Understanding the house edge

The basics of casino gambling are actually quite simple. While the rules of each game are different, the basic principle is essentially the same for all games.

Whether it’s a hand of blackjack, a spin of the roulette wheel, a roll of the dice at the craps table, or a spin of the slot machine, players place a bet and wager against the casino (also known as the house).

When the players lose, the house takes their bet. If the players win, the house pays out their bet.

Basically that’s pretty much all you need to know to start playing casino games. Of course, you also need to know the rules for each specific game you want to play, but they are usually fairly easy to learn.

However, in our opinion, it pays to have a basic understanding of how casino gambling works.

In particular, you should understand how casinos make money and be familiar with the concepts of house edge and payout percentages.

You also need to understand why it is possible for players to win money even if the odds are against them. On this page we explain all these things.

How Casinos Make Money

Essentially, casino games are all games of chance, meaning that a player ultimately depends on luck. There are some games that also involve an element of skill, such as blackjack, but luck is generally the deciding factor in determining whether or not a player wins.

However, this does not mean that a casino has to be lucky to make a profit with people playing their games.

Every casino game offers a long-term house edge, and this is how they make money.

The advantage that is effectively built into every casino game is known as the house edge. This advantage means that a casino will always win money over time.

The house edge exists because casinos do not pay out winning bets according to the actual odds of that bet. As such, they technically make money every time a player wagers.

While the house doesn’t win every bet, mathematically, the odds are always in their favor. Casino games are known as “negative expectation” games because the long-term expectation is negative.

The house edge

First, we’ll look at the American roulette vs. European roulette odds example to give us a better understanding of how the game works, so we can better understand how the house edge kicks in:

We now use an example to show how the house edge works in practice. Let’s say we play roulette and bet $1 on a single number for each spin. A roulette wheel has either 37 or 38 numbers, depending on whether you play the American or European style.

So you have either a 1 in 37 chance or a 1 in 38 chance of winning your bet. For this example, we will use the European version.

In theory, you should expect to win your bet every 37 spins.In practice, it doesn’t quite work that way because of the standard deviation and variance, which we’ll explain a little later, but in the long run, each number should be spun about once every 37 spins.

For the sake of this example, let’s assume that each number appears exactly once every 37 spins.

If a casino offered real roulette odds, then players would have to break even in the long run, and the casino would not be making any money. They are in the business of making money, so the house edge is very important to them.


True Opportunities


  • $1 bet equals $37.
  • Expected Loss  – $0

Over 37 spins, you would wager a total of $37, get a return of zero on 36 spins, and a return of $37 on 1 spin, so break even.

Actual Opportunities


  • $1 bet  – $36
  • Loss forecasted-$1

$1 as a percentage of $37 is 2.7%. That means 2.7% is the house edge for this game. To calculate the payout percentage, subtract that benefit from 100%. This means that the payout percentage is 97.3%.

The house edge/payout percentage is the same regardless of the wager you make during the game. This means that for every $100 wagered in roulette, the theoretical house win is $2.70. While a casino would never make exactly $2.70 for every $100 wagered, across millions of spins, it would average around that figure.

It should be noted that the house edge is not the same in every casino game, and there is a definite advantage to playing games with a low house edge. In theory, the lower the house edge, the less you will lose over time.

The size of the house edge is therefore something to consider when deciding which games to play. However, it shouldn’t be the only consideration, as some games with higher house advantages also offer certain advantages.

How players win at casinos

As we showed above, the casino will always win in the long run. You might then think that there is no point in playing casino games because you never win. However, it is perfectly possible to win at casinos despite the existence of the house edge.This is because it takes millions of bets to restore the house edge, and there is absolutely no reason why a player cannot beat the advantage in the short term.Let’s go back to the example we just used, where you bet $1 on a single number in roulette. With this method, even with the house edge, there are a number of possible outcomes to making money:

Win on the first spin of the wheel.

This is a completely conceivable outcome and would give you an instant profit of $35. If you stopped right away, you would have had a head start. Even if you played twenty more spins without winning, you could still make a profit.

The predicted number came out more than expected over a number of spins.

For example, if you played a hundred spins and your number came up five times, you would comfortably make a profit. You would have lost ninety-five times totaling $95, but the five times you won would have netted you $175. Your total profit would be $80 ($175 – $95).

It doesn’t matter what game you play; the fact is that there is always a chance that you can make money.Take blackjack for example. It is very possible to win several hands in a row playing blackjack, and it is far from uncommon for players to win long runs.Then there are slot games. You can spend just a few dollars playing slot games and win thousands or even hundreds of thousands. Of course you need a good dose of luck, but it can happen.


The essence of casino games is that the odds are always against you in the end, but there is always a chance that you could upset those odds. You never know exactly what’s going to happen, but it’s always fun to find out, and that’s what makes casino games so exciting.