Pari-Mutuel Betting

Let’s think of sports betting as a coin. And just like every other coin, it has two sides. On one side we have fixed-odds betting, which is when the sportsbook has fixed odds and hence fixed payouts for all wagers.

On the flip side, we have pari-mutuel betting. Here the outcome isn’t solely determined by the odds set by a bookmaker or a fixed paytable. Instead, it hinges on the collective wisdom and intuition of the participants themselves.

Pari-mutuel betting, a term derived from the French meaning “mutual betting” stands as a unique and captivating form of gambling quite different from traditional fixed-odds betting systems. Rather than pitting players against the house, pari-mutuel betting involves bettors wagering against each other with the pool of bets distributed among the winners after the deduction of taxes and fees.

Pari-mutuel betting is the traditional betting system for horse racing. Its allure, and probably most of its disadvantages, lies in its communal aspect and dynamic nature.

In this comprehensive guide, we take a closer look at pari-mutuel betting, exploring its origins, principles, and mechanics.

What is Pari-Mutuel Betting?

Pari-mutuel betting is a form of gambling where bettors wager against each other rather than against a fixed bookmaker or house. The term pari-mutuel has French origins and means mutual betting. In this system, all bets placed on a particular event are pooled together and the total pool is then divided among the winners after deducting taxes and fees.

Unlike traditional betting setups where odds are set in advance by a bookmaker, pari-mutuel odds are determined by the volume and distribution of bets placed on each possible outcome. By implication, the odds are never stable and fluctuate in real time leading up to the event based on the betting patterns of the participants.

So, you can’t be certain about the odds you will receive until the game starts. In fact. It is not uncommon to see multiple odds movements in the last few minutes leading up to the game. 

Pari-mutuel wagering is synonymous with horse racing; however, it is also used in other sports like greyhound racing and other sporting events where the outcome is uncertain and multiple participants compete. It is also quite common in other contexts such as lotteries and certain types of casino games.

At the end of the sporting event, tax will be deducted and the track will claim track takeout or house rake. The remaining amount is shared among the winners. A standard house rake is 16% depending on the size of the payouts. Bigger payouts usually mean higher-track takeouts.

History of Pari-Mutuel Betting

Pari-mutuel is a French word, so it should not come as a surprise that it was invented by the French. French businessman Catalan Impresario Joseph Oller in the late 19th century. Oller, who also founded the Moulin Rouge cabaret in Paris, introduced the concept of mutual betting as a way to provide a fair and transparent betting system for horse racing.

Pari-mutuel betting made its debut at French racecourses in the 1860s, replacing the traditional method of bookmaking where bookmakers set fixed odds for each horse. This new system allowed bettors to wager against each other, with the odds dynamically determined by the total amount of money wagered on each horse.

However, this system required a large amount of calculation. This led to the invention of a totalisator. This machine, also called the tote board, was invented by George Alfred Julius, an Australian engineer, and soon gained popularity among racecourses worldwide. It would find its way to the United States in 1927 leading to the creation of two popular racetracks, the suburban Arlington Racetrack in Arlington Park and the Sportsman’s Park in Cicero, Illinois.

Right now, pari-mutuel betting is the standard betting system for horse racing events around the world due to its fairness, transparency, and ability to handle large volumes of betting activity. And it has continued to evolve to keep pace with technological advancements and changing consumer preferences.

How Pari-Mutuel Betting Works

Pari-mutuel betting operates on a simple yet dynamic principle: all bets placed on a particular event are pooled together into a collective pot, and the total pool is then distributed among the winners after taxes and fees are deducted. Here’s a step-by-step breakdown of how pari-mutuel betting works:

Pooling Bets

All bets placed on a specific event are combined into a single pool. This stage determines just how big the odds are, and you can’t be certain of the odds until the bet is closed.

Calculating Odds

The odds for each possible outcome are determined based on the total amount of money wagered on that outcome relative to the total pool size. This means that the odds can fluctuate in real time as more bets are placed, reflecting changes in the betting patterns of participants.

