How Casinos Make Money: House Edge, RTP, and the Math Behind It

What Does “How Casinos Make Money” Mean? (House Advantage in Plain English)

Casinos Sell Entertainment With a Built-In Statistical Margin

“How casinos make money” means the games pay back less than they take in, on average.

That gap is the house advantage. You also see it as house edge.

When you wager, you buy entertainment priced by math. The price is your expected loss over time.

Two ways to express the same idea:

• House edge: the casino’s average profit per dollar you bet.
• RTP: the average percent the game returns to players over the long run.

If a game has a 2% house edge, the RTP is 98%.

Your expected loss equals your total amount wagered times the house edge.

If you wager $1,000 on a 2% edge game, your expected loss is $20.

Long-Run Expectation vs Short-Run Results

The edge shows up over volume. That means many bets.

In the short term, you can win or lose far more than the edge suggests.

Variance drives that swing. It changes how the session feels, not what the game costs on average.

Do not confuse a short run of wins with a shift in the math. Each bet still uses the same rules and paytable.

If you want examples of false patterns, see The Gambler’s Fallacy Explained (With Simple Examples) and Casino Myths vs Facts: Hot Streaks, “Due” Numbers, and Luck Explained.

“Player Wins” Fit Inside Casino Profitability

Casinos can advertise big winners and still profit.

They profit because they take thousands of bets from many players. The edge applies to every dollar wagered.

Some players walk out ahead. Many walk out behind. The house expects to win overall.

The business model does not require every player to lose every session. It requires the average outcome to favor the house as total betting volume grows.

House Edge vs RTP: The Two Numbers That Explain Most Casino Profit

Definitions: House Edge and RTP

House edge is the casino’s expected profit on each bet, shown as a percentage. A 5% house edge means the house expects to keep about $5 for every $100 you wager, over the long run.

RTP stands for Return to Player. It is the expected percentage of wagered money a game pays back to players over time. A 95% RTP means players, as a group, get about $95 back for every $100 wagered, over the long run.

How They Relate

For most casino games, the two numbers connect directly.

House edge = 100% − RTP.

If a slot lists 96% RTP, the implied house edge is about 4%.

Some games use multiple pay tables or rules. Those choices change the math. The displayed RTP may apply only to a specific version.

Why Advertised RTP Can Differ From Your Results

RTP describes a long-run average. Your short-run results can look nothing like it.

• Variance. Two games can share the same RTP but pay out in different patterns. High variance means bigger swings and longer losing stretches.
• Sample size. A few hundred spins or hands is a small sample. The math needs large volume to resemble the expected return.
• Bet selection. Your choices can raise or lower the effective edge. In blackjack, basic strategy lowers the edge. In roulette, betting the double-zero layout raises it versus single-zero.
• Rules and tables. Blackjack 6:5 payouts, fewer decks, or dealer rules change the edge. Slots can run different RTP settings by jurisdiction or operator. Provider choices matter. See who makes the games and why it matters.

RTP does not mean a game is “due” to pay. Each wager stands alone. If you catch yourself expecting a reversal because of recent results, read The Gambler’s Fallacy explained.

Common RTP and House Edge Ranges by Game

If you want a tighter side-by-side comparison across popular table games, use this casino odds comparison guide.

The Core Math: Expected Value (EV), Variance, and Why Casinos Don’t Need to Cheat

Expected Value (EV), the number behind every bet

EV tells you the average result of a bet if you repeat it many times.

EV per bet = (probability of win x win amount) minus (probability of loss x loss amount).

For most casino games, your EV is negative. The house edge is the same idea shown as a percentage of your bet.

EV using house edge = minus (house edge x bet size).

• If the house edge is 1%, your average loss is about $0.10 per $10 bet.
• If the house edge is 5%, your average loss is about $0.50 per $10 bet.

EV scales with volume. More bets means your expected loss grows in a straight line.

Variance and volatility, why you can win big anyway

Variance measures how much results swing around EV.

High variance games can pay large wins, but they hit less often. Your short-term results can look great or terrible.

• Slots often have higher variance than many table games.
• Side bets and bonus bets usually raise variance and house edge.
• Flat, frequent payouts usually mean lower variance, but you still face negative EV if the edge exists.

This is why casinos do not need to cheat. Variance gives you winning sessions. EV brings the money back over time.

Law of Large Numbers, why the edge shows up

The Law of Large Numbers says your average result tends to move toward EV as your number of bets grows.

Short runs can break either way. Long runs compress luck and reveal the math.

• After 20 bets, results can sit far from EV.
• After 2,000 bets, results usually sit closer to EV, but swings still happen.
• After millions of bets across many players, casinos see the edge with high reliability.

If you want to spot where the edge hides, learn to read rules and paytables. Use this guide: How to Read Casino Game Rules and Paytables (So You Know What You’re Playing).

Hold percentage vs theoretical win (theo), what casinos track

Theo is the casino’s expected win from your play, based on house edge and your betting volume.

Theo formula = average bet x decisions per hour x hours played x house edge.

Hold is what the casino actually keeps in real results over a period.

Hold formula = (buy-ins minus cash-outs) divided by buy-ins.

• Theo is a forecast. It uses math and averages.
• Hold is the scoreboard. It moves up and down with variance.
• Over time, hold tends to drift toward theo, but it never matches perfectly in the short term.

Worked examples, simple math you can use

Your actual result can land above or below these numbers. Variance drives the gap. EV sets the long-run direction.

For a deeper breakdown of how edge links to probability and payouts, see: How Casino Game Odds Work: House Edge, Probability, and Payouts.

