Sports Betting Margins
How sports betting companies print money with a guaranteed five percent margin on every dollar wagered — and why the business is recession-proof and fully automated.
Draft Kings and Fan Jewel generate billions in revenue. Take bets, pay winners, keep the difference. The difference is roughly 5% of all money wagered. A 10 billion market generates 500 million in revenue. This is called the VIG. The certainty of 5% seems terrible. You're dependent on balance. If more people bet one side, you pay out more. Oddsmakers manage lines continuously, but betting companies realized something. The VIG compounds. A 10 billion market, 5% equals 500 million. Tomorrow there's 11 billion. 5% is 550 million. Compounding comes from customer acquisition. The company spends 100 million on advertising. New users generate 150 million in VIG. Customer acquisition cost pays back in one year.
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