Week 6 of the NFL season gave sportsbooks their greatest one-day loss in over three decades. Week 5 was also a loser for the books. It’s rare for books to lose on any NFL Sunday. Two weeks in a row is nearly unheard of, as almost everything that could’ve gone wrong for the house did over these past two weeks.
Favorites covered spreads, and totals went OVER. But the parlays that came through were particularly damaging to the nation’s sportsbooks.
Despite the bleak milestone losses for the sportsbooks, it’s business as usual for bookmakers.
This won’t be the last “largest sportsbook loss,” either. Eye-catching headlines about significant sportsbook losses will become more common, as sports betting operators enter new markets, attract new customers, and handle more money.
However, sportsbooks have more good days than bad ones, and their winning days will become even more fruitful as legal gambling expands. For every story written about staggering sportsbook losses, there are hundreds of stories about sportsbook winnings.
To come out ahead long-term, sportsbooks take vig from the losing side. It’s a small house advantage built into every line that allows the house to profit. Sportsbooks also have bet limits, particularly imposed on sharp bettors. Finally, parlays come with a larger edge for the house, although when they hit for the bettors, they can result in big swings in the customers’ favor.
Taken together, sportsbooks have tools that grant them financial security. For example, Nevada sportsbooks went about seven years without reporting a monthly loss. The business models work. It allows sportsbooks to have nightmarish weeks and prosper over the long term.
How Sportsbooks Incurred Record-Setting Losses
Several factors aligned perfectly for bettors during Weeks 5 and 6, as teams that attracted an overwhelming percentage of the action covered. In Week 6 at PointsBet, four of the top five largest-handled games saw favorites cash for public bettors.
In Week 6, favorites went 7-0 in the early Sunday window and 8-5 over the course of the week. About 90% of the handle on the Chiefs-Washington game laid the 6.5 points with Kansas City. When Kansas City won 31-13, sportsbooks had a lot of money to pay out.
But what made Week 6 so devastating was the number of games that played out similarly.
About 77% of bettors’ money was on Packers -5.5 in their 24-14 win over the Bears, and 68% was on the Cowboys covering -3.5 against the Patriots. The Rams covering their 7.5-point spread against the Giants was brutal for PointsBet, too, with 82% of handle on L.A.
“It was the players’ time,” DraftKings Head of Sportsbook Johnny Avello said. “That’s really it. I mean, when we look at the games that the players bet on, they were games that were the normal person’s choice.”
Why These Bets Were So Popular
Public bettors prefer point spread favorites and OVERs. UNDERs are typically good for the books. For example, when the Ravens’ 34-6 win over the Chargers fell UNDER 51.5, PointsBet held 89% of the handle on that total.
While that was one of seven UNDERs that came through for the books in Week 7, more money is bet on point spreads, and the trend of favorites overwhelmed what the house collected on OVER bets.
Because of their customer’s tendencies, books almost always are cheering against the favorites and OVER, and when those bets start cashing, it exacerbates the risk the NFL presents to bookmakers.
“One (reason the NFL is so risky) is we take higher limits (on the NFL than on other sports). And two, there’s only so many games,” said Robert Walker, head of Sportsbook Operations at USBookmaking.
When there’s more money on a game, sportsbooks have more potential winnings to pay out. With a limited number of games, sportsbooks have fewer chances to win the money back.
“Sundays are difficult because you usually have three or four major decisions, and if you lose those, you’re kind of in trouble,” Walker said.
So the run of favorites, coupled with the inherent risk of the NFL, set sportsbooks up for a couple of bad weeks. Parlay bets were the biggest killer.
The Double-Edged Sword Of Parlays
While parlays give sportsbooks a greater edge over customers than straight bets, they also increase liability.
“A $10 (multi-leg) parlay can pay $1,000 or whatever,” Walker said. “So that’s really what it breaks down to. You (sportsbooks) can win $10 or lose $1,000.”
Walker attributes the significant losses sportsbooks incurred during NFL Weeks 5 and 6 to parlay bets
“You might lose 10% on a bad day on straight bets or win 10% on a good day,” he said. “But usually, you hover around 1%, 2%, 3%, somewhere in that vicinity. So those never make or break your day. It’s always the parlays.”
Public bettors often tie their parlays to Sunday night and Monday night NFL games. So, as Walker points out, a bad day can “steamroll” into the last two games of the week.
