How Do Sportsbooks Make Money?
Understanding the business model that turns $1 trillion in wagers into billions in profit
9 min read
Why This Matters For You
Understanding how sportsbooks profit isn't just interesting—it's essential for finding your edge. Every dollar they make comes from somewhere, and knowing their playbook reveals opportunities to bet smarter.
The short version: Books profit through the vig, public betting tendencies, and parlay-heavy products. Your job is to minimize their edge by finding +EV spots where the math works in your favor.
The Vig: Their Primary Profit Engine
The vig (vigorish), also called juice, is the commission built into every bet. It's simple but powerful—instead of offering fair odds, books build in a margin that guarantees profit over time.
How the Vig Works: Point Spread Example
Fair Odds (No Vig)
Chiefs -3 at +100
Bills +3 at +100
Bet $100, win $100. True 50/50.
Actual Odds (With Vig)
Chiefs -3 at -110
Bills +3 at -110
Bet $110, win $100. Book keeps $10 on losers.
The math: If $1,100 is bet on each side ($2,200 total), the book pays $1,100 to winners and keeps $1,100 from losers. Net profit: $100 on $2,200 wagered = 4.5% margin with zero risk.
The Five Ways Sportsbooks Profit
1. The Vig (Commission)
The guaranteed margin built into every line. At -110/-110, that's roughly 4.5% on straight bets. Even with perfectly balanced action, the book profits.
Impact: ~4.5% on straight bets
2. Parlays and Exotic Bets
The vig compounds with each parlay leg, turning 4.5% into 12%+ on 3-leg parlays. Same-game parlays are even more profitable for books due to correlation adjustments.
Impact: 12-30%+ on parlays
3. Public Betting Patterns
The public overvalues favorites, popular teams, and overs. Books shade lines accordingly, collecting a "popularity tax" from recreational bettors on top of the standard vig.
Impact: Additional 2-5% on public sides
4. Bonuses with Playthrough
That "$1,000 bonus" requires betting it 10x before withdrawal. With a 4.5% house edge, most of that bonus is recaptured through churn. It's marketing, not charity.
Impact: 40-50% of bonus value returned
5. Limiting/Banning Winners
Books identify and restrict profitable bettors. By removing sharp action, they ensure their remaining customer base is net-negative. This is why "soft" books can offer worse odds—their competition (you) is weaker.
How Sportsbooks Set and Move Lines
Lines aren't arbitrary. They're calculated using sophisticated models, then adjusted based on real-time betting action. Understanding this process reveals where value can exist.
The Line-Setting Process
Opening Line
Models calculate initial line based on team ratings, injuries, weather, etc.
Sharp Action
Professional bettors bet early. Books move lines quickly in response to sharp money.
Public Action
Recreational bets pile on favorites and popular teams. Lines may shade further.
Closing Line
The final line before kickoff is the most efficient—the market's best estimate.
Where Value Exists
Value typically exists early (before the line is efficient) or on unpopular sides (where public bias creates inflated odds on the other side). The closing line at a sharp book like Pinnacle is the benchmark—if you consistently bet better than the closing line, you're likely profitable.
Learn more: Why Closing Line Value Matters
Sharp Books vs. Soft Books
Sharp Books (Pinnacle, Circa)
- Lower vig (better odds)
- Higher limits
- Don't limit winners
- Profit primarily from vig
Soft Books (DraftKings, FanDuel)
- Higher vig on some lines
- Promos and bonuses
- Will limit/ban winners
- Profit from public betting patterns
How to Use This Knowledge
- Line shop to minimize vig
Different books offer different odds. Always get the best number available.
- Avoid parlay-heavy strategies
The compounding vig makes parlays the book's most profitable product.
- Bet against public bias when appropriate
Unpopular sides often have better value because lines are shaded toward the public.
- Focus on +EV opportunities
The only way to win long-term is finding bets where true probability exceeds implied probability.
Find the Bets Books Don't Want You to Find
We analyze odds across every major sportsbook to identify +EV opportunities—the bets where math favors you, not the house.
Frequently Asked Questions
How do sportsbooks make money?
Sportsbooks make money primarily through the vig (vigorish/juice)—the commission built into every bet. At standard -110/-110 odds, the book collects 10% more than they pay out. They also profit from parlays, bonuses with playthrough requirements, and betting against the uninformed public.
What is the vig and how does it work?
The vig is the sportsbook's commission, typically built into the odds. Instead of offering +100/+100 on a 50/50 game, they offer -110/-110. This means bettors must risk $110 to win $100 on either side. The $10 difference is the vig—about 4.5% house edge.
Do sportsbooks want balanced action on both sides?
Yes and no. Balanced action guarantees profit through the vig with zero risk. But sportsbooks also take positions against the public when they believe the line is accurate. Sharp books like Pinnacle profit primarily from vig; recreational books often profit from public betting patterns.
How do sportsbooks set their lines?
Lines start with mathematical models factoring team strength, injuries, weather, and more. Then they adjust based on betting action—if money flows one direction, lines move to attract opposite bets. Sharp money moves lines more than public money because books respect sharp bettors' opinions.
Can you beat the sportsbook?
Yes, but it requires finding positive expected value (+EV) bets where the true probability exceeds the implied probability in the odds. Sharps do this through superior modeling, line shopping, and exploiting soft lines. Books may limit or ban consistently winning bettors.