Nevada Sportsbooks LOST Money on the Super Bowl

Traditional bookmaking can earn a profit - if you can have equal money wagered on both sides of the game. For Super Bowl XLII, unfortunately more money was wagered on the Giants - and the Giants won. This outcome cost Nevada sportsbooks $2.6 million. Since $92.1 million was wagered on the Super Bowl, Nevada sportsbooks had looked to profit by approximately $4 million. The actual result was an almost $7 million swing in the wrong direction. The debacle is described in detail by the Las Vegas Sun .

What should happen is that once the sportsbook sets a line, if too many wagers occur on one side, the line is adjusted to incent increased action on the other side, to balance the money on each. That didn't happen to a sufficient degree. The main culprit wasn't the spread, however, but the money line. A particular sportsbook had the money line: Giants +320, New England -440. This means that you could bet $100 on the Giants to win $320 or bet $440 to win $100 on the Patriots. The books should have adjusted the odds downward on the Giants and upward on the Patriots to incent proportionally more wagers for the Patriots.

There is some general correlation between point spreads and the money line, which I won't get into here. It appears though that the money line on the Patriots was attractive compared to the point spread, but even that attractiveness to experienced bettors couldn't overcome the large casual betting interest in the Giants.

The need to balance the books is a problem with this type of wagering. The book needs to be maintained in balance and done so on a fairly continuous basis to ensure the house earns a profit. That isn't the problem with a pari-mutuel wagering method. With pari-mutuel, the house takes its profit off the top and distributes the remainder of the wagers to the winners.

For example in a pari-mutuel wagering scenario, if early wagering on the Giants was 2.5 times the amount wagered on the Patriots, the odds on the Giants would have dropped to 1:1 and the odds on the Patriots would have risen to 5:2, given a 15% takeout for the sportsbook. When bettors saw this, more wagers would have been placed on the Patriots. If this occurred to the point where the money ultimately wagered on the Giants was equal to the amount wagered on the Patriots, the final odds for each would have settled at 8:5. What is better about this method is that the house has no need to balance the book because the bettors themselves set the odds and the house earns its takeout regardless of the outcome. If $18 million had been wagered this way at a 15% takeout, Nevada sportsbooks would have earned $2.6 million.

Pari-mutuel wagering, due to the larger takeout, may not be as attractive to experienced bettors, but with sporting events with large casual interest, such as the Super Bowl, a wagering method that generates a good margin with lower risk has potential value.