Continual Updates

Throughout the betting period leading up to the event, the odds are continuously updated based on the influx of new bets and changes in betting patterns. This dynamic nature of pari-mutuel betting adds an element of excitement and uncertainty to the gambling experience.

Deducting Taxes and Fees

Before the winnings are distributed, a portion of the total pool is set aside to cover taxes, fees, and other deductions. These deductions include the track takeout and may vary depending on the jurisdiction and the specific rules governing the betting event.

Distribution of Winnings

After deducting taxes and fees, the remaining pool is distributed among the winners. The amount received by each winner is proportional to the size of their wager, relative to the total pool for the winning outcome. This means that larger bets result in larger payouts, but the winnings are shared among all winning bettors.

Settlement

Once the event concludes and the winners are determined, the payouts are calculated and distributed to the winning bettors. However, you should keep in mind that the size of pari-mutuel payoffs is determined by more than just the amount of money you wagered. Other factors that might affect it include:

• The amount of money wagered on the horse or combination of horses that won.
• Breakage
• The track takeout.

The Mathematics of Pari-Mutuel Betting

To further help you understand how pari-mutuel betting works, let’s take a look at a hypothetical horse race with the following distribution of bets on horses 1-5.

Horse	Wagers
Horse 1	$25.00
Horse 2	$40.00
Horse 3	$5.00
Horse 4	$50.00
Horse 5	$30.00
Total	$150.00

In this situation, we have $150.00 before the race starts. Once the gunshot is cracked for the first race, no further bets are made. Now let’s ignore, for a moment, that the race track and its operators need to make a profit. And suppose that horse 5 wins the race.

The pot is supposed to be distributed among those who bet on horse 5 in the following proportion:

$150/30 = $5 per $1.00 wagered. This is referred to as the payout multiple.

So if you wagered $5.00 on the proposition that Horse 5 would win the race, you would be getting $25.00. If one person managed to wager the entire $30.00 on the winning horse, they would get the entire pot of $150.00.

Of course, this includes the money they wagered. Now, let’s imagine for a second that the track operators want to make a profit from this race. They would want some form of compensation for the risk they took, and also a reimbursement for the platform created.

Let us, for a moment, assume that the operators wish to collect a guaranteed profit of $9 per $100 wagered.

9/100 = 0.09 This is called the profit margin.

Now that we have introduced the profit margin, then our wagers and payout multiple will change. The table would look something like this:

Horses	Wagers	Payout Multiple
Horse 1	$25.00	5.46
Horse 2	$40.00	3.41
Horse 3	$5.00	27.3
Horse 4	$50.00	2.73
Horse 5	$30.00	4.55
Total	$150.00

So if we were working with horse 5 as the winner, the operators would have claimed a profit of $13.5. And each bettor who wagered on horse 5 will get paid $4.55 for each dollar they wagered. So if a single person wagered the entire $30.00, then they would get

$30.00 x 4.55 = 136.5

Add this to the profit the operators claimed and you would get the round figure of $150.00 which is the total amount of wagers.

Of course, this does not take tax and other deductions into consideration, but you should have a clearer picture of how pari-mutuel betting works.

Pros and Cons of Pari-Mutuel Wagers

Just like every form of betting, the pari-mutuel system offers several advantages and disadvantages for bettors. You need to consider these before participating. Here is a breakdown of some of the pros and cons:

Pros

• The Odds: The dynamic nature of parimutuel odds is its greatest advantage and disadvantage. You do not know how the odds may end up, but if they are in your favor, you could earn a bigger payout.
• Potential for Big Payouts: Pari-mutuel betting offers the potential for significant payouts, particularly when there is a large pool of bets and few winning tickets. This can attract bettors who are seeking the thrill of a big win.
• Fairness: Pari-mutuel betting provides a fair and transparent betting system where all participants wager against each other, rather than against a bookmaker or house. This ensures that odds are determined by the collective betting activity, leading to fair payouts for winning bettors.

