Vigorish

Definition

Vigorish (vig) is a term that originates from gambling and betting circles. It refers to the fee or commission taken by a bookmaker or a gambling operator for accepting a risky bet. The term has expanded in usage to describe any exhorbitant interest rates or fees charged in financial transactions, often seen as unfairly high or usurious.

Examples

Sports Betting: A bookmaker offers bets on a football game but charges a 10% fee, known as the vigorish, on all bets placed.
Loan Sharking: An illegal money lender charges excessively high-interest rates, known colloquially as vigorish, well above market rates, to borrowers who have limited options for credit.
Casino Games: In some casino games, the house edge can be referred to as vigorish, representing the built-in advantage that the house has over players.

Frequently Asked Questions (FAQs)

What makes a rate “usurious”?

Answer: A rate is considered usurious if it exceeds the legal limits set by state or national laws. Usurious rates are typically significantly higher than those offered by standard financial institutions and are often seen as exploitative.

Is vigorish legal?

Answer: The legality of vigorish depends on the context. In regulated betting and gambling contexts where it is standard practice and disclosed, it is legal. However, in loan sharking, where exorbitant interest rates are charged outside of regulated financial systems, it is illegal.

How do bookmakers determine vigorish?

Answer: Bookmakers determine vigorish based on several factors, including the perceived risk of the bets, the likelihood of various outcomes, and their need to ensure a profit margin. It is often represented as a small percentage of the total bet.

Can vigorish be negotiated?

Answer: In regulated betting environments, vigorish is typically fixed and non-negotiable. However, in informal or illegal lending scenarios, there may be some room for negotiation, although such practices are risky and not recommended.

Does vigorish only apply to gambling and loans?

Answer: While vigorish is most commonly associated with gambling and informal lending, the concept can apply to any situation where a commission, fee, or interest rate is charged for the use of money.

Usury: Charging interest at a rate that is considered excessively high and beyond what is allowed by law.
Bookmaker: A person or organization that accepts and pays off bets on sporting and other events at agreed-upon odds.
Interest Rate: The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage rate (APR).
House Edge: The mathematical advantage that a gambling game, such as in a casino, provides to the house, or the operator.

Online References

Suggested Books for Further Studies

Gambling and Risk Taking: The Fiction of Commerce by John M. Bates
Laying the Odds: How to Succeed as a Sports Bettor by William T. Ziemba
Usury: The Path to Devious Lending Practices in History by Mary A. Lamberton

Fundamentals of Vigorish: Finance and Gambling Basics Quiz

### What does the term "vigorish" refer to in gambling? - [x] The commission or fee collected by a bookmaker on bets. - [ ] The total amount of money wagered by players. - [ ] The winnings collected by a player. - [ ] The taxes paid by the gambling establishment. > **Explanation:** In gambling, vigorish refers to the commission or fee collected by a bookmaker on bets to ensure a profit margin. ### How is vigorish typically expressed in sports betting? - [ ] As a dollar amount - [ ] As a percentage of winnings - [x] As a percentage of the total bet amount - [ ] As a fraction of the gambling tax > **Explanation:** Vigorish in sports betting is often expressed as a percentage of the total bet amount, serving as the bookmaker's fee. ### Is vigorish applied to both winning and losing bets? - [ ] Only winning bets - [ ] Only losing bets - [ ] Neither, it's a one-time charge - [x] Yes, it applies to all bets > **Explanation:** Vigorish is charged on both winning and losing bets as the bookmaker or operator's fee for accepting the bet. ### In the context of loan sharking, what is vigorish? - [x] An excessively high-interest rate charged on loans - [ ] A service fee for providing loan - [ ] A legal fee - [ ] A repayment reward > **Explanation:** In loan sharking, vigorish refers to an excessively high-interest rate charged by illegal money lenders. ### Who benefits from vigorish in a betting scenario? - [ ] The players - [ ] The referees - [x] The bookmaker - [ ] The spectators > **Explanation:** The bookmaker benefits from vigorish as it ensures they make a profit regardless of the outcome of the bets. ### Why is vigorish considered usurious in some contexts? - [x] Because it involves charging inordinately high rates of interest - [ ] Because it contributes to gambling addiction - [ ] Because it is a tax on winnings - [ ] Because it follows fixed odds > **Explanation:** Vigorish is considered usurious when it involves charging excessively high rates of interest, often seen as exploitative. ### What legal aspect determines if a rate is usurious? - [x] State or national laws on interest rates - [ ] The lender's discretion - [ ] The borrower's willingness to pay - [ ] The amount borrowed > **Explanation:** State or national laws on interest rates determine whether a rate is considered usurious. ### Can vigorish ever be considered fair? - [ ] No, it is always exploitative - [ ] Yes, if it is openly disclosed and regulated - [ ] Only if it is below 5% - [x] Yes, if it is openly disclosed and regulated, ensuring fairness. > **Explanation:** Vigorish can be considered fair if it is openly disclosed and regulated, ensuring transparency and fairness in the transaction. ### How do bookmakers ensure they profit from vigorish? - [x] By setting it as a fixed percentage of all bets placed - [ ] By issuing more bets than they can handle - [ ] By manipulating game outcomes - [ ] By borrowing from other bookmakers > **Explanation:** Bookmakers ensure profit by setting vigorish as a fixed percentage of all bets placed, securing a profit margin. ### Which term is related to vigorish in terms of charging interests? - [x] Usury - [ ] Equity - [ ] Collateral - [ ] Depreciation > **Explanation:** Usury, which refers to charging excessively high-interest rates, is directly related to the concept of vigorish.

Thank you for exploring the concept of vigorish with our informative glossary entry and engaging quiz questions. Continue your learning journey with these resources and deepen your understanding!