Parimutuel betting is very different than betting on sports with fixed odds. Parimutuel betting is most often used in used in horse racing, but can also be used in other sporting events where there is a pool of bettors. It is very important that you understand parimutuel betting and how it differs from fixed odds betting or you will end up very confused with your final payouts.
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Parimutuel vs Fixed Odds
I think the best way to explain the parimutuel betting system is to compare it to fixed odds betting system that most people are familiar with.
With fixed odds betting the oddsmaker sets the odds for a particular outcome and if this outcome occurs you are paid out based on the odds you bet at, regardless of what every other individual betting on the event wagered on. With fixed odds betting you are wagering against the sportsbook at the odds given.
In contrast parimutuel betting basically involves betting against other gamblers who are betting on the same event. It’s easiest to think of parimutuel betting as betting into a pool where the payout is determined by the total number of other bets on that same outcome. So if you bet on a horse named ‘Joe’ to win and one third of the money in the betting pool was bet on ‘Joe’ then your payout would be 2-1. The potential payout for each outcome changes as more bets are placed, so the odds that you see when you place your bet, may not be the same odds that you are paid out at if more bets are placed after your wager.
Example
Here is an example to show how your payout can change even after you placed your bet at certain odds.
Consider a horse race with 8 runners. Three hours before the race you like a horse named ‘Eat Em Up’ to win the race and his current parimutuel odds (aka tote) is at 5/1. You place $100 on ‘Eat Em Up’ to win and if the race began right then without anymore bets being taken and ‘Eat Em Up’ won the race you would win $500. However, with one hour left before the race some news leaks that the current 2/1 favorite didn’t have a good warm-up and is looking sluggish. Now all of a sudden ‘Eat Em Up’ is perceived as a good shot to win. More money comes in on ‘Eat Em Up’ and his tote moves down to 3/1 by the time the race starts. ‘Eat Em Up’ does pull out the victory and you win $300, but you are somewhat disappointed because you thought you would win $500 when you placed the bet 3 hours earlier. This is a common thing with parimutuel betting and is the reason why it is smartest to place your bets closer to the starting of the race.
Of course the odds don’t always get shorter. If ‘Eat Em Up’ had been the horse looking sluggish his odds would have lengthened and if he had of gone out and still won the race you could have won more than $500. That being said money that is in earlier is usually sucker money because the professional gamblers will wait until the last second to have as much information as possible on the race prior to placing their wagers.
Legality
Parimutuel betting is legal many places where fixed-odds betting is not because you are essentially betting against other gamblers rather than the sportsbook. The bookie just takes some juice off the top of the betting pool and thus the bookie always profits no matter what happens in the race.
I hope you now understand parimutuel betting and use this knowledge to your advantage next time you are at the race track.