Kelly Criterion in Casino Gaming

The Kelly Criterion strategy started out as a way to improve bad telephone signals in 1956, thought up by a physicist. Shortly after, a clever mathematician realised that the calculations could also apply to a player’s odds at a casino. 

So, how does a method used to fix a bad telephone line assist as an online casino gaming strategy? Let’s take a look.

Kelly Criterion Advises On Smart Bets

Kelly Criterion is a method used to suggest wagers for players, based on the edge they have in the game. It’s all about betting smart—increasing them when the odds are in your favour and decreasing them when the house is cleaning up. It’s simply a way to manage bankroll.

Kelly Criterion Works With Casino Games (But There’s a Catch)

Kelly Criterion can work with some casino games where the odds can shift in the player’s favour. Blackjack is a prime example,  especially when card counting is involved. This is done by keeping track of high and low cards that have already been dealt, then calculating the ‘true count’ by dividing the running count (the tally of high and low cards dealt so far) by the number of decks remaining. 

Once the player has an idea of their edge, they can enter all the numbers into the Kelly formula, which will tell the player what percentage of their bankroll could be wagered, based on their estimated chance of winning (or losing). It’s important to know that this isn’t a magic formula that will guarantee a huge payout, but it can be more fun than betting without any rhyme or reason. 

The Technical Side of Kelly Criterion

Once a player has worked out the chances of winning, they can enter the numbers into the Kelly formula:

f = (b × p – q) ÷ b, where b is the net odds — your profit per £1 bet (not including your original stake), p is your chance of winning, and q is your chance of losing.

For example, let’s say you’re counting cards in blackjack and figure you’ve got a 52% chance of winning a hand. Since blackjack usually pays 1:1, your net odds (b) would be 1. The equation would look something like this: f = (1 × 0.52 – 0.48) ÷ 1 = 0.04, which means a bet of 4% of your bankroll would be recommended.

Kelly Criterion Calculators Do The Math

While the formula may look complicated at first glance, those wanting to use the Kelly Criterion can use an online calculator. They take all the guesswork out of the math, allowing players to enter the odds, the estimated chance of winning, and the funds they’re playing with. The tool will then tell them the suggested percentage of their bankroll they could bet for that particular hand.  

Reduce Risk With Fractional Kelly

A lot of players who use Kelly Criterion like to use a variation called fractional Kelly, which helps them play it safe. They bet a portion of what the formula recommends, so instead of going all-in with what the strategy suggests, they may choose to bet half, a third, or even a quarter of it. 

Why do players do this? Well, Kelly Criterion can be super intense—it maximises long-term growth, but it also comes with massive swings that can be tough to handle. The suggestion is that by betting less, you smooth out the ups and downs and reduce your risk.

Can Kelly Criterion Be Used In Online Casino?

Because the Kelly Criterion strategy needs a positive player edge to work, the big problem is that RNG games, like online slots and roulette, are usually designed to give the player an RTP (return to player) less than 100%. This means, on average, they expect to return less than 100% of their original bet.

The method doesn’t work for live casino games either. That’s because the cards are constantly being shuffled to make them as fair as possible. So even the most skilled card counter won’t be able to keep track of what’s left in the deck or predict what cards are coming up.