Cons

• The Odds: Like we said, the odds are both the biggest advantage and disadvantage. Since the odds in pari-mutuel betting are determined by the collective betting activity, bettors have less control over the odds they receive compared to fixed-odds betting. You can never tell what the current odds are.
• Higher Takeout: Pari-mutuel betting typically involves a takeout, which is a percentage of the betting pool that is withheld by the operator to cover expenses and generate revenue. This takeout can reduce the overall payout for winning bettors, making it less lucrative compared to other forms of betting.

Types of Pari-Mutuel Wagers

Now that we have figured out how pari-mutuel bet works, let’s take a look at the types. Pari-mutuel betting offers a variety of bet types that allow participants to wager on different aspects of an event.

The types of pari-mutuel wagers can be broken down into two: straight and exotic bets. The first three types of bets we list in this article are straight bets, while the rest are exotic bets. 

Here are some common types of pari-mutuel bets:

Win

This is the simplest form of pari-mutuel wagers. In a win bet, the bettor selects a single participant or outcome to win the event. If the selected participant or outcome finishes first, the bettor receives a payout based on the final odds and the size of their wager.

Place

A place bet involves selecting a participant or outcome to finish either first or second in the event. If the selected participant finishes in either of these positions, the bettor receives a payout based on the final odds and the size of their wager. It is easier to win than a win bet but the payout is less.

Show

Similar to a place bet, a show bet involves selecting a participant to finish in one of the top three positions (first, second, or third). If the selected participant finishes in any of these positions, the bettor receives a payout based on the final odds and the size of their wager. This makes it even easier to win a show bet than a place or win bet. However, the payout is further reduced.

Exacta

An exacta bet requires the bettor to predict the exact order of the top two finishers in the event. However, it is a bit more complicated than this. Exacta bets are considered a form of exotic wagers, and in most circles, it is referred to as the easiest of exotic wagers. There are four ways to play exacta bets:

• Straight
• Boxed
• Wheeled
• Part-wheeled

A straight exacta bet would look something like this: ¾

The implication is that the No. 3 horse has to finish first and the No. 4 horse has to finish second for your bet to win. 

Boxing the horses means creating multiple selections from 2 or more horses. In essence, you are saying that these horses will come out in the top two but in any other. So if we use a horse race that has horses 1-5 competing. A boxed exacta bet on horses 3 and 5 would mean that horses 3 and 5 would come out in the top two regardless of their order.

In a wheeled exacta, you select one horse to come first place and then select multiple participants to finish in second place. Using the example above of horses 1-5, we can wager that horse 3 would come out first place, and horses 1,4, and 5 would come out second place. This is known as a part-wheeled exacta. A wheeled exacta is picking one horse and saying it would come first, while any of the other horses would come second.

Exacta bets are one of the easiest pari-mutuel bets to make; however, they cost more and the potential payouts are not as high.

Across the board

Across the board is a type of hedge bet. In essence, you are making three separate wagers as follows:

• One win wager
• One place wager
• One show wager

All these are placed on the same horse. So if your selected horse places first, you get the payout for all your 3 wagers. If the horse places second, you get the payout for your place and show wager. If the horse places third, you only get the payout for your show wager. 

Quinella Bets

These are pretty much the same thing as a boxed exacta wager. A quinella bet involves selecting two participants to finish in the top two positions in any order. If the selected participants finish in the top two positions, regardless of the order, the bettor wins the wager and gets a payout.

Trifecta Bets

The trifecta bet is probably one of the most difficult types of pari-mutuel bets. It requires the bettor to predict the exact order of the top three finishers in the event. If you make a wrong selection for even one of the positions, you lose the bet.

However, the good thing is that, like the exacta bet, trifectas can be boxed or wheeled. However, adding more slots to your trifecta bet will increase the price.

Superfecta Bets

It gets even more difficult here. A superfecta bet involves selecting the exact order of the top four finishers in an event. If the selected participants finish in the predicted order, the bettor receives a payout based on the final odds and the size of their wager.

However, placing a superfecta wager can be costly if you want to make a decent profit. However, most tracks put their minimum bet for as low as 10 cents.

Any2 or Duet Wagers

In duet wagers, you pick two horses from all the horses running in the race. These horses must place first, second, or third in any order for you to win the bet.

Super 5

This type of pari-mutuel betting rarely occurs except in races that have 8 or more horses. In super 5 wagers. You pick 5 horses to come out top five in the exact order you listed them.

Jackpot, Pick Six, and Other Multiple Races Bet

Pari-mutuel also lets you make multi-race bets. The two most common are the pick six and the jackpot bets. The pick six wager requires you to pick the winning horses of Six consecutive races. There are variants like the Pick Four, where you have to pick the winners for consecutive races, and it can continue for as many as nine games.

There is a form of progressive jackpot for the pick six wager that continues to grow until a winner is announced. There are also consolation prizes for bettors who manage to get 5 out of the six winners correctly.

The Jackpot is a much more difficult variation of the pick six bet. With the jackpot bet, the jackpot continues to grow until there is a single winner. If multiple bettors hold the winning wager, then they are only going to get the consolation prize divided among them.

Other types of multi-race bets include:

• Double: You must pick the winners of two consecutive races. Most tracks will open this bet for the first or last two races in the program. 
• Triple: This is also known as a treble or a pick three wager. Here, bettors must pick the winners of three consecutive races. 
• Quadrella: Also known as quaddie. The bettor must pick the winner of four races. These races must be within the same program and on the same track.

Pari-mutuel and Other Sports

Historically, pari-mutuel was used for horse races. However, the system is perfect for a variety of sports and events where the outcome is uncertain and multiple participants compete. Here is a look at some of the sports and events for which pari-mutuel is commonly offered:

Horse Racing

Pari-mutuel is synonymous with horse racing. It has been a staple for horse racing for over a century, allowing bettors to wager on races held at racetracks around the world.

Greyhound Racing

This is another event where pari-mutuel betting is employed. Greyhound racing involves dogs competing in races around an oval track. Pari-mutuel betting is commonly offered at greyhound racing tracks, allowing bettors to wager on the outcomes of individual races.

Harness Racing

Harness racing might be considered to be a form of horse racing. However, the horses must trot at a particular pace. To make this possible, they are usually harnessed to a driver in a two-wheeled cart called a sulky. The unpredictable outcome of this event makes it perfect for pari-mutuel bets.

Dog Sledding

Dog sledding is popular in regions such as Alaska and Norway. It is a fast-paced event where dogs pull humans across a track made of ice. Pari-mutuel betting is often offered at these racing events allowing spectators to wager on the teams of mushers and their sled dogs as they compete in long-distance races.

Jai Alai

Jai alai, a fast-paced sport originating in Spain, involves players using a handheld curved basket called a cesta to hurl a ball against a wall at high speeds. Pari-mutuel betting is often available at jai alai frontons, where spectators can wager on the outcomes of matches.

Other Sporting Events

While pari-mutuel is mostly offered for the events we have mentioned above, it can also be offered for certain sporting events where the outcome is uncertain and multiple participants compete. Good examples are golf tournaments, auto racing events, and some track and field competitions.

Is Pari-Mutuel Legal?

Sports betting still faces a bit of controversy, as various forms are not legal in many parts of the world. However, pari-mutuel betting is legal in many jurisdictions around the world. However, the legality of pari-mutuel betting can vary depending on the specific laws and regulations of each country, state, or region.

In countries where gambling is legal and regulated, pari-mutuel betting is commonly offered for various types of events, including horse racing, greyhound racing, and certain sporting events. In fact, until recent times, most pari-mutuel establishments were government-owned, and the profits generated, if any, were directed into the coffers of the government.

Regulatory bodies oversee the operation of pari-mutuel betting to ensure fairness, transparency, and compliance with applicable laws. These bodies may impose licensing requirements, set rules for betting operators, and monitor the integrity of betting markets to prevent fraud and manipulation.

Pari-Mutuel Across the Globe

We have mentioned that pari-mutuel is legal across most regions around the globe. This is the case even with the United States and its murky betting regulations. So let us take a look at some of the regions where pari-mutuel is legal and popular, and information you need to know before wagering in these regions:

United States

Pari-mutuel betting is legal in almost all the states in the United States of America, except for 7 states. These 7 states are:

• Alaska
• South Carolina
• Utah
• Georgia
• Hawaii
• North Carolina
• Mississippi

All the other states in the country offer pari-mutuel bets for horse racing, However, not all of them offer this type of betting for the other types of events we have listed in this article.

The United States also allows for interstate pari-mutuel betting but only between states where it is legal. Interstate pari-mutuel betting and horse race betting were made possible due to the 1978 Horse Racing Act.

France

Pari-mutuel was created in France, so it should not come as a surprise that it is popular in the country. What might surprise you though is that it is the only type of horse race betting allowed on most tracks across the country.

The country has the largest pari-mutuel operator in the whole of Europe and the second largest in the world. This operator, called the Pari Mutuel Urban (PMU) regulates all pari-mutuel betting outlets in the country.

Canada

Canada allows for pari-mutuel betting on all horse race tracks across the country. You can bet at physical race tracks or licensed websites. You can even place a bet via telephone.

Canada has a regulatory body that regulates pari-mutuel betting. This is the Canadian Pari-Mutuel Betting Agency which is under direct supervision by the Department of Agriculture and Agri-Food.

The United Kingdom

The United Kingdom has a long history with pari-mutuel bets. The country has a leading pari-mutuel establishment called the Tote. It is also the premier establishment and the only organization with the authority to provide citizens of the United Kingdom with pari-mutuel betting services for horse racing. It was created in 1938 and was referred to as the Horserace Totalisator Board.

In 2011, BetFred acquired the Tote and added fixed odds betting to the services offered by the agency.

Australia and New Zealand

In the past, Australia and New Zealand only offered pari-mutuel betting through Totalisator Agency Boards. Each state had one tab that was owned by the government and had a total monopoly over everything pari-mutuel.

However, things changed in the time surrounding the Racing Act of 2023. These TABS are now mostly owned by private corporations with Tabcorp owning the majority.

Ireland

Ireland has Tote Ireland, an establishment similar in many ways to the British Tote. The agency primarily covers Irish horse racing, but they also offer the option to bet on international horse races, Greyhound races, and soccer pools.

Tote Ireland is owned and managed by Horse Racing Ireland and all the profits are invested in Irish horse racing.

Best Pari-mutuel Betting Apps

Most people do not want to go through the stress of finding racecourses in the country that offer pari-mutuel bets. For these people, betting through a sportsbook becomes the next best option.

However, not all sportsbooks provide this service. So let’s take a look at some of the best places to make pari-mutuel wagers:

• Caesars Sportsbook
• BetMGM
• PointsBet
• FanDuel
• Twinspires

All these sportsbooks allow for pari-mutuel bets and have mobile apps so you can wager from your mobile devices. However, you have to be within states where pari-mutuel betting is legal.

FAQs on Pari-Mutuel Betting

What Happens To The Unclaimed Portion Of The Betting Pool In Pari-Mutuel Betting?

Unclaimed funds in the betting pool are typically distributed among the winning bettors, resulting in slightly larger payouts for those who placed winning bets. This redistribution ensures that all funds in the pool are allocated, maintaining fairness in the payout structure.

Can You Cancel Or Change A Bet In Pari-Mutuel Betting?

Once a bet is placed in pari-mutuel betting, it cannot be canceled or changed. This is because the odds and payouts are determined by the collective betting activity, and altering a bet after it’s placed could disrupt the integrity of the betting market.

How Are Odds Calculated In Pari-Mutuel Betting?

In pari-mutuel betting, odds are calculated based on the total amount of money wagered on each outcome relative to the total pool size. The odds for each outcome are then derived from this ratio, with higher betting activity resulting in lower odds and vice versa.

Are There Any Strategies For Maximizing Winnings In Pari-Mutuel Betting?

One common strategy is to analyze betting patterns and market trends to identify undervalued or overvalued outcomes. Additionally, studying past performances and understanding the nuances of the sport or event can help inform more informed betting decisions.