I’ve always been fascinated by gambling: the adrenaline generated by risk, the dream of a big win.
Since I first understood how roulette works, I’ve been struck by how “fair” this game is.
When you do the simple math, betting €1 on any number gives you a 1/37 chance of winning, and in the case of a win, the house pays 36 times the stake. Playing repeatedly, the house wins on average only 2.7% of the total amount bet (1/37). Blackjack is even more “fair.” Played by the rules, the house edge drops to as low as 0.5%.
When we think of games more familiar to us, like the Lotto, a single number has a 1 in 18 chance of being drawn and pays 10.23 times the stake (a margin of 38%). This margin doesn’t change whether the number is overdue or not, as Giovanni explained to us here.
The “Cinquina” (five-number match), however, is a real theft, with a margin of 86%. That is, for every €100 wagered, the house pays out only €14 in winnings on average (compared to €97.3 for roulette!). Similarly popular sports betting can have a margin of up to 40–50% when played as a parlay.
House Edge by Game Type
Gioco | Margine del banco |
---|---|
BlackJack | 0.5-1.5% |
Roulette | 2.7% |
Slot machine | 3-10% |
Scommessa sportiva* (in singola) | 3-10% |
Scommessa sportiva* (in multipla) | 20-50% |
Lotto - Estratto | 38% |
Lotto - Cinquina | 86% |
*Indicative margins for sports betting.
After appreciating the low margins of casino games, I discovered something else that decisively tilts the odds in the house’s favor: the so-called “Gambler’s Ruin Theorem,” which highlights the significant difference between a casino’s capital and that of the player.
Using the chart, it’s easy to see how, even in a fair game, a player spending an evening at the casino is almost doomed to lose.
Let’s assume the player is willing to lose €15. The house, with far greater resources, only needs to wait for fortune’s fluctuations to push the player to the point of no return (in the chart, this happens on the 430th round). While the player’s balance oscillates around zero, the game ends when the player runs out of funds, whereas the house essentially has no loss limit.
The chart demonstrates this with a zero-margin game (perfect fairness). In the presence of even a small house edge, the player will reach the point of no return even faster.
The theorem can be summarized by this formula, calculating the probability of the player’s ruin in a fair game (zero margin), assuming play continues until either the house or the player runs out of capital:
Player’s Probability of Ruin = House Capital / (Player Capital + House Capital)
Even with modestly different amounts (Player = €15, House = €40), the odds are heavily skewed, with the player going broke in 72% of cases. Considering the house usually has vastly greater capital than the player, the probability of ruin approaches 100%.
At this point, it should be clear that the low house edge in casino games does not limit the house’s profitability.
In light of this, the next time you spend an evening at the casino, either bet all your capital in one go (and nearly break even) or simply enjoy the price of an entertaining evening!