A sports bet, a prediction-market bet, and an options trade all take the same kind of bite. The two sides of the market are priced so they add up to more than 100%, and that little extra is the platform's margin, the vig, the spread, the fee. Bet both sides and you hand it over automatically. Multiply it by the volume these platforms move and it becomes a fortune.
The two sides never add up to 100%
Team A
52.4%
-110
+
Team B
52.4%
-110
They add up to 104.8%, not 100%. The house's built-in margin: 4.8%
Bet both sides and you lose the cut, guaranteed
Now multiply it by volume
Total wagered / traded
$1.0B
The house keeps
$45M
Which is cheapest to transact in?
Sports bet standard -110 linethe vig is the fee, nothing on top
~4.5%
Options bid-ask on a liquid nameplus about $0.65 per contract
The bars show the spread. On top of that, a sportsbook charges no separate fee (the vig already is the toll), options add roughly $0.65 a contract, and prediction markets vary by venue (Polymarket about nothing, Kalshi around 1-2%, PredictIt 10% of your winnings). Figures are typical, not exact: parlays and thin markets run far higher, sharp books and very liquid options run lower. The toll is small per trade but enormous across volume.
Plain EnglishPicture a coin flip. A fair payout is even money, win a dollar for every dollar risked. But the house offers you a little less than even money on both sides, so the two prices add up to more than 100%. That gap is its cut. You cannot bet your way around it: back both sides and you simply pay the cut. This is exactly why a plain coin-flip bet is a gamble, the odds are quietly shaded against you, so over many tries the cut grinds you down. To be on the betting side of the line, your real edge has to be bigger than the cut. See Betting is not gambling. Options work the same way on the fee: the bid-ask spread is a toll you pay to get in and out. The difference is that a stock can genuinely move your way, so a researched, capped-risk option is a bet you chose, not a rigged coin flip.
Three things to know about the cut:
The two sides add up to more than 100%. Generally that overage is the platform's margin, and betting both sides hands it straight over, no matter who wins.
It is tiny per trade, gigantic across volume. A few percent of billions in handle is, in practice, how these platforms print money while individual bettors swing up and down.
An edge has to beat the cut to be a bet, not a gamble. As a rough rule, not a promise, if you do not have a real edge larger than the fee, the math is against you, which is the whole difference in Betting is not gambling.
Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.