Preseason Super Bowl Odds Are Here to Screw You
And three other observations from studying Vegas' opening-season lines
The NFL season starts later tonight, and before it kicks off, I took a deeper study at a topic that’s always fascinated me: preseason betting. For those unfamiliar, sportsbooks in Las Vegas publish estimates each year for how teams will perform. Customers can bet against these “lines”, guessing if the team will win its division, the Super Bowl, or just more games than Vegas projects. Gambling has exploded in popularity since been legalized in the US (now an $8 billion industry! Even ESPN created its own casino!) so these get bet more than ever. To take a look, I downloaded all the preseason Super Bowl odds since 1990 and found some interesting takeaways.
Takeaway #1: The NFL is the most balanced of all major sports, but not by much
More than any sports league in America, the NFL prides itself on competitive balance. With good reason! The hard salary cap, short careers, one-game playoff formats, and inherent randomness creates serious year-to-year instability. The NFL sells this hard in the offseason. Every team tells its fans a story about how this is their year. Maybe they’ve got a shiny new free agent, maybe it’s unbelievable draft picks or a fancy new coordinator – whatever the product, they sell hope to put butts in seats. No such fantasy pervades baseball or basketball. There, teams publicly acknowledge they need years to build a team that can compete for titles.
Vegas doesn’t see the leagues as so different. The 2023 preseason title odds for all four major sports leagues are plotted below. Each shows the cumulative championship odds for the league’s top team, top 2 teams, top 3 teams, etc. For example, Vegas thinks the top 5 NBA teams have a 52% combined chance of the title – that’s 46% in the NFL / NHL, and 48% in major league baseball1.
All of the leagues are plotted against the hypothetical “even” league with perfect competitive balance, where every team has an equal shot to win the title. The closer the league is to that line, the closer it is to true parity. The NFL in blue is the closest, but it’s indistinguishable from the other sports.
Takeaway #2: Vegas Is Pretty Good At This
Of course, Vegas’ projections for competitive balance are just forecasts. Is the league as balanced in reality? To look at this, I compared who actually won the Super Bowl each year to who Vegas thought would get there. Thirty-three data points isn’t too many, so I made the decision to include each Super Bowl loser in the analysis as well. No football game is a certainty given the luck involved in the game. Twelve of the last 20 Super Bowls were decided by less than a touchdown (one play)!
Below, I’ve plotted a team’s % chance of making the Super Bowl based on Vegas’ faith in them. Vegas’ hand-picked best team has made the Super Bowl 45% of the time, a pretty good track record! We can see the graph drop off pretty sharply after Vegas’ top 6 teams, which make up about 60% of all Super Bowl appearances in the dataset.
Let’s look at a similar graph, showing average wins instead of title odds. The casinos are reasonably good at parsing out the good from the bad. Taking out the oddly performant 9-11 group, it’s basically just decreasing / staying flat. Pretty impressive!
Takeaway #3: Vegas Sees 2023 as Just Like Any Other Year
Taking these together, you can bucket the NFL into 3 nicely-sized groups:
The Contenders: Vegas’ top 8 teams. It made up 67% of Super Bowl slots and won 76% of titles. Only 3 of the last 33 Super Bowls didn’t feature a Contender.
The Middle Class: The next 8 teams. Each has a real title shot – even the 15th and 16th ranked teams have made Super Bowl runs recently. Combined, they account for 17% of Super Bowl slots and 18% of the titles.
Living On a Prayer (The Bon Jovis): The other 16 teams. Most have no chance, but the aggregate chance is decent (17% of Super Bowl slots, 7% of titles). They’ve risen recently - four Bon Jovis made it in the last 8 years (’21 Bengals, ’19 49ers, ’16 Falcons, and ’15 Panthers).
The balance of these groups in Vegas has stayed astonishingly consistent. Save a brief early-2000s stretch of parity, Vegas sees the league almost the same way every year. In the chart below, I’ve shown Vegas’ preseason estimates of each group’s strength.
2023 barely stands out. Vegas sees the middle class as being slightly weaker than usual, the contenders slightly stronger, and the Bon Jovis about the same.
Takeaway #4: Preseason Lines Are Not Your Friend
A careful reader will look at the above and notice Vegas systematically underrates top teams in the league – Contenders win 76% of titles but Vegas predicts 60%. Is there arbitrage here? Can you just bet the top 8 teams each year and make a profit?
Short answer: Nope.
Long answer: It’s all in the vigorish, baby.
OK, fine, longer answer: The casino takes too big a cut to make this worth it. The casino’s cut of the action is called the vig (short for vigorish). To make money, casinos don’t post odds perfectly adding up to 100% - they add in a cushion so no matter which team wins, the house wins too. If you bet with your friend on a game, she will probably given you even odds - bet $100 to win $100. If you bet with Vegas, the typical odds will be worse - bet $110 to win $100. This insulates the casino from risk and ensures it makes money: the vig is the difference between the even odds and the casino odds.
For most sports gamblers, this means you have to win 52-55% of your bets just to break even. Anyone who goes 50-50 hands it over to Vegas. Take the example above: if you went back in time, having read the first 3 takeaways of this article, you might decide you’ve found a foolproof way to screw Vegas. You could equally put $10 on each Contender, knowing 76% of the time it would cash.
But in the long term, you’d have made only $2,357. Less than the $2640 investment - a net loss of $283 and -11% return on investment.
That’s because the cut Vegas takes is way more than what it gives away. The 60% figure I showed you is what you get when you adjust for Vegas’ cut. But look at the cut they take below. For comparison, I’ve included a line showing the average cut of betting on one game.
Vegas makes out like bandits - a thirty percent cut! It needs this high a cushion because it has exposure to 32 different teams (v. a single game with 2 outcomes) but you don’t care about that. All you care about is this is jerry-rigged against you. You need massive conviction to find value in these odds. The other obvious takeaway is Vegas has given gamblers a better and better deal as more and more money flows into the system2, but it’s still nowhere near a good one.
But hey, that’s Lesson #1 of Vegas: it’s built to fuck you.
And with that, a merry season to everyone!
Here, as I have everywhere in the analysis, I’ve normalized out the vig so Vegas’ listed odds add up to 100%. Typically, if you add up the odds of each team together you get somewhere in the 125-150% range. See takeaway #4 for a more detailed explanation.
You can think of Vegas like the stock market in this way. The more liquid the market (more people interested in buying and selling), the smaller the spread you have to pay.