Parimutuel betting (from the French language: pari mutuel, mutual betting) is a betting system in which all bets of a particular type are placed together in a pool; taxes and a house take are removed, and payoff odds are calculated by sharing the pool among all placed bets.The parimutuel system is used in gambling on horse racing, greyhound racing, jai alai, and all sporting events of relatively short duration in which participants finish in a ranked order. A modified parimutuel system is also used in some lottery games such as Lotto South.

Parimutuel gambling is frequently state-regulated, and offered in many places where gambling is otherwise illegal. Parimutuel gambling is often also offered at “off track” facilities, where players may bet on the events without actually being present to observe them in person.

Parimutuel betting differs from fixed odds betting in that the final payout is not determined until the pool is closed – in fixed odds betting, the payout is agreed at the time the bet is sold.

Example of parimutuel betting

Consider a hypothetical event in a country using a decimal currency such as dollars which has 8 possible outcomes. Each outcome has a certain amount of money wagered:

Outcome 1 – $30.00
Outcome 2 – $70.00
Outcome 3 – $12.00
Outcome 4 – $55.00
Outcome 5 – $110.00
Outcome 6 – $47.00
Outcome 7 – $150.00
Outcome 8 – $40.00

Thus the total pool of money on the event is $514.00. Following the start of the event, no more investments are accepted. The event is decided and the winning outcome is determined to be Outcome 4 with $55.00 invested. The payout is now calculated. First the commission or take for the wagering company is deducted from the pool, for example with a commission rate of 14.25% the calculation is: $514 – 0.1425 * $514 = $440.76. The remaining amount in the pool is now distributed to those who invested in Outcome 4: $440.76 / $55 = $8.00 per $1.00 invested. Thus, in decimal odds, outcome 4 is said to pay out $8.00.

Often at certain times prior to the event, betting agencies will provide approximates for what should be paid out for a given outcome should no more bets be accepted at the current time. Using the example above, an approximates table using the same commission rate in decimal odds would be:

Outcome 1 – $14.69
Outcome 2 – $6.30
Outcome 3 – $36.73
Outcome 4 – $8.00
Outcome 5 – $4.00
Outcome 6 – $9.38
Outcome 7 – $2.94
Outcome 8 – $11.02

In real-life examples such as horse racing, the pool size often extends into millions of dollars with many different types of outcomes (winning horses) and complex commission calculations.

Sometimes the amounts paid out are rounded down to a denomination interval – in the United States and Australia, 10 cent intervals are used. The rounding loss is sometimes known as breakage and is retained by the betting agency as part of the commission.

History of parimutuel betting

The parimutuel system was invented by Parisian perfume maker Pierre Oller in 1865 when asked by a bookmaker friend to devise a fair system for bettors which guarantees a fixed profit for the bookmaker.

The large amount of calculation involved in this system led to the invention of a specialized mechanical calculating machine known as a totalisator, “automatic totalisator” or “tote board”. The first was installed at Ellerslie Racecourse, Auckland, New Zealand in 1913, and they came into widespread use at race courses throughout the world (the U.S. introduction was 1933 at Arlington Park, near Chicago,IL USA).

Strategy and comparison with independent bookmakers

Unlike many forms of casino gambling, in parimutuel betting the gambler bets against other gamblers, not the house. The science of determining the outcome of a race is called handicapping.

It is possible for a skilled player to win money in the long run at this type of gambling, but overcoming the deficit produced by taxes, the facility’s take, and the breakage is difficult to accomplish and few people are successful at it.

Independent off-track bookmakers have a smaller take and thus offer better payoffs, but they are illegal in some countries. However, with the introduction of Internet gambling has come “rebate shops”. These off-shore betting shops in fact return some percentage of every bet made to the bettor. They are in effect reducing their take from 15-18% to as little as 1 or 2%, still ensuring a profit as they operate with minimal overhead. Rebate shops allow skilled horseplayers to make a steady income.

Links

• Parimutuel News
• The Betting-Ring – info on betting links around the world

This guide is licensed under the GNU Free Documentation License. It uses material from the Wikipedia.

Video: How To Bet

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