“The $10 rose to $100, and then that compounds as well on Monday night,” Walker said. “Sunday (nights) and Mondays, I don’t care for them that much.”
Prime-time viewership is also prime time for betting, so the night games are particularly important to the books’ ledgers.
“When you have all those games kind of hit, the prime-time game liability is even higher,” Avello said. “Not only do you need a side because it’s the biggest write of the day, there are parlays and teasers and moneyline parlays that go into that game. And that’s the prime-time parlay hazard.”
While books can get dinged by point spreads, totals, and moneylines, it’s winning parlays that lead to big losses for the house.
Sportsbooks, of course, usually collect from parlay wagers. They can afford to pay them out every now and then.
Common Sportsbook Pressure Points
Weeks 5 and 6 were bad for sportsbooks because favorites and OVERs won. However, there are a few pressure points that can stress sportsbooks throughout the year.
“I think what hurts us the most is when good teams are on the road,” Walker said. “I think historically there’s where the player gets to lay a little bit better number. You know, Kansas City 6.5, 7.”
Certain conditions can make the moneyline dangerous for sportsbooks, too.
“When you get a good team that’s a dog,” Walker said. “Right now, that’s Arizona. They’re a dog (at Cleveland in Week 6). The Raiders, they’re a dog (at Denver in Week 6). We’ve really gotten hurt on the Raiders as a dog.” Las Vegas is 3-1 outright as an underdog this season.
While public bettors tend to lay points with favorites on spread bets, they like the plus-money opportunities underdogs present on moneylines. That can be problematic in major events like the Super Bowl. For Super Bowl 55, the Tampa Bay Buccaneers were underdogs, as Tom Brady led his team past the Chiefs. The underdog moneyline is always a popular Super Bowl bet, and competitive underdogs in major events give sportsbooks plenty of reasons to sweat.
But sportsbooks routinely come out of these events profitable. Since 1991, Vegas books have recorded a loss on the Super Bowl just twice – in 2008 when the Giants beat the Patriots, and in 1995, when the 49ers rolled over the Chargers.
Likewise, two bad weeks won’t put sportsbooks out of business. They’ll be mildly unpleasant memories bookmakers look back on after they win their money back.
The Best And Worst Is Yet To Come
Sportsbooks have had newsworthy losses in 2008, 2012, 2017, and now in 2021. Losses will become more pronounced as the sports betting business grows,
“That’s why when we get stung pretty good, we have a bad day. Sometimes, it’s the worst day we’ve ever had,” Avello said. “Because (DraftKings is) growing. We’re in 15 states.”
But these past two weeks have been a rough patch operators are taking in stride as just a part of the business.
“Players win, and sometimes they win two weeks in a row,” Avello said. “Sometimes they win longer. Sometimes it goes on. It gives you heartburn. But it happens, and I’ve been around it a long time.”
The picture becomes even less bleak when a sportsbook is part of a casino instead of on its own.
“It’s like at the Mirage when we have a bad day, we hope to win it back in the casino,” Walker said of his former place of employment. “…. People will go play (in the casino), or they’ll go watch a show, or they’ll go into the restaurants or the bars or play slots. So it’s really an overall entertainment solution that we’re just one really small part of.”
While modern online books like DraftKings don’t have such luxury, both types are built to recover from weeks like they just experienced.
Taking Losses In Stride
Although bettors’ wins mean sportsbook losses, sportsbooks don’t hold big wins against their bettors. Operators recognize it’s part of the business.
“I’d like to get away from this ‘it’s us against the bettors’ mentality,” Walker said. “Everybody hates sportsbooks and stuff like that. We’re just trading money. We take some punches. They take some punches. But at the end of the day, we’re just putting up the number, letting the player bet, and having a good time.”
DraftKings has one of the largest selections of sports in the market. However, even that wasn’t enough to spare them from two weeks of carnage.
“NFL and college football on Saturdays, they write a lot of business,” added Avello. “And so those other sports, you may pick something back up. But you’re probably not going to offset [losses] when you have the kind of Sunday we had last week.”
So, when the next “sportsbooks’ worst week” article comes out, remember their profits are growing, too, and will continue to in post-PASPA America. Worse losses are yet to come, but the best days are also ahead, and they’ll be far more common yet far less newsworthy.
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