Pari-Mutuel Betting Guide
In this article, we will take a closer look at what pari-mutuel betting is and how this form of betting works in both horse racing and golfing events.
We will also discuss the legality of this type of betting around the world and in the United States.
We take include how pari-mutuel betting in Canada and the UK works, before concluding our article with a detailed look at the history of this popular form of betting.
What is Pari-Mutuel Betting?
Pool betting, or more commonly known as pari-mutuel betting, refers to a popular and unique betting form that can be used on a variety of sporting events.
Instead of placing a bet against a sportsbook, you will place a bet against other people who have placed a bet on the same sporting event.
All bets that have been made will go into a pool, and the amount will be shared equally between everyone that placed bets on the winning selection.
As you might have guessed, a small portion of the total bets will be subtracted by the house.
With pari-mutuel betting, the house will refer to a private company or a state run organization which offers pari-mutuel betting as a service.
Pari-mutuel betting is completely legal in several states across the United States, as well as various other regions across the globe. This form of betting is typically associated with greyhound racing and horse racing, but it can be utilized on other sporting events as well, including golf.
It’s extremely difficult to use a betting strategy with pari-mutuel bets, as you won’t benefit from fixed odds. The payouts with pari-mutuel betting will depend on two factors:
- How many bettors selected the winner
- How many bettors placed a bet on the sporting event.
The payouts will only be calculated after betting has closed, which means just before the sporting event gets underway or after the sporting event has started.
As you’ll quickly realize with pari-mutuel betting, its impossible to determine whether a selection provides any value when you initially place your bet.
Regardless of this fact, pari-mutuel betting remains an extremely popular form of betting for both professional gamblers and recreational bettors alike.
For many bettors across the globe, it’s actually the only legal form of sports betting that is available to them.
How Does Pari-Mutuel Betting Work?
The concept behind this form of betting is rather straightforward. You will essentially make selections on a certain sporting event in the same way you would make a bet on a traditional sporting event at a sportsbook.
However, you will not receive fixed odds when you initially place your bet.
Instead, you’ll receive probable odds that will be based on the betting pool. It’s worth mentioning that the probable odds that are offered to you when you place your bet will undoubtedly change as the sporting event unfolds.
Every pari-mutuel bet that is placed on a betting market will go into a specific pool. When the sporting event is completed, the total amount of bets will be added up. As previously mentioned, the house will take a small percentage of the total bets in the pool.
Thereafter, the remaining amount will be divided between the bettors that managed to make the winning selection. Your payout will be based on how much you wagered.
This might sound complicated at first, but once you go through the example we included below, you’ll have a much better understanding on how pari-mutuel betting works.
For the purpose of our example, we’ll focus on a horse race that only features five runners. We’ll place a $10 bet on Horse A and another $10 bet on the Horse C.
Pari-mutuel Betting Example
The house accepted the following bets on the race:
- Horse A – $200
- Horse B – $400
- Horse C – $100
- Horse D – $150
- Horse E – $300
The above bets come to a total of $1,200. It’s worth mentioning that we used smaller bets to ensure this example is easy to understand. You’ll notice that there will be a lot more money involved once you actually start using pari-mutuel betting.
The house will take a 10% cut from the total pool, amounting to $120, leaving $1,080 in the betting pool. Thereafter, the potential payouts for every horse in the race will be calculated. This can be accomplished by dividing the remaining balance by the total bet amount on each horse.
The potential payout for each horse is as follows:
- Horse A – $5.40
- Horse B – $2.70
- Horse C – $10.80
- Horse D – $7.20
- Horse E – $3.60
Due to the fact that the potential payout for Horse B is $2.70, it means that anyone who placed a bet on Horse B can win $2.70 for every $1 that was wagered. This will include the initial bet made as well.
Should Horse A win the race, we will receive a payout of $54 for our $10 bet.
If Horse C won the race, we will receive $108 for our $10 bet.
You’ll notice a huge difference when it comes to the potential payouts on each horse. The total payout amount will always remain the same.
However, the payout amount on every $1 wagered will change based on the total bet amount on each selection. The more bets are placed, the smaller the payout amount will be for every $1.
Just like fixed odds betting, the odds for the favourite to win the race will always be the lowest, while the odds for the underdogs will always be highest. Even though you won’t have fixed odds in pari-mutuel betting, you will usually receive more money on the favourite compared to the underdogs.
Pari-mutuel vs. fixed odds betting
The biggest difference between pari-mutuel betting and fixed odds betting is that we won’t know what the potential payouts will be when we place our bets.
The operators that provide pari-mutuel betting will display probably odds before the sporting event gets underway. Even though it’s labelled probable, there’s still no guarantee that the concluding payout will be anywhere near the probable payout.
At the end of the day, it will all depend on the total amount wagered for each selection when we place a bet.
For instance, let’s say we place a $10 bet on Horse A and another $10 bet on Horse C a day before the horse race starts.
The betting pool at the time looked like this:
- Horse A – $50
- Horse B – $200
- Horse C – $20
- Horse D – $150
- Horse E – $80
A day before the horse race started, the total bet amount in the betting pool was $500, leaving $450 to be divided between the winners due to the house taking a 10% commission.
The probable odds that were displayed at the time for Horse A was $9 for every $1 wagered ($450 divided by $50), while the probable odds for Horse C was $22.50 for every $1 wagered ($450 divided by $20).
Obviously, this was completely different at the end of the race. When we placed our bets a day before the event, we didn’t know how many additional wagers were going to be placed, which is why the payout numbers didn’t add up.
This is why it’s so difficult to make a profit from pari-mutuel betting. A key ingredient to any decent strategy in sports betting is to evaluate the value within each betting market. You achieve this by identifying the probability behind a winning wager, while comparing the probability behind the relevant odds. Once the winning probability is better than the suggested odds, you’ve discovered value.
