Parimutuel betting
Parimutuel betting, or pool betting, is a betting system in which all bets of a particular type are placed together in a pool; taxes and the house-take, are deducted, and payoff odds are calculated by sharing the pool among all winning bets. In some countries it is known as the tote after the totalisator, which calculates and displays bets already made.
The parimutuel system is used in gambling on horse racing, greyhound racing, jai alai, and other 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.
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 made.
Parimutuel gambling is frequently state-regulated, and it is 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.
Example
In a hypothetical event that has eight possible outcomes, in a country using a decimal currency such as dollars, each outcome has a certain amount of money wagered:| Outcome | Wager |
| 1 | 60.00 |
| 2 | 140.00 |
| 3 | 24.00 |
| 4 | 110.00 |
| 5 | 220.00 |
| 6 | 94.00 |
| 7 | 300.00 |
| 8 | 80.00 |
| Total | 1028.00 |
Thus, the total pool of money on the event is $1028.00. Following the start of the event, no more wagers are accepted. Then suppose Outcome 4 occurs. 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: $1028 × 0.1425 = $146.49. This leaves a remaining amount of $881.51. This remaining amount in the pool is now distributed to those who wagered on Outcome 4: $881.51 / $110.00 = 8.01 ≈ $8 payout per $1 wagered. This payout includes the $1 wagered plus an additional $7 profit. Thus, the odds on Outcome 4 are 7-to-1.
Prior to the event, betting agencies will often provide an approximate pay-out figure for each given outcome should no more bets be accepted after the current time. Using the wagers and commission rate above, an approximates table in decimal odds and fractional odds would be:
| Outcome | Decimal odds | Approx. fractional odds |
| 1 | 14.69 | 13–1 |
| 2 | 6.30 | 5–1 |
| 3 | 36.73 | 35–1 |
| 4 | 8.01 | 7–1 |
| 5 | 4.01 | 3–1 |
| 6 | 9.38 | 8–1 |
| 7 | 2.94 | 2–1 |
| 8 | 11.02 | 10–1 |
In real-life examples, such as horse racing, the pool size often extends into millions of dollars with many different types of outcomes and complex commission calculations.
Sometimes, the amounts paid out are rounded down to a denomination interval — in California, Australia, and British Columbia, 10¢ intervals are used. The rounding loss is known as breakage and is retained by the betting agency as part of the commission.
In some situations, a negative breakage may occur — for example, in horse racing when an overwhelming favorite wins. The parimutuel calculation results might call for a very small winning payout, but legal regulations might require a larger payout. This condition is sometimes referred to as a '''minus pool.'''
Algebraic summary
In an event with a set of n possible single-winner outcomes, with wagers the total pool of money on the event isAfter the wagering company deducts a commission rate of from the pool, the amount remaining to be distributed between the successful bettors is. Those who bet on the successful outcome will receive a payout of for every dollar they bet on it.
When there are possible winners, such as a North American "place" bet which has winners, the total amount to be distributed is first divided into equal shares. If is one of the winners, those who bet on outcome will receive a payout of for every dollar they bet on it.
History
The parimutuel system was invented by French-Catalan entrepreneur and showman impresario Joseph Oller in 1867.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", invented by the Australian engineer George Alfred Julius. 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 in 1927, which led to the opening of the suburban Arlington Racetrack in Arlington Park, near Chicago, and Sportsman's Park in Cicero, Illinois, in 1932.
Strategy and comparison with independent bookmakers
Unlike many forms of casino gambling, in parimutuel betting the gambler bets against other gamblers, not the house, which necessarily implies that the bank cannot be broken. The science of predicting the outcome of a race is called handicapping.Independent off-track bookmakers typically have a smaller take and thus offer better payoffs, but they are illegal in some countries. However, the introduction of Internet gambling led to "rebate shops". These off-shore betting shops promise to return some percentage of every bet made to the bettor. They may reduce their take from 15–18% to as little as 1–2%, while still generating a profit by operating with minimal overhead.
By region
There may be several different types of bets, in which case each type of bet has its own pool. The basic bets involve predicting the order of finish for a single participant, as follows:North America
In Canada and the United States, the most common types of bet on horse races include:; Single race
- Win: to succeed the bettor must pick the horse that wins the race.
- Place: the bettor must pick a horse that finishes either first or second.
- Show: the bettor must pick a horse that finishes first, second or third.
- Across the board: the bettor places three separate bets to win, place or show.
- Exacta, perfecta, or exactor: the bettor must pick the two horses that finish first and second, in the exact order.
- Trifecta or triactor: the bettor must pick the three horses that finish first, second, and third, in the exact order.
- Superfecta: the bettor must pick the four horses that finish first, second, third and fourth, in the exact order.
- Quinella or Quiniela: the bettor must pick the two horses that finish first and second, in any order.
- Any2 or Duet: The bettor must pick the two horses who will place first, second or third but can finish in any order. This could be thought of as a double horse show key.
- Hi 5 or Super 5: The bettor must pick five horses finishing in the exact order. Typically does not occur unless there are 8 or more horses in a race.
- Double: the bettor must pick the winners of two successive races
- Triple, Pick3 or Treble: the bettor must pick the winners of three successive races
- Quadrella or Quaddie: The bettor must pick the winners of four nominated races at the same track.
- Pick six or Sweep six: the bettor must pick the winners of six consecutive races.
Australia/New Zealand
- Win: Runner must finish first.
- Place: Runner must finish first, second or third place. In events with five to seven runners, no dividends are payable on third place and in events with 4 or fewer runners, only Win betting is allowed.
- Each-way: A combination of Win and Place. A $5 bet Each-way is a $5.00 bet to Win and a $5.00 bet to Place, for a total bet cost of $10.
- Exacta: The bettor must correctly pick the two runners which finish first and second.
- Quinella: The bettor must pick the two runners which finish first and second, but need not specify which will finish first.
- Trifecta: The bettor must correctly pick the three runners which finish first, second, and third.
- First4: The bettor must correctly pick the four runners which finish first, second, third and fourth.
- Duet: The bettor must pick two horses who will place first, second or third but can finish in any order.
- Running double: The bettor must pick the winners of two consecutive races at same track.
- Daily double: The bettor must pick the winners of two nominated races at the same track.
- Treble: The bettor must pick the winners of three nominated races at the same track. This bet type is only available in the states of Queensland and South Australia.
- Quadrella or Quaddie: The bettor must pick the winners of four nominated races at the same track.
United Kingdom
; Single race
- Win: Runner must finish first.
- Place: Runner must finish within the first two places, three places or four places.
- Each-way: Charged and settled as one bet to win and another bet to place.
- Exacta: The bettor must correctly pick the two runners which finish first and second, in the correct order.
- Trifecta: The bettor must correctly pick the three runners which finish first, second, and third, in the correct order.
- Swinger: The bettor must correctly pick two runners to finish in the places, both runners must place, in any order.
- Jackpot: Pick the winner from each of the first six races of the advertised Jackpot meeting of the day.
- Placepot: Pick a placed horse from each of the first six races from any British race meeting.
- Quadpot: Pick a placed horse from the third, fourth, fifth and sixth race from any British race meeting.
- Scoop6: Pick the winner or a placed horse from the six advertised Scoop6 races. Saturdays only.
- Super7: Pick the winner from seven races. This bet ceased being offered by totepool from January 2012.