A sportsbook is a gambling establishment that accepts wagers on a variety of sporting events. These businesses make a lot of money, but they have to pay taxes and abide by regulatory oversight. Understanding how these businesses make their profits can help you be a savvier bettor and recognize potentially mispriced lines.

Traditionally, the most common type of wager placed on a football or basketball game is a point spread bet. These bets aim to level the playing field between a team and its opponent by setting odds on whether or not the favorite will win a given game by a certain number of points. The oddsmakers who set these odds take into account the team’s past performance, current form, and a number of other factors that may affect the outcome of a game.

To analyze the efficiency of sports betting markets, we define a margin of victory distribution M and construct a probability distribution of expected outcomes for a unit bet on either team against the spread. The distributions are evaluated at offsets of 1, 2, and 3 points from the true median. The height of the bar in each figure indicates the expected profit on a unit bet if a bettor consistently wagers on the team with the higher probability of winning.

We find that, when the sportsbook estimates m within 2.4 percentiles of the true median, placing a unit bet on either side yields an expected profit of less than one dollar. For larger deviations, the required sportsbook error to permit positive expected profit rises.