How does a sportsbook make money?
Quite simply, the sportsbook pays off winning bets at less than 1 to 1.
Payoff odds help ensure that the sportsbook makes a profit. Typically, payoff odds of -110 are set, which calculates the payout by dividing 10/11. With these odds, a winning $100.00 bet doesn’t pay $100, it pays $100/$110, or $90.91. The difference between the $100 wager and the payout is the profit for the sportsbook.
Here’s an example. Let’s say a sportsbook received 50 bets on Team A for $100, and 50 bets on Team B for $100. That’s $5,000 wagered on each team, or $10,000 total.
Now let’s assume Team B was the winner (and covered the point spread). Now the sportsbook pays 50 bettors their original $100 bets, plus another $90.91 each-- a payout of $9,545.50. The difference between the $10,000 total wagered and the $9,545.50 paid out is the profit for the sportsbook—in this case $954.50—close to the typical ‘vigorish’ (odds charged per bet) of roughly 4.5%.