games and Lotteries

These are the odds of a player winning versus the odds of the casino winning.

 

House Edge (%)

Maximum Odds

(Single Bet Payoff)

Max % Odds for Player Win

Max % Odds for Casino Win

Lotteries

≥50%

1 in millions

   

Craps (x1 odds)

0.8%

1 in 2

49.5%

50.5%

Fixed Jackpot (Flat top) Slots

0-17%

1 in 5, 000

83%

17%

Bacarrat

1.06%

1 to 1

50%

50%

Keno

≥25%

1 in thousands

   

Progressive Jackpot slots

2-17%

1 in 5, 000

   

Roulette

5.26-5.5%

1 in 36

48%

52%

Poker (video)

0.5-5%

1 in 800

40%

60%

Blackjack

0.28-0.5%

1 in 1.5

49%

51%

The House Edge and Odds Explained

Here comes the big numbers and small numbers that mean a lot… so brace yourself, you’re about to be blown out of your mind… and skin!

Looking at this issue from a statistical point of view, all odds add up to 100%. This therefore means that the probability of not winning is given by the expression:

 P(not W) = 1 – P(W) 

The probability that 2 (or more) mutually exclusive winning events will occur can be given by the expression:

P (x or y) = P(x) + P(y)

However, the probability that 2 independent winning events will occur can be expressed as:

P(x and y) = P(x) * P(y)

For instance, if you want to find the probability of not rolling a 6 on a die on any four successive throws (which is not mutually exclusive), then our equation becomes:

P(not 6) = the other 5 sides that are not 6 = (5/6) which is 5/6 * 5/6 * 5/6 * 5/6 = 0.4823

This basically means that you have a 48.23% chance of not getting a 6 in all four throws; but a 51.77% chance of actually hitting a 6 on any of the four throws... in the long-run. Translation, the odds are in your favor if you throw the die for an infinite number of times. However, the Law of Big Numbers suggests otherwise. According to the principle of “Bernoulli trials” and the “Law of big numbers”, the casino will always come out on top in the long-run, but gamblers can (despite all odds) still benefit from casinos in the short-term due to what is commonly known as short-term variance.

To avoid hurting your brain with complex gambling science/mathematics/statistics/logic, let’s simplify the following “house edge” explanation as much as possible. 

The house edge is a small percentage (commission) charged by casinos for facilitating and coordinating all forms of gambling activities for gamblers. 

For instance, most online casino video slots have an RTP ratio of 95%+… some going up to 98. Something percent! What this means in simple English is that 98% percent of the money wagered on that particular slots machine is paid back to the punters… the casino only keeps ≤5% of the total. 

In simpler terms, if you bet a dollar on a video slot with an RTP of 98%, the casino gets to keep $0.2 and $0.98 is paid back to the player. This doesn’t make any sense if you consider just one player. However, if a million players each accessed the same jackpot slot at the same time, this means the total pool money is a cool $1 million. Therefore, this means the casino will only bank $20, 000 of the total, and the rest ($980, 000) will be up for grabs for all players with equal chances of walking away with the whole amount or a large percentage of the shared cut.

A comprehensive statistical analysis carried out on the MegaBucks progressive jackpot slot machine by the Wizard of Odds revealed that, for every dollar wagered, $0.11 went to the casino as profit, $0.10 fed the progressive jackpot, and $0.78 was paid back to players (jackpot + non-jackpot wins). 

So, what does it mean that “The house always wins”?

Well, in the simplest terms possible, the odds are stacked against you, and the casino or lottery administrator always retains a small portion of your money logically keeping the house (somewhat unfairly) ahead… unless you win big after a few trials, in which case it’s the casino that has to do the chasing…! This casino chasing and “whittling away” at your cash is known as the grind.

In essence, if you choose to play on a $5 (per spin) video slot only one time and lose, then that’s a loss of 100%. However, if you play the same slot machine a million times, then that means you lose only $268, 250 which is approximately 5.4% of your total wager of $5 million. In short, your losses eventually match the house edge (to your slight advantage) the more times you play… does that make any sense to you yet? 

What Does All This Mean To the Average Gambler?

Nothing… absolutely nothing!

Why?

Because none of that gambling science and statistical analysis means anything to you (or the average gambler)! All these fancy numbers should be preserved for accountants and idle mathematicians…

For starters, it does nothing to affect your individual chances of winning or losing, and it does not determine the amount of money you end up spending on gambling… all that is determined by you; well, your budget, time spent playing, choice of casino game and luck! 

How is it possible to gain an advantage over the casino(s) despite all this “house edge and odds mumble-jumble” you ask…? 

While the odds and house edge percentages give the casinos and lottery administrators a slight advantage over gamblers, hitting the big one places at an even greater advantage. That’s why casinos and all other gambling establishments never want you to leave the house, especially after a large win. This is where fancy advertising and luring bonuses come in…

 

Can Gamblers Ever Beat the House?

Of course, Yes!

How?

Definitely not by scheming or trying any of those hyped underhand strategies…

 - The “Beginners Luck” Factor:

Consider true stories like in the case of Lisa Quam who bought the PowerBall lottery ticket for the first time while on a regular run to the local store (with her husband) for some pumpkin spice and a newspaper. She won the $90 million jackpot and quit her job through an email to her boss and colleagues! It is not clear whether she tried the lottery or any form of gambling ever again but she the choice to get annual checks for 30 years, or get a reduced lump sum figure of $56.8 million.

FYI: The couple bought a ticket each but it was Lisa’s ticket (pinned on the fridge) that emerged a winner!

Another first-time jackpot winner was Maria Lopez, another woman… she walked away with $20, 000 at the Delaware lottery.

A 19-year old dude –Fredrick Walker - from Florida, the US, also decided to try the PowerBall lottery by buying a single ticket. He won the $2 million jackpot using a ticket that some other guy decided not to pay for…

- More Amazing Jackpot Wins:

Against all odds, a Croatian man who had survived 7 fatal accidents that would have easily claimed his life ended on the brighter side of life when he landed a $1 million jackpot win in a Croatian lottery!

Derek Ladner bought a lottery ticket and forgot all about it… he later bought another ticket with the same numbers… both tickets doubled his win when it turned that the $2.4 million jackpot prize would be shared by 5 winners.

A Canadian 86-year old woman had a dream where she saw not only the numbers that would win the jackpot, but also herself standing in front of cameras and a cheering crowd holding the dummy check. She bought 2 tickets with those same number combinations and ended up winning twice! While statistics may prove her daring move totally bonkers… winning 2/3 of the shared $24 million jackpot prize said differently! Only 3 tickets claimed the jackpot win and 2 of them belonged to Mary Wollens!  

Mike McDermott was able to beat a (rather depressing) 5 trillion to 1 odd by winning the jackpot twice on 2 different occasions by playing the same numbers on both times! 

 

Final Word: Beating the House Using Sound Strategy

So, how else can punters beat the house edge and odds?

* Only bet a few times on each session (don’t get carried away even when on a winning streak)

* Select games with low house edge percentages

* Know when to quit… of course, its better you quit while you’re ahead

* Take advantage of bonuses and discounts offered by different gambling businesses.

 

Bonus Amazing Fun Fact: Bet You Didn’t Know…

 

The Great Wall of China was funded using state lottery money!

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