Casino games are designed with a house advantage. Mathematically, the house advantage is a measure of how much the house expects to win, expressed as a percentage of the player’s wager. The house advantage is the difference between the “true” or actual odds of “winning” and the odds at which the casino pays you when you win. The house advantage ranges from about 0.5 percent for blackjack to 12 percent or more for nickel slots. Remember, on a Las Vegas roulette wheel, there are 36 numbers plus the zero and double zero, so there are 38 numbers where the ball can land. When you place a bet on a single number the odds of the ball landing on your number are 37 to 1. If you win the casino pays you “only” $35 for your dollar bet. You keep your original dollar, and you are paid an additional $35 so the total returned to you is $36. The difference is two dollars (38 minus 36). Divide the $2 by 38 which is the “true odds” and you come up with the house edge of 5.26 percent. What this means is that you could actually cover all the numbers on the roulette wheel and still lose money because the house will always retain 5.26 percent of the wager.

Gamblers intuitively understand the foregoing. And, of course, the “house advantage” is why “gaming companies” build opulent casinos to attract more “players.”

So, is there a “house advantage” for certain “players” in the stock markets? And, if so, do the rest of us understand that?

This week, Mark Cuban, the billionaire owner of the Dallas Mavericks and one of reality TV’s “sharks,” again criticized the Securities and Exchange Commission over the agency’s use of its in-house judges. Mr. Cuban said that he likely would have been found liable in the 2013 insider trading case brought against him if his case had been decided by an SEC judge instead of by a federal court. He believes that as a “firsthand witness to and victim of SEC overreach,” he has an interest in helping to fight the SEC. There are several pending challenges to the SEC’s increasing use of its own administrative law judges, which some say gives the agency an unfair edge.

But Bloomberg Hedge Fund Brief reported this week that the SEC had lost a recent stock-tipping case against a former trader. The SEC failed to prove that the tipster received a personal benefit for giving the information to the trader, which now seems to be the burden of proof the government must meet in order to prevail in such cases. The article notes that the loss was “the first ever for the SEC on an insider-trading case that was handled by an administrative law judge. The defeat contrasts with criticism that SEC in-house judges are biased in the agency’s favor.”

Earlier this week, a front-page Wall Street Journal article reported that data from a recent survey shows that volatility raises risks for retail investors who jump into trading at the opening stock bell. Buying and selling by individual investors generally is heavy in the minutes immediately after the market opens, making it more difficult for such investors to compete for the best trades. This increases the likelihood that such investors will overpay for a stock or sell below the prevailing market price relative to large, institutional traders. According to the article, “the wider the spread, the more exposed investors are to high costs, which can erode returns at a time when major stock indexes are down for the year.” 

Yet another Wall Street Journal article reported this week that “corporate executives and board members regularly make market-beating returns from buying and selling their companies’ stock in the days before disclosing a significant event, according to a study that says it has found a link between insider knowledge and investment profits.” The study found that, on average, company insiders “netted about 0.4 percentage points over a broad market index between the time of their trades and the market close after the disclosure.”

In all of the games we humans like to play, we strive for a fair and level playing field. The problem, however, is determining which advantages offend our sensibilities. Our sense of outrage probably is directly linked to how much we like the game, and, more importantly, how much we like the player who may be enjoying the slight edge. Perhaps this is why we collectively are more bemused than outraged about football games played with under-inflated footballs.