How the House Edge Works in Casino Games

If you spend any time at all reading about online casino games and gambling in casinos, you’ll encounter an expression—“the house edge.”

You’ll see writers explain that blackjack house edge is the lowest in the casino, and that the slots have the worst.

You’ll see them mention that some of the bets at the craps table have a house edge of less than 2%, while other bets at the craps table have a house edge of more than 16%.

But what is the house edge in a casino game and how does it work?

This site covers some similar concepts as they relate to the math of sports betting, but the casinos’ house edge works slightly differently.

Some Probability Background that Matters

You can’t understand the house edge if you don’t understand some of the basics of probability.

Probability is just a mathematical way to measure how likely something is to happen.

When a weatherman says there’s a 50% chance of rain, he’s using probability (as well as meteorology) to express that likelihood.

And most people have an intuitive understand of probability when it’s stated as a percentage, because we use it all the time.

If you paid attention in 8th grade math, you probably already know that a percentage is just another way of expressing a fraction, and that’s all a probability is—a fraction.
To determine the probability of something happening, you just look at the number of ways it could happen and divide it by the total number of possible events.

Here’s an Example:
You’re rolling a 6-sided die, and you want to know what the probability of rolling a 6 is. A 6-sided die has 6 sides numbered 1 through 6. There’s only a single 6.

Since there are 6 possible outcomes, and since only one of those outcomes is a 6, the probability of rolling a 6 is 1/6.

You can convert that to a percentage of 16.67%.

You can also convert it to “odds format,” which just compares the number of ways it can’t happen with the number of ways it can. The odds of rolling a 6 on a 6-sided die are 5 to 1.

Once you have a basic understanding of probability, you can move on to the next step, which is determining the house edge of a bet.

What Is the House Edge and Why Does It Matter?

Every bet has a payout if you win and an amount you lose if you lose. This is often the same amount, or even money.

For Example:
If you’re playing blackjack, you bet one unit, and most of the time, if you win, you win one unit. If you lose, you just lose that one unit.

In other words, if you bet \$100 on a hand of blackjack and win, you usually win \$100.

If you lose, you usually lose \$100.

That’s called even money.

(And some bets in blackjack result in bigger winnings, and you sometimes have the option of surrendering, which means you only lose half your stake. But that’s a complication that doesn’t help you understand the house edge, so I’m going to save that discussion for another blog post.)

A bet’s payout can also be expressed using odds, though.

An even-money bet pays off at 1 to 1.

A bet that pays off at 5 to 1 is also possible—if you win, you get 5 units, but if you lose, you only lose 1 unit.

In the die-rolling probability example I used above, if you have a payout of 5 to 1, you’re playing a game with no house edge.

That’s because in the long run, you’ll win as much money as you lose.

But suppose I reduced the payout for rolling a 6 to 4 to 1?

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Do you see how the casino would have a mathematical edge in the long run by paying out less for a win in that situation?

You can use statistics to determine an average amount you’ll lose per bet in this situation.

You assume 6 statistically perfect rolls of the die. This means you’ll win once and lose 5 times.

If you’re betting \$100 every time, you’ll have a single win of \$400 along with 5 losses of \$100 each, or a \$500 total loss.

Your net loss after that is \$100.

Since that’s a net loss of \$100 over 6 bets, you’ve lost an average of \$16.67 per bet.

That’s the same thing as lose 16.67% of each bet, and that percentage is the house edge.

There are other ways to arrive at that number, but that’s the easiest method I’ve seen used.

With every online casino game you play, the house pays off your bets at odds lower than the odds of winning. This results in a mathematical edge for the house.

That’s why casinos are profitable in the long run, even though every, a percentage of their customers go home with winnings in their pockets.

Probabilities—and the house edge—are always long-term phenomena. In the short run, anything can happen.

Individual online casino gamblers are always playing in the short term.

Online casinos are always playing in the long term.

If the House Has an Edge, Why Do People Still Play Casino Games?

So if, in the long run, the house can’t lose because of the math behind the games, why do people still play?

The answer is simpler than you think:

Most people don’t think about things from a long-term perspective. If they did, everyone in the United States would save 10% of everything they earn and retire early because their cost of living would be low enough to be easily affordable.

I have a friend who visits the casino at least once a week. He loses money on 4 out of 5 visits to the casino, but on one of those 5 visits every month, he comes home a winner.

He doesn’t care that he’s losing money hand over fist in the long run. He just wants to keep getting that buzz from his occasional wins.

The human brain is irrational, especially when it comes to gambling.

How the House Edge for Various Casino Games Compare

The house edge is only one factor that affects how much you’re going to lose when you’re gambling on online casino games. Other factors include how many bets you place per hour and how much you’re betting every time you place a wager.

That being said, if everything else is equal, you should play the casino games with the lowest house edge.

Keep in mind, too, that game conditions affect the house edge, too.

For Example:
In some blackjack games, a natural pays off at 6 to 5 odds instead of 3 to 2 odds. The house edge on such a blackjack game is higher.

And, in fact, blackjack is a good place to start a discussion of the house edge for various casino games. It’s widely known that the house edge for blackjack is between 0.5% and 1%, but that number assumes that you’re making the optimal move in every situation. The average blackjack player is probably giving up 2% or so in mistakes.

Craps is a game where different bets have a different house edge. If you stick with the basic bets, pass and come, you face a house edge of 1.41%, which is relatively low. The more “exciting” wagers on the craps table come with a higher house edge.

Roulette comes in 2 main versions—single zero and double zero. The double zero version of roulette is predominant in the United States, and the roulette house edge for that game is 5.26%. By removing one of the zeroes, the online casino reduces the house edge to 2.70%.

Slot machines have a house edge that varies based on the PAR sheet for the game. (That’s the logic behind the game which determines the probability of getting various combinations of symbols and the payouts for those combinations.) You can find slot machines with a house as high as 35% or as low as 5%, but you never know what the number is.

Video poker machines look like slot machines, but they offer a better house edge—if you play the hands optimally. Depending on the pay table, the house edge for video poker can be as low as 0.5% or as high as 5% or 6%.

Conclusion

And those are the basics of the house edge as it pertains to casino games.

Now that you have an understanding of the probability behind casino games and how it affects your winnings and losses, are you going to be more or less likely to play casino games?

Are you going to change the amounts you bet or the games you play?

Let me know in the comments.