What is House Money in a Casino?

Sup folks, it‘s your boy Terry here! If you‘ve ever had a hot streak at the slots or walked away from the tables up big, you‘ve probably heard the term "house money" thrown around. As a longtime gamer and casino buff, let me break down everything you need to know about playing with house money.

The Core Concept

The basic idea behind house money is simple:

• It refers to money you‘ve already won FROM the casino while gambling

• So it‘s not technically your money, it already belonged to the "house"

• You can bet these winnings more freely without cutting into your own bankroll or winnings

Let‘s say you walk into the Bellagio with $500 of your hard-earned cash. After an hour of blackjack, you manage to walk away up $250 from your original $500.

That $250 profit is now considered house money, since it was the casino‘s money you won fair and square.

So even if you proceed to lose that $250 in house money over the rest of the night, you‘d still walk away breaking even at $500. Makes sense so far?

Real World Scenarios

Here are some typical scenarios where you‘ll hear gambling noobs and pros alike reference playing with house money:

Hitting a big slot win – "Dude I just won $2000 in that Wheel of Fortune slot! That‘s insane. I‘m taking this house money over to the craps table, time to press my luck!"

Going on a heater at blackjack – "I just doubled my buy-in three hands in a row in blackjack. Feeling it now. Let it ride baby! Time to really play with this house money."

Cashing out up big – "I need to walk away while I‘m up $5000 tonight. That‘s a nice chunk of house money in my pocket I can come back and play with another time."

Splurging on side bets – "I‘m way up so let me throw some of this house money on those silly side bets I never play. Feeling reckless!"

No matter how you slice it, the essence is using casino winnings to fuel further gambling without cutting into your own starting bankroll.

The Psychology Behind House Money

The reason house money gets people revved up to take risks comes down to prospect theory.

Prospect theory says that people behave very differently in a domain of gains versus a domain of losses. When we‘ve gained money, we become less loss averse – more willing to gamble and less fearful of losing what we‘ve already won.

It taps into our human tendency to segregate and valuate money differently based on where it came from.

We attach less emotion and risk to money that feels like it was handed to us freely (like casino winnings) compared to money we worked hard for.

Several studies have tried to analyze this phenomenon in a controlled lab setting:

• In one study, people were given money and gambled 50% less cautiously if told that money was randomly gifted to them rather than earned through work.

• Another study found the higher people‘s initial winnings, the more likely they were later to make extremely risky longshot bets with those winnings. Higher early wins inflated their confidence.

• Across multiple experiments, people consistently took more gambling risks when playing with ‘found money‘ from prior wins compared to their own savings.

This data demonstrates that house money clearly impacts human gambling behavior!

Real World House Money Effect in Action

Let‘s look at some real world examples of the house money effect sending gamblers on a rollercoaster ride:

Brian from Milwaukee walks into Potawatomi Casino with $300, hoping to have some fun on a Saturday night. He sits down at a $5 minimum blackjack table and improbably proceeds to win 8 of the first 10 hands, ballooning his stack up to $1000.

Now up $700, Brian starts betting much more aggressively with his house money, doing silly things like splitting 10s against a 6 just for fun. The rush of winning so much so fast makes Brian feel invincible.

Of course, the cards cool off and by the end of the night Brian loses his entire $700 profit chasing that high. But in his mind it‘s no big deal since he‘s still walking away even at $300. Without the house money effect, Brian likely would have walked away up $200-300.

Jennifer from Minnesota has a different experience. She drives down to Mystic Lake Casino with $100, hoping to have some bachelorette party fun with friends. Jennifer sits down at a Wheel of Fortune slot machine and hits the spin button…

Ka-ching ka-ching ka-ching! The machine starts lighting up with a bonus frenzy, and next thing Jennifer knows, she‘s cashing out a ticket for $2000!

Now intoxicated by winning such a massive jackpot, Jennifer immediately takes the $2000 over to the roulette wheel, letting it all ride on 17 black, her favorite number.

You can guess what happens next… Jennifer walks away 10 minutes later having lost her entire stash. But in her mind she‘s not irked at all, since her actual $100 is still safe in her pocket. She just got a bit too fired up playing with house money.

Does House Money Actually Change the Odds?

