Pari-Mutuel Betting Explained

In the pari-mutuel system, gamblers bet against each other rather than the house. All wagers of a particular type are pooled together, and payouts are distributed based on each winner’s share of the pool after the operator’s commission has been deducted. This means your payout is determined only after the pool is closed and the event has concluded. 

In other words, the pari-mutuel betting system distributes winnings based on the total amount wagered and the number of winning picks. It’s more common in sports where participants finish in ranked order, like horse racing, where it’s usually called the tote or totalisator system.

How Pari-Mutuel Betting Works

The major fact that defines parimutuel wagering is that odds are not set in advance. Instead, they fluctuate based on how much money is staked on each outcome or participant in the event. 

Once all wagers for the event are in, they are collated in a pool. The operators, which might be racetracks or online betting sites for horse racing, take a percentage as their commission. Upon the event’s conclusion, the remaining pool is divided among the punters who have picked the correct outcomes. So, the more people who pick the correct outcome, the smaller each individual payout will be.

Let’s consider a practical example. Imagine you’re betting on a race of five horses: A, B, C, D, and E, and you’ve staked $100 on horse A to win. Once all the wagers are placed, the operator gathers them all into a single pool. Let’s say the total amount of pari-mutuel bets on each horse are as follows:

• Horse A: $10,000 
• Horse B: $5,000 
• Horse C: $4,500
• Horse D: $6,000
• Horse E: $3,000

Total pool: $29,000

Let’s say the operator takes a 10% commission of $2,900 from the total pool, leaving $26,100 to be distributed among winners. If horse A wins at the end of the race, the $26,100 will be distributed among everyone who backed it based on their stakes. Pari-mutuel betting sites mostly determine the payout for each bettor by dividing the total pool after commission by the total amount of money on horse A.

In this case:

$26,100/$10,000 = $2.61 per dollar staked. This means for every dollar put on horse A, you’d get $2.61. Since you bet $100, your total payout will be $261 (100 X 2.61). Let’s imagine that Horse E, which has a lower volume of $3000, wins; punters who bet successfully on this horse will get $8.7 for every dollar they wagered ($26,100/$3000). This means a $100 stake will yield $870 in this case.

Pari-Mutuel in Other Forms of Gambling

Besides sports, the pari-mutuel system is also applied in other forms of gambling, like lotteries, jackpots, and casino games like poker tournaments and progressive blackjack. 

Let’s consider an example of pari-mutuel gambling. In a poker tournament, each player buys in for a set amount, contributing to a collective prize pool. The casino or organizer takes a small cut, known as the rake, and the rest of the money is divided among the top finishers. How much each winner takes home depends on the number of players, their place in the tournament, and their stake amount.

Prop Bets & Pari-Mutuel

Besides the conventional win, place, and lose options, you can also explore prop bets within the pari-mutuel system. These prop wagers function similarly to those in fixed-odds betting, allowing you to predict specific outcomes not directly tied to the event’s final result. However, the payouts here are determined by the total pool rather than predetermined odds.

Let’s consider a pari-mutuel betting example involving props. Instead of backing the winner in a horse race, you can predict the jockey’s performance, total time of the race, etc. Like in regular pari-mutuel wagers, all props of a particular type are pooled together, and the payouts are distributed accordingly among winners.