Its impossible to determine whether there’s any value when it comes to pari-mutuel betting. The probable odds when we place a bet can drastically change over time as we’ve demonstrated above. So even though there is value when we place our bet initially, it can actually transform into a very bad wager without you ever knowing it. The upside to pari-mutuel betting, however, is the vast selection of different wagers that is available to you…
Pari-Mutuel Bet Types
In the horse race example we included above, we used a win wager. This is considered the most popular wager when it comes to pari-mutuel betting. However, there a several other types of bets you can use as well.
Each of them will function in the same way when it comes to calculating the potential payouts. However, they will differ greatly in terms of outcomes.
Let’s take a look at some examples.
The terms behind this bet will greatly depend on where you are situated in the world. For instance, a place wager in North America will be on a selection to either finish first or even second, while in other regions from across the globe it can be a bet on a selection to finish in ‘the places’. The places that will count towards this bet will solely depend on the number of participants.
This is a wager that is primarily used in North America and covers the first, second, and third place selections.
Across the Board
This is considered a combination bet and is primary used in North America. It basically incorporates three different wagers, including a show wager, a place wager, and a win wager. If your selection finishes first, you will win on all three wagers. If your selection finishes second, you will only win on the show wager and place wager. If your selection finishes third, you will only profit from the show wager.
This is another popular combination wager which you will find in most regions around the world. It basically combines a place wager and a win wager.
This is a wager that is placed on two selections to finish 1st and 2nd and needs to be in the correct order as well.
This is a bet on two selection to finish in the top 3 places.
This is a bet on three selections to finish 1st, 2nd, and 3rd and needs to be in the correct order as well.
These are the most popular types of bets you will find in pari-mutuel betting. These bet types are nearly impossible to get right, but they offer very appealing payouts, which makes them so popular around the world.
Is Pari-Mutuel Betting Legal?
You might be surprised to learn that pari-mutuel betting is legal in most regions across the globe. What’s even more surprising is that the same applies to the United States, as well as areas around the world where the legalization of sports betting is still unclear.
With that in mind, let’s take a more in-depth look at several regions from around the world where pari-mutuel betting is the most popular.
Pari-Mutuel Betting Laws in the United States
There are currently 43 states in America where pari-mutuel betting is legalized. It’s legal to bet on horse racing in the states listed below, but not of all them offer greyhound bets or wagers on Jai Alai. The 43 states that allow pari-mutuel betting include:
- West Virginia
- South Dakota
- Rhoda Island
- North Dakota
- New York
- New Mexico
- New Hampshire
- New Jersey
This means that there are only 7 states in America that do not provide pari-mutuel betting to its citizens. The 7 states include:
- South Carolina
- North Carolina
Interstate pari-mutuel betting is regulated by the federal government. This occurs when a bettor from one state places a bet in another state through electronic communication, also referred to as remote betting, as opposed to placing a bet in person. Interstate pari-mutuel betting, by US law, is perfectly legal but only when pari-mutuel betting is legal in both states. Most interstate gambling forms are illegal. However, this does not apply to horse racing along with pari-mutuel betting thanks to the 1978 Horse Racing Act.
Pari-Mutuel Betting Laws in Canada
You will be pleased to know that pari-mutuel betting is available at all horse racing tracks across Canada.
Bettors are also more than welcome to place a bet on theatre betting websites that are licensed, or through betting services via telephone.
All pari-mutuel betting activities are regulated and governed by the Canadian Pari-Mutuel Betting Agency that falls under the supervision of the Agriculture and Agri-Food government department.
Pari-Mutuel Betting Laws in the United Kingdom
The United Kingdom’s leading pari-mutuel betting organization is the Tote. It was initially established back in 1928 by the British Government, known as the Horserace Totalisator Board. In fact, it’s the only organization within the United Kingdom that is allowed to provide pari-mutuel betting when it comes to horse racing in the country.
History of Pari-Mutuel Betting
In 1867, Joseph Oller invented pari-mutuel betting. He was an entrepreneur from Spain but spent most of his life in France. The word ‘pari-mutuel’ originated from ‘pari mutual’, a French phrase that means ‘mutual betting’. After Oller grew frustrated with bookmakers and the way in which they made significant profits from innocent bettors, he created a brilliant way to solve the problem thanks to pari-mutuel betting.
Oller successfully managed to implement this form of betting at several horse racing tracks within France. However, in 1874 Oller was accused of running an illegal gambling operation and was sent to prison for a couple of years. In 1891, despite the setback, pari-mutuel betting was legalized in the country of France, while fixed odds betting was eventually banned in the country.
After the betting form was legalized in France, it began spreading into other regions across the globe. The United Kingdom, the United States, New Zealand, and Australia embraced pari-mutuel betting, stating that this form of betting is fairer. After it became a huge success around the world, Oller decided to take a brand-new path and went on to establish the now popular Moulin Rouge.
The biggest drawback to pari-mutuel betting were the calculations that were required to determine the payouts. This was originally accomplished manually which took a great deal of time to achieve. However, George Julius, an engineer from Australia, managed to solve the problem when he invented the automatic totalizer. This was initially developed as a mechanical machine that would count votes. However, it was rejected by the government when the prototype was originally presented to them. After a few changes to the machine, it served as an automatic totalizer for pari-mutuel betting.
Historically, nearly all operators that provided pari-mutuel betting across the globe were either not-for-profit or state owned. Any profits that came from pari-mutuel betting were either given to the government or it was spent on horse racing to improve the sport. In recent times, most operators are now run commercially and are owned privately.