In the world of sports betting, there are two schools of thought when it comes to calculating the odds of an event; the common approach and the mathematical approach.
The common approach is best summed up in an old adage; “Odds are made on predictions,” which is incredibly misleading. This school of thought originates from bookmakers, who look at an event and try to make a prediction on whether it will be a home win, a draw, or an away win. If they place a bet on the game and it turns out to be exactly what they predicted, their profit is bettors’ odds x amount of money bet (“multiplied”).
But while bookmaker’s odds may be easy enough to comprehend, sportsbooks that accept wagers on sporting events don’t use them. Instead, they use math to calculate the odds of an event happening. For instance, let’s say you’re betting on the NFL and the San Diego Chargers are playing the Oakland Raiders. It’s late in the game and the score is close. You’re betting on whether the Chargers will cover the point spread (–5). If you’re reading this on a mobile device, click here to continue.
The Charger Wins
What happens if the Chargers win the game? You’ll receive winnings based on the amount of money you wagered (multiplier x winnings). Here’s an example:
If the game is scored over 38 points, your bet is a push. However, if the score is 34-28, your bet is a win. In the case of a tie, your bet is a push.
Even if the score is 3-0 in favor of the Chargers at the start of the 4th quarter, your bet is a win. This is because the bookmaker’s original prediction doesn’t account for the possibility of the Chargers scoring 3 unanswered touchdowns in the final quarter of the game. The mathematical approach tries to simulate this scenario and assign it a numerical value. This is where things get a little bit complicated.
The Math Behind The Scenes
As mentioned, the math behind the scenes is complicated, so let’s get into it step by step. The first step is to determine how much money you’ll need to cover your anticipated loss. To do this, take your initial bet (–5) and add to it the point spread (–5). This gives you your total bet (–10), which you’ll need to cover your loss. So, you’ll need to stake at least 10 units on each side (–5 + –5 = –10).
The next step is to determine how much the point spread will cost you. To do this, add the point spread (–5) to your initial bet (–5). This is your total bet (–10), as we discussed above, so you’ll need to stake 10 units on each side (–5 + –5 = –10). Now add this new total (–10) to your point spread (–5). This is your new total (–15), which you’ll need to bet to force a win. So, you’ll need to stake 15 units on each side (–5 + –10 = –15).
As you can see, the process starts to look a lot like a loan: you need to start with a base amount (–5) and add to it to get your total bet (–10), which you’ll need to stake (10 units + 10 units = 20 units). Your stake will then be added to your total bet (–15) and that’s how much you’ll need to bet to force a win (15 units + 15 units = 30 units).
This process is repeated for every quarter. Let’s say the 4th quarter ends in a tie and you need to make another bet to win the game. In this case, you’ll need to bet (20 units) to cover your loss from the 3rd quarter (–30 units) plus your stake from the 4th quarter (–20 units).
Before we begin our discussion of legalities and regulations, let me emphasize that this is NOT financial advice. I am not a financial adviser, and this information is for educational purposes only. It is not meant to substitute for professional advice. It is also not intended to propose or imply direct or indirect liability. I am not liable for any losses incurred in connection with the information presented on this site. Finally, my objective is to simply provide information so that you, the reader, can make better-informed decisions about your personal financial future.
The Legalities
One of the most complicated aspects of wagering on sporting events is legalities. In the U.S., you must be over 18 years old to legally bet and have to be a citizen. You also need to be a resident of a state where you can legally wager. There are exceptions for some groups, like students and military personnel. In most states, you’ll need to register with the state and pay annual licensing fees.
Because this is such a complicated issue, I’ve created a completely step-by-step guide that covers everything there is to know about legalities and regulations. I’ve also included a section on how to find the best sportsbook when it comes to your state. You can find this guide at the end of the article if you’d like to review the legalities behind wagering on sporting events.
Regulations And Penalties
One of the biggest issues facing sportsbooks is determining how much they’ll be taxed by the government. In the U.S., the government charges a $3,000 annual occupational license for bookmakers and wagering businesses. This is in addition to any state taxes that may apply.
In order to operate legally, sportsbooks must adhere to many regulatory requirements aimed at ensuring the fairness of their games. For example, they must ensure equal chances of winning for all sports bettors. This means, among other things, that the amount of money wagered per game must be distributed evenly among all the sports books that the state regulates. It also means that the odds of an upset must be kept the same for all sports books. Finally, in order to prevent the big-balloon effect, where the favorite wins because of its superior size, books must keep an adequate supply of balls.
Where Do I Stand?
So, let’s get to the good stuff already. We’ve covered the odds and the legalities. Now let’s talk about where you stand. Once you’ve calculated your anticipated loss, it’s time to figure out how much you need to risk. In order to do this, take your total bet (–30 units) and subtract from it your expected loss (–40 units). This is the amount of money you need to risk. So, you’ll need to stake (20 units) in order to win (–20 units – –40 units = +20 units).
Remember, Vegas Math does not apply to professional sportsbooks. These are the odds makers for casinos and racetracks. They have specialists that determine the number of bets placed and calculate the winnings and losses for the house.
With this in mind, let’s return to the example above where we calculated that you need to risk (20 units) in order to win (–20 units – –40 units = +20 units). Let’s say that you were successful in your bet and won (–20 units). What would happen to your bank account?
You’ll begin to receive winnings from the state and federal governments. The money will be in your account within 7-10 days (check here for the latest IRS rates). When this happens, you’ll need to decide whether or not to withdraw your winning. Most sportsbooks give you 30 days to settle your wager and begin to receive your winnings. After this time period, you’ll need to contact the bookmaker to request a withdrawal.
Final Takeaway
So, where does all this leave us? Well, if you’re looking to place a wager on a sporting event, I would recommend taking a step back and doing some research. There are lots of reputable booksites where you can research games and odds, or you can read blogs that discuss sports betting. Of course, you can also ask questions about odds and betting strategies by contacting the bookmaker directly.