Jesse Strader vs. Taylor Alfaro (Dave Mandel/Combat Press)

How Do Sportsbooks Determine Betting Odds?

Sports betting means different things to different people. For some, it’s just a fun hobby; for others, it’s a source of reliable side income. And for the sportsbooks themselves, it’s a hugely profitable industry. 

But how does the whole thing work? Do the betting odds merely represent the estimated odds of each team winning, or is there more to it? In addition, if it is just the odds of winning, how does the sportsbook make money? Finally, can sportsbooks lose money, or do they “always win,” as the cliché goes? Read on as we go over the entire process of determining betting odds below. 

The 7 Factors That Determine Betting Odds

Let’s get the obvious out of the way first: a sportsbook’s betting odds aren’t just the estimated odds of either team, player, or fighter winning. They are close to that, but the formula is usually spiced up by a couple of other factors – the sportsbook’s overround, which determines its vig or juice (more on that below), and the sportsbook’s efforts to drive or manipulate the betting engagement. That last part might sound almost sinister, but it’s quite simple and necessary. We’ll cover that in more detail below as well.


1. Head-to-Heads and Historical Data

In some sports, such as tennis and golf, head-to-head and other historical data play a huge role in determining the odds of a specific match. Of course, it’s not 100% reliable because players get better or worse over time, but it’s always a factor. Even in team sports where entire teams and coaches change regularly, historical data is still taken into account, as it’s widely accepted that these things affect a team’s performance. 

2. The Team’s or Player’s Capabilities and Recent Form

Probably the biggest factor that plays into the odds is the current quality and form of the two teams or players. Historical data and other factors can matter little if one side is clearly on a superior winning streak. While most would assume that this is or should be the only driving criterion, it’s just one of seven. 

3. Suspensions, Injuries, and Other Current Issues

One team can be significantly better than another in the current season, but if they have just picked up a couple of key injuries or suspensions in the previous match, you can rest assured that the sportsbook will take this into consideration. Some bettors might say that the sportsbook sometimes underestimates or overestimates such factors, and that’s part of the betting game. 

4. Environmental Factors, Home-Court Advantage, and Other Factors

Some teams or players do better in the rain than others. Some tolerate heat better. Some do better on longer and narrower fields or courts, while other teams’ strategies are better suited for shorter and wider spaces. In team sports, most teams do better at home, yet some are notoriously good on the road. Home-court advantage is extensively studied in basketball and football, but it’s commonly known to be a factor in most other sports as well. However, many bettors believe factors such as house advantage are sometimes overrated. 

5. Public Attitude, Betting Trends, and Risk Management 

A good sportsbook always pays close attention to public sentiments and betting trends and factors them into the final odds. This can seem unrelated to the actual odds of either team winning the game, and it isn’t. Instead, sportsbooks factor this into the odds to make sure they don’t get overwhelmed by too many people betting on the same side, as that can end up losing the house a lot of money.

In most other forms of gambling, the house indeed always wins, and any jackpots scored by the individual players are not significant enough to offset the house’s overall revenue. Therefore, even though people can absolutely win at casino games, such as online slots games with real money stakes, the casino is always all right at the end of the day.

In sports betting, however, a sportsbook can easily lose a significant sum of money if many major bets start pouring in for one team or player but not for the other. When this happens, and the player/team that people are betting on happens to win, the house may end up having to pay the winning bettors out of its own pocket. 

To avoid that, sportsbooks often engage in risk management and shift the odds a bit to encourage people to bet more on the player/team that fewer people have bet on. Understanding how and when sportsbooks do this allows smart bettors to find the best betting lines that often end up undervalued by the sportsbook. 

6. The Sportsbook’s Overround

The overround is the excess percentage over 100%, which often occurs when we add up the odds of the two opposing teams or players. Very often, we can see one team having odds of 58%, for example, while the other has odds of 46%. Adding those two up gives 104%, which is obviously impossible, but that excess 4% is the overround. That overround is then used to calculate the vigorish, also known as vig, juice, or cut. That’s the actual profit the sportsbook makes from each bet.

7. Competitors’ Behavior 

Many sportsbooks offer similar or even identical odds before the game. Once the betting intensifies and the game begins, however, the odds given by different sportsbooks start to differ. On the one hand, this allows bettors to start looking for the best betting lines across various sportsbooks. On the other hand, the sportsbooks themselves also look at each other’s changing odds to make sure their own odds are competitive and in line with the overall market.

Final Thoughts

Considering all the above, it can seem like sports betting odds aren’t truly representative of a game’s actual odds. This isn’t entirely true, of course, as the betting odds will always be somewhat close to the game’s most likely odds. The variations are there to make the sportsbook profitable and to protect it from going bankrupt. In a way, some might say that understanding how sports betting odds are calculated and how they differ from the “true” betting lines is the actual “game” of sports betting.