How Game Rules and Player Choices Change the Edge (Blackjack, Roulette, Slots, Video Poker)

House edge is not fixed. Rules shift it. Your choices shift it more. In blackjack, small rule changes and basic strategy can move the edge from close to 0.5% to several percent. In roulette, the jump from European to American adds a full extra pocket and a bigger edge. In slots, you cannot change the math with skill, but you can pick higher RTP games and manage bet size. In video poker, the pay table and your holds decide everything, the same machine can swing from strong to brutal. Use this to spot traps, compare games fast, and avoid myths like “due” wins. Variance hides the edge short term, but the rules and your decisions set the long-run cost.

• Blackjack: rules plus strategy drive the edge.
• Roulette: wheel type sets the edge, bet type does not remove it.
• Slots: RTP varies by game, your play does not change it.
• Video poker: pay tables and correct holds can make or break RTP.

Read our detailed guide: How Game Rules and Player Choices Change the Edge (Blackjack, Roulette, Slots, Video Poker) - How Casinos Make Money: House Edge, RTP, and the Math Behind It

Poker Economics: Rake, Tournaments, and Why Casinos Profit Even When Players Compete

Poker works differently from house-banked games. You play other players, but the casino still gets paid. Cash games use a rake, a small cut of most pots. It often caps fast, which makes small and medium pots carry most of the cost. Tournaments use entry fees, your buy-in plus a fee, so the house earns before the first hand. Add rebuys, add-ons, and bigger fields, and that fee base grows. Promos can shift value back to players, but they usually come from the rake pool. Your real opponent is the fee structure, not the dealer. If you want better value, track rake, caps, tournament fees, and payout depth.

Read our detailed guide: Poker Economics: Rake, Tournaments, and Why Casinos Profit Even When Players Compete - How Casinos Make Money: House Edge, RTP, and the Math Behind It

Beyond the Tables: Other Ways Casinos Make Money (and Why They Matter)

Non-Gaming Revenue: Rooms, Food, Shows, and Why It Changes the Math

Modern casinos run as mixed businesses. Gaming drives traffic. Non-gaming captures spend.

Hotels, food and beverage, nightlife, entertainment, and retail bring in steady revenue with higher pricing power than most table games. They also smooth volatility. Slots and tables swing day to day. A full hotel and busy venues keep cash flow stable.

This matters to you because casinos can afford lower game margins in some areas while making it back elsewhere. You might see low minimums, “good” RTP slots, or sharp headline promos. Your total trip cost can still rise through room rates, resort fees, parking, and overpriced food.

• Hotels: dynamic pricing, weekend compression, paid upgrades, early check-in, late checkout.
• Food and beverage: high markups, package deals that lock spend on-site.
• Nightlife and entertainment: cover charges, table minimums, ticketing fees, drink pricing.
• Retail: convenience pricing and captive foot traffic.

Online Casino Revenue: Bonuses as Cost-Controlled Marketing

Online casinos buy customers with bonuses. They control the cost with wagering requirements, game weighting, max cashout rules, and time limits.

Your bonus value depends on the terms, not the headline number. A large bonus with strict playthrough can carry a negative expected value once you factor in house edge and restricted games.

• Wagering requirements: 35x to 60x bonus or bonus plus deposit is common. Higher multipliers raise expected loss during clearing.
• Game weighting: slots may count 100%, roulette may count 10% or 0%. You may not clear the bonus with low-edge games.
• Max bet rules: limits like $5 per spin reduce variance spikes that could let you cash out early.
• Max withdrawal: caps can turn a big win into a smaller cashout.
• Expiry: short windows force volume, which increases expected loss.

If you take offers, read the paytable and promo terms first. Use the same discipline you use for game rules. See: How to Read Casino Game Rules and Paytables (So You Know What You’re Playing).

Loyalty Programs: Comps Track Theoretical Loss, Not Your Results

Comps feel like rewards. Casinos price them from your theoretical loss, often called theo.

Theo uses your average bet, decisions per hour, time played, and house edge. Your actual win or loss does not drive the comp budget. You can win and still “earn” strong comps if the casino rates your play as profitable. You can lose and still rate low if you play low-edge, low-speed games.

• Faster games rate higher: slots and fast table games generate more decisions per hour.
• Higher house edge rates higher: many side bets, carnival games, and some slot profiles drive more theo.
• Longer tracked sessions help: rated time can matter as much as bet size.

If you chase comps, you usually pay for them through expected loss. If you want lower cost play, start with low-complexity, lower-edge games and learn the basics. See: Best Casino Game for Beginners: The Easiest Games to Learn First.

Fees and Ancillary Income: Small Charges, Big Margins

Casinos stack fees because they convert at high margins. You notice them late, often after you commit to the trip.

• ATM fees: casino surcharge plus your bank fee. It can total $8 to $15 per withdrawal.
• Foreign exchange: poor spreads and extra service charges.
• Parking: paid self-parking, premium parking, event pricing.
• Resort fees: bundled charges that raise the real room rate.
• Convenience fees: tickets, reservations, delivery, room service fees.

Build these costs into your bankroll. They reduce your playable money and raise the real cost per hour.

Sportsbook Profit: The Vig, Pricing, and Volume

Sportsbooks make money from the vig, also called juice. They price lines so the combined implied probability exceeds 100%.

At standard -110 pricing on both sides, the built-in hold sits near 4.54% if action splits evenly. Real results vary with sharp action, promos, and parlay mix. Parlays and same-game parlays usually lift hold because pricing and correlation controls favor the book.

• Line shopping matters: small price differences change expected value.
• Parlay exposure matters: higher theoretical hold often means higher long-run cost.
• Promo terms matter: free bets and boosts come with limits and reduced conversion value.

If you want clean definitions for hold, RTP, and house edge, use: Casino Terminology Glossary: House Edge, RTP, Variance, and More.