House Edge and Return To Player Explained
In this article, we explain two important concepts in betting: house edge and return to player (RTP).
House edge is an important concept to understand when you’re betting. House edge is the mathematical advantage that a casino has on a player’s bet that ensures the casino makes a profit over the long run. The house edge percentage can tell you the average loss you can expect with each bet and help you make smarter betting decisions.
You may have heard the phrase ‘the house always wins’ before, which refers to the fact that players are at a disadvantage when playing in a casino and risking their stake when betting against ‘the house’. The purpose of the built-in mathematical advantage for the casino is to ensure their operations remain profitable.
But what’s the point of playing if the house has a built-in mathematical advantage?
Firstly, the house doesn’t need to beat every player - the house takes a percentage of the wagers placed by all players as profits over the long-term. In any given game, you may turn a profit, break even, or realise a loss. But the law of large numbers tells us that if you play a game repeatedly for enough time, your losses will gradually approach the house edge. The more game rounds that are played for a particular game, the more the average loss will approach the house edge in practise.
Secondly, while you are expected to lose money over the long-term, even with the odds stacked against you, it’s still possible to win. Over the long-term, you may be expected to lose 5% of the time, but in the short-term anything is possible. The odds of hitting a x300 multiplier on X-Roulette are low, but it’s still a possibility! Since there will be variation within the game, sometimes you will be a winner, and it's that small chance that’s worth betting on. Another scenario is where the player wins on the first spin; their winnings could be enough to make them profitable, even if they play several more games and lose.
Thirdly, if you know what you’re doing, betting can be a relatively cheap form of entertainment - if you bet $5/hour and the house edge is 5%, then it could provide more value for money than going to the movies or to a concert. Your expected loss with a bet size of $1, playing five times per hour for a game with a house edge of 5% would be just $0.25 per hour.
What is Return To Player?
A related concept is the Return To Player (RTP) percentage (also known as the expected return or payout ratio). The RTP percentage of a game of chance is the long-term statistical rate of the total money won, divided by the total money staked.
The RTP can be thought of as the opposite of the house edge, calculated as:
RTP = 100% - House Edge
To illustrate with an example, Rollbit’s X-Roulette game has a house edge of 5% and the RTP is 95%.
Over a large number of games, the house is expected to make 5% from the wagered bets as profits, while the lucky players who win will take 95% of the money staked in prizes. If more than 100 games of X-Roulette are played and in total $100 million is staked, Rollbit is expected to make $5 million as profit, but pays out a grand total of $95 million to the winners.
House Edge Varies Across Different Games
The house edge and RTP vary across different games, so be sure to check before you play. You can check the RTP of a third-party game by clicking the question mark button on the top right-hand corner, then click on ‘Return to Player’, as shown below:
As displayed above, the Return To Player percentage for Evolution Gaming's Lightning Roulette is 97.10%. To find out the house edge for this game, we can perform a simple calculation:
Theoretical house edge = 100% - RTP = 100% - 97.10% = 2.9%
To find out how much the house will keep as profit (on average) for every $100 bet on Lightning Roulette, we convert the house edge percentage to a decimal number (i.e., 2.9% is equal to 0.029), and then multiply the decimal by $100, giving us $2.9.
To factor the house edge into your betting, you’d know beforehand that for each $100 wager on Lightning Roulette, you’d likely lose $2.9 on average.
Using your chosen bet size and the game's house edge, you can work out your expected loss per hour (and a rough estimate of betting as a cost of entertainment). For example, if your bet size is $10, and you make on average 10 bets per hour, then you would expect to lose ($10 x 10 x 0.029) = $2.90 per hour playing Lightning Roulette.
The house edge and Return To Player percentages for the most popular games on Rollbit are displayed below:
- Sweet Bonanza: RTP = 96.51%; House edge = 3.49%,
- Juicy Fruits: RTP = 96.51%; House edge = 3.49%,
- Fruit Party: RTP = 96.47%; House edge = 3.53%.
- Instant Roulette: RTP = 96.51%; House edge = 3.49%,
- X-Roulette: RTP = 95%; House edge = 5%,
- Crazy Time: RTP ranges between 96.08% and 94.41%; House edge ranges from 3.92% to 5.59% (depending on your strategy),
- Mega Ball: RTP ranges between 95.05% and 95.40%; House edge ranges from 4.95% to 4.60% (depending your strategy),
- Monopoly: RTP ranges between 91.03% and 96.23%; House edge ranges from 8.70% to 3.77% (depending your strategy).
- Blackjack VIP M: RTP ranges between 95.9% and 99.29%; House edge ranges between 4.1% and 0.71% (depending on your strategy).
You can usually find the house edge and RTP of a third-party game on the game publisher's website. In the future, we plan to make the house edge/RTP more accessible from the game selector.
Use House Edge to Your Advantage
As mentioned previously, the house edge of a game can be used to calculate your expected loss per hour. House edge is just one variable affecting a player’s average hourly loss. Your bet size, number of bets, and how long you play for also affect your average hourly loss.
Remember, look for games with a lower house edge as you’ll have a better chance of winning! While the odds are stacked against the players in a casino, there’s always a chance they could win big if luck is on their side.
Some games of chance have a fixed house edge. For other games, like Blackjack and Texas Holdem, your strategy can affect the house edge. If you play an inappropriate strategy, this has the effect of increasing the house edge and therefore your expected losses. For example, the house edge of Blackjack games relies on the player executing a perfect strategy, which means you play the perfect response for each possible situation at the table.
In summary, the house edge for a game tells us the casino’s average profit per bet (and can also indicate your expected loss). The inverse of house edge is the Return To Player percentage, which is the total amount staked paid out to winning players as a ratio of the total money staked.
To give yourself a higher chance of winning, play games with a lower house edge and a higher RTP, as these games are statistically more likely to result in a lower average hourly loss over the long run.
-The Rollbit Team