£15 For Free!

Online casinos often try to lure in new members by offering a sign-up bonus. One I saw recently offered a free£15 bet. Sounds like a great deal: gamble with someone else`s money - if you`re lucky you get the winnings, and if you`re not you lose nothing.

Being a law graduate, I`m trained in reading the small print. Before you can withdraw your winnings from your free £15 bet you have to gamble 99 times the £15. In other words £1,485. And you have to gamble that money within 30 days.

Let`s say you play roulette. Online casinos typically use roulette wheels with a single 0, as well as 1 to 36, half of which are coloured red and the other half are black. The 0 is coloured green. The simplest bet is red or black. If you bet red and red comes up you win double your money (i.e. the money you bet, plus the same amount again). However, because of the 0 (which is neither red nor black) the probability of winning is 18/37, which is a little less than a half.

Now suppose you bet £10 and that you always bet on red. If you played 37 games, you`d expect to win 18 of them and lose 19. So you`d wager £370 and win back £360: a net loss of £10.

To get your winnings from your free £15 bet, you`d have to gamble £1,485. If you were betting on red as above, you can expect to lose slightly over £40. Not such a great deal. Especially when you consider that your free bet may not actually win at all, in which case you`ll get nothing back. So the casino can expect to gain £40 from new players` losses, but only pay back £15, and only to one in two of them. The promotion brings in £80 but costs only £15. And, they hope, by the time you`ve placed 99 bets you`re already hooked and will contine playing for a long time, each time losing on average about 3-6% of what you bet depending on the game you play.

You may be wondering who could possibly afford to bet so much money in such a small time. It`s a lot easier than you think because you typically gamble the same money over and over again. Suppose you have £10 to play on a slot machine. On some spins you`d win, on some you`d lose. What would you do with your winnings? People generally recycle their winnings, putting them back in the machine. A typical slot machine takes "only" 3% of the money you bet. 3% of £10 is 30p: hardly a big loss. But it`s not the £10 that the slot machine takes 3% from. It`s the total money you put in the machine, which is like to be far more than the £10 because you`ll keep putting the same money in the machine over and over again. This is how it`s perfectly possible to come away completely empty-handed.

Incidentally, I`ve said that the £15 bonus actually costs you £40. Another way of putting this is that the casino gives you back £15 of your expected £40 loss after gambling £1,485. This rate of return of losses is typically followed by "real" casinos in places like Las Vegas. Regularly gamblers can ask to be "rated" by the casino they play in. The casino monitors your gambling and gives you around a third of your expected losses back - not in cash but in freebies: usually food, drink, accommodation in the casino and tickets to shows.