The concept of risk and return in betting can be tricky. Take a classic sports bet, for example. You may know that even a slight underdog victory has significant value – in theory, at least.
You may have also heard that sportsbooks sometimes take a “bag” or “banker’s” bet. What exactly does that mean?
Let’s take a closer look.
Bag or Banker’s Bet
First, a little background. Back in the 1800s, bookmakers would often “bank” certain types of betting events. If they felt like the sportsbook was getting a better return on their investment (for example, an underdog win), then they might “bank” the win, meaning they would take a hit on the bet and get all of it back when the team they bet on lost. This is, in fact, the origin of the term “banker’s bet,” as many punters would go bankrolling the side they felt was sure to win.
Then, in the early 1900s, an entire sports betting industry emerged. Gamblers began doing their own research and analysis, creating an entirely new world of wagers and opportunities. The explosion of sports betting led to greater volatility and tougher rules, but it also created a whole new industry.
In today’s world, most sportsbooks still offer some form of “banker’s bet.” The casinos also got in on the act by adding a few of their own versions. For example, if a gambler bets on a certain team to score exactly 30 points in a football game and that team scores exactly 30 points, the gambler wins. In this case, the casino would take a hit on the bet, but they would also get all of it back since the points scored were the same as what they had bet on.
This concept of “negative risk” makes a lot of sense. If you’re risking $10 on a football game and that game ends in a tie, you would naturally want to get your $10 back. The risk in this case is that the game may not end in a tie, in which case your $10 would be lost. However, because the point spread is in your favor (the Rams are -3 and the Falcons are +3), you would still win $7, which is why this is sometimes called a “winner take all” situation. In theory, at least.
On the other side of the coin, if the point spread is in your favor but the team you backed falls short of the point spread by a few points, you would also lose $7. In this case, the risk is that the game may not end in a tie, in which case you would lose $7. However, because the points scored were greater than what you bet on, you would still win $10, which is why this is sometimes called a “loss-win” situation. That is, you win some, you lose some.
Negative vs. Positive
As noted, most sportsbooks and casinos still offer some form of “banker’s bet.” What is different today is that due to the COVID-19 pandemic and the resulting “sports stoppage” measures, the majority of sportsbooks now take a “negative” view on wagers. This means that if a game is scheduled to start at a certain time and there is no show or no go sign, they will refund (or “cancel”) your wager. In other words, the risk in most cases is not in your favor. The only way this can happen is if the game ends in a tie. Otherwise, the risk (and potential reward) are in the house.
What About Margins?
Many people are under the mistaken belief that sportsbooks take a “markup” (or commission) of some kind when customers win big. This is simply not true. As noted, most sportsbooks will refund (or “cancel”) your bet in the event of a no-show or canceled game. This means that the commission you would have to pay is actually the downside of betting, not the upside.
What about Vegas’s take?
For years, the mantra of most sportsbooks and online betting companies was “never bet against the house.” While this may have made sense in a world where losing a bet was simply inconvenient (and sometimes even costly), with no-show and canceled games a thing of the past, it’s time for a change. Vegas is now welcoming bets from all comers.
The point spread is the most popular way to bet in the sports world, but that doesn’t mean it’s easy to understand. Take a few moments to read the key takeaways from this article: