In horse racing the odds change even after your place your wager.  This is much different than betting on regular sports online and it results in you not really knowing what your potential payout could be until the start of the race.  This type of betting system is known as parimutuel betting, while regular sports betting uses the fixed odds system.

I’ve seen many people who didn’t understand the parimutuel betting system wager on horse races and then look very surprised when after the race their payout isn’t what they expected.

It is a little bit hard to get your head around if you’re used to fixed odds, but I my explanations below will make the differences clear.

What Is Parimutuel Betting

The most important thing to remember when trying to understand the parimutuel betting system is that you are not betting against the house (racebook or betting site for online bettors).  With parimutuel betting you are instead betting against other gamblers who have placed bets on the same race.  Because you are betting against the other gamblers the odds will change depending on how much money has been wagered on different horses.  The racebook will try to set accurate odds when the book opens (known as morning line odds), but these are just estimates and the true odds for the race are not known until all of the wagers have been received.

All of the bets for a single races are placed in a pool.  The “win” bets go in one pool, the “place” bets in another and so on.  The odds on the betting toteboard at any time indicate the amount of the money that has been bet that is currently on that horse.  For example, if a horse is 2/1 to win the race that means that 33% of the bets so far have been placed on that horse.  If a bunch of money comes in right at the end on a different horse than the 2/1 horses odds could easily jump to 3/1.

Another Way To Look At It

Here is another way to look at it if you are still having trouble understanding.

Let’s say that for every $1 that a person has wagered that’s one “bet” for that horse to win the race.  Whichever horse does win the race every bet on that horse receives an equal share of the $1’s spent on all of the losing bets.

So if there’s $500 on horse A in a win pool of $10,000 that means that $9,500 have to be split up evenly among the $500 of winning bets.  In this example that means that every $1 bet on horse A wins $19 when the horse wins ($9500/$500).  Therefore, before the race began horse A was a 19/1 long shot to win the race.

Taking this one step further, if just before the race a big bet of $1500 came in on horse A that would mean that there is now $2,000 of $12,000 total that has been bet on horse A.  With this last second bet horse A’s odds would have shortened to 6/1.

This example is a very small scale because most major horse races will have millions being bet on them, but you can add some zero’s if you want to make it more realistic.

Where is the Juice?

In the example I used above the Racebook didn’t make any money just for explanations sake.  In reality though the Racebook will take a percentage of the total pool of bets placed on the race.  This percentage take will not affect the relative odds between the horses and it will differ depending on the racebook you use.

Tips to Winning with Parimutuel Betting

Because you are betting against the other gamblers with pari-mutuel betting the smartest thing to do is go against the grain.  This is especially true in high profile races such as the American Triple Crown races.  If certain horses are getting a lot of media attention I would stay away from these horses because this popularity will bring in more bets on these horses.  Try to find horses with good track records who may be being overlooked by the general public.  It’s these horses that you will often find are undervalued in relation to their actual shot at winning the race (or placing or showing).

Continuing with the above tip I personally try to steer clear of big favourites in the high profile races.  The general public loves to back a winner and this can often shorten the favourites odds to unrealistic amounts.

A Brief History

Pari-mutuel odds were invented way back in 1867 by Joseph Oller, a Spanish entrepreneur who lived in Paris.  The betting system began in France and gradually caught on at other racetracks around the world.  Once the pari-mutuel betting system became popular a betting machine called the totalisator was invented to help with the required calculations to keep the odds as up to date as possible at the tracks.  This is where the words “tote” and “tote board” come from for the boards that showcase the odds at the race.  Pari-mutuel betting was adopted across the pond in North America in the 1920’s and it is still the most common betting system used for horse racing around the world.