Parimutuel betting

Parimutuel betting is a betting system where all bets of the same type are pooled. The arranger (e.g. the race track) takes a “tax” known as house-take or vig. Payoff odds are then calculated by sharing the pool among all winning bets.

The name parimutuel comes from the French term Pari Mutuel which simply means mutual betting. Parimutuel betting is also known as tote, a name derived from the totalisator that calculates and displays bets already made at the race track.

Parimutuel betting is especially popular for betting at races, e.g. horse races and greyhound races, but is also used for other types of event, including jai alai matches.

What's the difference between parimutuel betting and fixed-odds betting?

In parimutuel betting, the final payout is not known until the pool is closed since the pool can keep growing and new bets can be made up until then. In fixed-odds betting, the bookmaker will offer you fixed-odds so that you will know at the time of wagering how much you will win if your prediction comes true.

It is quite common for parimutuel betting to be legal in jurisdictions where other types of betting, e.g. sportsbetting with fixed odds, is illegal.

History

Parimutuel betting was invented in 1867 by Joseph Oller from Catalonia. Later on, this type of betting was made easier by Australian engineer George Alfred Julius who invented a specialized mechanical calculating machine that would carry out the large amounts of calculations associated with large-scale parimutuel betting. This type of machine is known as a totalizator. The first totalizator was installed at Ellerslie Racecourse in Auckland, New Zealand in 1913. It would take until 1927 for the first totalizator to introduced in the United States. Among the early U.S. venues to use totalizators were Arlington Park and Sportsman's Park, both located in the state of Illinois.

Example

Let's say you bet on a horse race with eight possible outcomes. When the pool closes, the amounts of money wagered on each outcome are these:

1

€30.00

2

€70.00

3

€12.00

4

€55.00

5

€110.00

6

€47.00

7

€150.00

8

€40.00

Total pool = €514.00

Now, horse number 4 wins the race. A total of €55 has been wagered on this option.

First, the house will take is commission. This house takes a commission of 14.25%, i.e. €514 x 0,1425 = €73.25.

€514 - €73.25 = €440.75

The €440.75 that left in the pot is now distributed to those who bet on horse number four.

€440.75 / €55 = 8.01.

For each euro someone wagered on horse number four, they will get €8.01 and make a €7.01 profit. A €10 bet will thus yield €80.1 and make a €70.1 profit.