Now you might be wondering – does betting with house money actually change the real odds or probabilities in the casino?

The short answer is NO. At the blackjack table, whether you bet $5 of your own money or $5 in house money, the mathematical house edge is exactly the same.

But most psychologists argue that how we PERCEIVE risk is what alters our behavior, moreso than actual risk. So while house money doesn‘t change the true probabilities, it does change our mind‘s RISK ASSESSMENT of the gamble.

We view wagering house money as a safer bet with less downside risk. And studies show that when humans feel less potential risk, we tend to behave more recklessly.

Think of it like a bet with training wheels on versus a high stakes bet with your kid‘s college tuition. Which bet would make you more nervous and cautious? That‘s the effect of house money psychologically.

House Money vs. Gambler‘s Fallacy

Sometimes people mistakenly lump the house money effect together with the gambler‘s fallacy. But it‘s important to understand they are very distinct concepts:

House Money Effect – Willingness to take larger risks due to feeling you are playing with the casino‘s money

Gambler‘s Fallacy – Believing you are "due" for a win after many losses in a row

The difference comes down to this – house money is driven by reduced PERCEPTION of risk. The gambler‘s fallacy deals with misconceptions of increased PROBABILITY.

With house money, you simply feel less anxiety betting. With the fallacy, you actually think your odds of winning have increased based on prior outcomes. Subtle, but very different psychologically.

Sports Betting and House Money

The house money concept also pops up frequently in sports betting, though the meaning is slightly different than at a casino.

With sports betting, the money you are wagering doesn‘t actually come straight from the bookie like at a blackjack table. But early winnings can still generate a house money effect.

After a hot streak, bettors may start viewing their bankroll as being divided into two pots:

• Money they‘ve won (house money)
• Their original starting bankroll

This makes bettors feel like they are now betting only with profits, since their initial bankroll is safe. They can take bigger risks letting their winnings "ride."

Rather than casino house money, it‘s more like a cushion or protection buffer before you dig into your own funds.

5 Downsides to Watch Out For

While house money can amplify the rush and fun of gambling, there are some definite downsides to be aware of if you want to gamble responsibly:

1. Illusion of reduced risk

House money FEELS less risky, but the actual odds and risk do not change. A $500 bet carries the same risk whether you use cash or house money.

2. Encourages chasing losses

It‘s easy to go on tilt blowing house money trying to chase losses and recapture that high of your first big win. Those swings get out of control quickly.

3. No clear stop point

With house money since it‘s not your own, it‘s harder to set and follow reasonable loss limits. This often ends badly.

4. Taxes

Big casino wins may bump you into a higher tax bracket at year end. With house money, you risk overextending and losing far more than you would have otherwise.

5. Feeding addiction

For problem gamblers, house money gives a dangerous sense of justification to keep playing. It feeds the addiction mentality of chasing losses to try getting even.

How To Play House Money Smarter

Does this mean you should avoid house money altogether? Of course not – it can be fun and exciting if handled responsibly. Here are a few tips:

• Set clear stop points before you start gambling with house money. Stick to those limits.

• Slow play house money. Don‘t increase your normal bet size drastically just because you‘re on a heater.

• View house money as a bonus, not an endless fountain of free gambling funds. Always rein in your risk.

• Walk away at reasonable intervals if you get up big early. Don‘t go crazy giving all those winnings back.

• Most of all, remember that house money carries the same mathematical risk as any other bet. Enjoy it, but bet responsibly.

In Summary

Alright guys, let‘s recap the key need-to-know points:

• House money is casino winnings you can bet without risking your own bankroll. Feels like you‘re playing with the casino‘s money.

• Prospect theory says people perceive more gain than pain from losing ‘found money‘ like gambling winnings.

• This house money effect leads to bigger bets, chasing losses, and a false perception of reduced risk.

• While the effect is real, house money doesn‘t actually change the underlying odds or probabilities.

• With great power comes great responsibility. Have fun playing with house money, but always gamble responsibly!

Let me know if you have any other casino related topics you‘d like me to cover in the comments. And don‘t forget to SMASH that like button if you enjoyed this breakdown!

Your boy Terry is signing off for now. Catch you next time!