How sportsbooks use parlays to skyrocket profits
The most popular wager in sports betting
One of the most popular bets among sports bettors today are Parlays. A parlay is a single bet that combines together two or more individual wagers (otherwise known as "legs") for a higher potential payout.
For example, you could bet on the outcomes of three separate basketball games and link them together in a parlay. If all three of your picks win, you would receive a much larger payout than if you had simply wagered on each game separately.
But as your risk associated with parlay betting is higher (all your picks must hit for you to win), the house edge is also higher.
Neil Greenberg of the Washington post explains how 6 favorites that have a 70% chance each of winning might seem like locks, but in reality since they all have to win, it's only a 12% chance of hitting.
What may seem super juicy for you is in reality a massive edge for the books hidden in plain sight.
Commercials are pumping the parlay message
As sports betting legalization sweeps across the United States, so is the advertising for it. You can’t watch a sporting event these days without being bombarded by commercials for various online sportsbooks, which even features an A-list celeb.
It's no surprise since sports betting is now big business in the US. Americans bet over $150 billion on sports each year, and that number is only going to increase as more states legalize gambling. The major online sportsbooks are all eager to get their share of that market, and they are willing to spend millions of dollars on advertising to do so.
And parlays are heavily baked into their messaging — even assuming you've already made one, creating serious FoMO. Just take FanDuel's latest ad which opens with "You've already made a parlay on this game."
Why? Because it turns out that parlays are at the helm of the sportsbooks profits...
Why the sportsbooks love parlays
What many people may not realize is that sportsbooks profit more from parlay bets than any other type of wager. This is because the house has a built-in edge on parlays that simply isn't there for other types of bets.
As a result, bookmakers love when customers place parlay bets, as they are almost guaranteed to make money regardless of the outcome. This is why you see so many commercials for online sportsbooks pushing parlays - it's essentially free money for them.
As seen by the New Jersey's 2022 June Gaming Revenue Results, the houses win rate on the year for parlays is 16% which is nearly triple the 5.3% rate for all sporting events.
In other words, the books are making about 3X more on parlays than any other bet.
Covers also reported that Parlays are responsible for more than 60% of the $308.9 million won in New Jersey this year.
In Louisiana, 48.2% of sports betting revenue came from parlays.
Parlays literally are driving the sportsbooks revenue...
Sportsbooks looking to ramp up parlay growth
As if those profits aren't enough, they want even more.
During a BetMGM Investor Day, their chief product officer Jarrod Schwarz said he wants to enhance the parlay experience.
"This year, as part of our redesign effort, we will deliver an even better One Game Parlay experience," Schwarz said. "We expect this investment to pay dividends and increase both customer adoption and margin for our sportsbook business."
As an example, have a look at one of FanDuel's latest products called Same Game Parlay, which is designed and engineered around this entire house parlay ROI.
All indicators at this point show that sportsbooks will do anything to keep these mini sports lottery tickets, aka parlays, and their addictive nature pushed on to the consumer.
According to UNLV's Center for Gaming Research, Nevada's house win rate on parlays is 30.97% all-time, compared to 5.6% win rate across all other bets (since 1984).
The report also uncovered that Nevada's sportsbooks earned 5.7 cents, 5.5 cents and 4.8 cents on every dollar wagered on football, basketball and baseball respectively in 2021.
How about for Parlays? An insane 32.1 cents per dollar...
So for the books, pumping parlays and reducing single bets (especially from pro handicappers) is just a no brainer considering the wild return it brings them.
Increase parlay revenue and limit sharp action
At a Goldman Sachs conference this summer, DraftKings CEO Jason Robins told attendees that their company's focus on parlays would continue to expand.
“What we are doing is trying to get smart at eliminating the sharp action or limiting at least …and then also making sure that we have a high parlay mix because people do like that,” Robins said.
With the addictive and fun nature of parlays to the everyday recreation bettor, the books seem well on their way to blast through their profit targets for next year and beyond.
Mark Rodgman
Mark is a Top 30 Under 30, award-winning entrepreneur & the co-founder of inplayLIVE. He’s consulted some of the most famous companies in the world like Samsung, Cisco, Kickstarter, as well as many of the fastest growing Google-backed startups from Silicon Valley.
