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The Real Cost of Gambling
by John G Brokopp

Whether you win money or lose money when you gamble on the Internet, there is always a price to pay when you bet. It is referred to as the 'house edge', or, 'vigorish', in casino circles.

First, let me explain that there are three major distinctions between the money you bet and the money it COSTS you to bet:

1. The money you gamble with in the casino and the money (if any) you finish with is very real and apparent, whereas the money you spent for the 'privilege' of betting is hidden and quite abstract.

2. The amount of money you win or the money you lose while gambling is static, whereas the COST of gambling is constant and directly proportional to the amount that you wager.

3. It does not make any difference what your own bottom line may be. The house will always derive its share via the built-in advantage that it enjoys.

In order to fully understand what 'house edge' is all about, lets compare it to a fact of real every day life: Taxes.

When you go to the store and write a check for goods or services, a portion of the money is tax. You may be bringing home $100 worth of new clothing, but you paid $108 for the items, thanks to the sales tax.
Look at it another way: Say that four people are playing penny-ante poker, but that one of the players extracts a percentage from each pot. Theoretically, if the game goes on long enough, the player whos taking the cut will wind up with all the money regardless of who wins and who loses. His cut was constant. Winning and losing is static.
The price that people pay for gambling may be hidden, but it can prove to be very costly. For example, fifty percent of all the money that is wagered in the Illinois State Lottery in the United States is taken out in the form of operating expenses and taxes. The other fifty percent is returned to the players in the form of prizes.

For the purposes of illustration, say that people buy $1 million worth of Illinois State Lottery tickets. This means $500,000 is taken right off the top and the other $500,000 is distributed as winnings. The winnings, in turn, are subject to state and federal taxes. What a difference it would make if, say, $250,000 was taken out and $750,000 was paid out to the players.
Sportsmans Park Race Track in Cicero, Ill., a southwest suburb of Chicago, conducted a program during its 2000 racing season whereby the 'takeout' on certain bets was reduced. Twice a week the 'take' on win-place-show wagers made on the live races on-track was cut from 17 percent to 13 percent. Once a week the 'take' on exacta bets made on Sportsmans races at wagering locations nationwide was slashed from 20.5 percent to 10 percent. Winners benefited from the program in the form of more dollars in their pockets.

Similarly, if Internet casinos were to reduce the edge that they garner from bets that are made, players would realize more REAL dollars in their pockets and purses.
It is important at this time to emphasize that bettors feel the pinch of house edge only when they win, even though they are still being pinched, but don't feel it, when they lose! Here's how:
In roulette, the house advantage on all bets with the exception of one is 5.26 percent. Say that you bet $5.00 on number 29. If the ball lands on number 11, you will lose your $5.00. Even though it was all the same to you, it still cost you 26.3 cents to make the bet.
But what if that little ball does land on 29? You will be paid 35 to 1 for your bet, or $175. A nice little profit, except for the fact you SHOULD have been paid 37 to 1, or $185, if the casino had paid you back at the true mathematical odds. The house is taking ten bucks in the form of vigorish, or 'betting tax' if you will, plus they still nailed you for the 26.3 cents to make the bet in the first place!
Next time I will continue this discussion about the price of gambling by delving into the specific games in an effort to discover which ones carry the most hidden cost. You may be surprised!