Commercial provision of zero house-edge gambling products

Abstract

In commercial gambling, the odds of winning are against the gambler. Roulette is a good game to demonstrate this principle with. A roulette wheel has the numbers from 1 – 36 that the wheel can land on, and a successful stake of £1 on one of these numbers will pay-off £36 (including the return of the stake). However, a European roulette wheel has an extra number, zero, which the wheel can also land on (and which can also be bet on). This means that a bet on any specific number will only win 1 in 37 times on average, resulting in an average loss of 2.7% of all money staked. This average loss for the gambler is known as the house edge. American roulette has a second zero (the double zero), but the payoffs are the same. These further reduced odds of winning in American roulette translate into a higher house edge of 5.3%, making this a less attractive gambling product. This shows how the house edge can be compared across gambling products, which along with the total amount bet, predicts gamblers’ average losses. Since these losses lead to harm, some economists have proposed zero house-edge games as a theoretical harm reduction approach. But these games are not just a theoretical possibility, as at least three significant online operators have either provided or promised to provide these games. This article reviews this short history of zero house-edge games, while also proposing an alternative model for how they could be commercially provided.