“Risk Free” bets aren’t risk free

What a “Risk Free” Bet Actually Means

Many of U.S. sportsbooks offer a large “risk free” first bet to attract deposits from new customers. The amount of the risk free first bet usually ranges from $500 to $5,000.  If you’re like most people, “risk free” sounds like something that has no risk.  You couldn’t be blamed for thinking that a $5,000 “risk free” bet is a free chance to make $5,000 or $10,000 without any risk.  But you’d be wrong.

A risk free bet is a cash wager that pays out as usual if it wins and is reimbursed* if it loses. So if you bet $5,000 at +200 and the bet wins, then you get your $10,000 profit in cash just as if you placed the bet normally. If the bet loses, you get reimbursed*.  But how?

The Fine Print Behind Reimbursements

The asterisk * next to “reimbursed” indicates the fine print that you need to understand before placing a “risk free” bet.

First, let’s talk about what would make a risk free bet actually be “risk free”.  Very simple: a $5,000  risk free bet pays out as usual if it wins and returns $5,000 in cash if it loses. You could cash out the $5,000 reimbursement right away, and pretend this never happened.

That’s what something called a risk free bet should be, but that’s not what it is.

Sportsbook Credit vs Free Bets

Instead, the “reimbursement” by U.S. regulated sportsbooks is almost always paid either in sportsbook credit or in free bets.

Sportsbook credit acts like cash but can only be used for wagering at the sportsbook. It cannot be cashed out, but it can be wagered and any winnings turn into cash.  So if a $100 bet with sportsbook credit wins at +200, the stake and profit are both returned in cash; that is, your account will increase by $300 in cash.

A free bet is betting credit usually in a fixed denomination (e.g., $25 or $100).  If the bet loses, the player loses nothing.  If the bet wins, the account is credited only with the profit.  So if a $100 free bet is placed at +200 and it wins, then the account will increase by $200 in cash.  The free bet amount disappears.

Why “Risk Free” Still Means Risk

First, notice that a risk free bet that regardless of whether the reimbursement is paid in sportsbook credit or in free bets, the bettor is required to place an additional bet (and therefore take additional risk) in order to recover their initial stake. This is not, by definition, risk free.

Of course, all the conditions of the “risk free” bet are explained in the fine print.  But, if sports books know one thing, it’s that gamblers aren’t generally the type to read the fine print.  And, even if someone were to read the fine print, only a select few is savvy enough to figure out that the true value of the reimbursement falls short of a full refund.

So, if you take up the offer for a $5,000 “risk free” first bet and lose, then you’ll be left with $5,000 in sportsbook credit that you have to put at risk in order to get your money back.  Your initial $5,000 investment is still very much at risk.  If you don’t play it correctly, you could end up losing $5,000 on what was supposedly “risk free” proposition. 

A better way to think of a risk free bet is as a “get out of jail free” card: if I lose my first bet, I get to bet the same amount a second time for a chance to win my money back (or more).  Not a bad deal, but a far way from risk free.

In a regulated industry, you’d expect truth in advertising: that when something is advertised as “risk free” that it actually means it’s “risk free”.   But that doesn’t mean it’s a bad deal for us.  Indeed, risk free bets (and other sportsbook promotions) are actually a great way to pick up some extra money and build your bankroll if you know what you’re doing.  We just need to approach it with the right mindset.  

The questions we need to answer are: How much is a risk-free bet really worth? Is it worth our time and money?  And if so, how should we execute the risk free bet and other sportsbook promotions in order to extract the maximum value with the minimal risk?

Answering these questions requires too much detail for this short blogpost.  More details on evaluating risk-free bets and other sportsbook promotions, along with other skills necessary to becoming a profitable sports bettor, will be discussed in future articles.

Learn How to Evaluate Sportsbook Promos

“Risk free” bets are only one example of why headline promo values can be misleading. In our Foundations of Sports Betting course, we cover how to evaluate sportsbook promotions, free bets, bonus money, risk-free bets, and expected value in a more systematic way.

For a deeper treatment of bankroll management, hedging, Kelly sizing, and market evaluation, see our
Science of Sports Betting course.