Parimutuel betting is commonly known as pool betting. It works differently from a traditional betting market in that, instead of betting against the bookmaker, all bets are cumulated into a pool and then dividends are awarded based on the number of bets taken and the amount the player has wagered.
In this article, we will be looking at how parimutuel betting works, along with examples and pros and cons of using this bet type. We’ve also included information on when best to use this market over a standard betting market.
What is Parimutuel Betting?
Before we jump into how parimutuel betting works, it’s important to understand how a standard market would work. For this, the bookmaker will set betting lines (odds) based on the probability of the result and then adjust as needed as money is wagered.
You’re essentially betting against the bookmaker to win money from them. The odds that you take at the time of placing your bet are set and won’t be changed.
A parimutuel bet creates a pool of money that is paid out based on the amount of money that is wagered on each possible outcome. In the US, this bet type is very common with horse racing and is accessible in most states throughout the country. In places like the UK and Japan, this bet is run alongside fixed odds markets as an alternative.
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How Does Parimutuel Betting Work?
As we’ve stated, the concept that you need to note is that this is pool betting and you’re paid a dividend which will work out the odds for the bet. The odds are based on the amount of money that is staked on each possible outcome within the betting pool.
How this differs from a fixed odds bet is that you don’t know what the odds or payout will be until the event has finished. This is because the pool only closes once the event has started and then the dividend is calculated at the end.
So, let’s assume that you’re betting on a horse race, and on that race there has been $100,000 staked in total pool money across 5 horses. The total staked on each horse is $20,000. This means that the pool is even and the payout on each result will be the same.
Payouts are calculated by dividing the total amount staked for the pool by the total amount staked for each horse. In this case that would be $100,000 / $25,000. This creates odds of 5.00 (decimal odds) or +400 in American odds.
What this means is that for every unit ($1) staked, you would get $5 back. So, if you were to bet $100, you would make $500 on the winning horse.
Just like fixed odds betting, if you don’t pick the winner, then you won’t be due a payout from the dividend.
There is a caveat to all this and that comes in the form of the betting sites cut (often referred to as vigorish or juice). In the example above this would assume that all money staked is paid to the players, but this is not the case.
The amount of money they take will range, but it can be anywhere between 10% and 30% as a rule. This reduces the amount of money in the pot but is not something that as a punter, you will see.
How are the Odds Calculated?
With parimutuel betting you won’t see the odds before the event starts. Some betting sites will run morning lines, but these are more of a guide price, than the actual horse racing betting odds that you will get.
Working out the odds is not something that you need to do with this type of bet as the account will be credited as needed once the market has closed, but it’s important to know how they work.
To start with, you need to know two key factors:
- Total amount of money staked
- Total amount of money staked on each possible outcome
Once we know this, we can then start to calculate betting odds for the market. We’re going to use an example from an upcoming race at Keeneland Raceway to highlight how this might work.
As you can see, we’ve information from the race card about the jockey, runner, trainer, and then the price. The “price” column will only be filled once the race has been run and the dividends paid out so people can see the results.
We’re going to assume that $100,000 has been staked on a single race like this with the following breakdowns for the amount staked per horse:
- Boy Por Uno – $5,000
- Blue Eyed Soul – $2,000
- Kore Kinetic – $10,000
- Commissioner Dan – $6,000
- Saddle Up – $18,000
- Dunphy – $9,000
- Imperial Thunder – $25,000
- Gewurztraminer – $10,000
- Express Cruiser – $15,000
The next thing we need to do is to consider the betting sites cut. We’re going to set this to 20% for the market, meaning the total wagered for the race is $80,000. All we need to do now is divide the total amount staked by the amount staked for each horse. This gives us the following payoff odds
- Boy Por Uno – $5,000 = +1500
- Blue Eyed Soul – $2,000 = + 3900
- Kore Kinetic – $10,000 = +700
- Commissioner Dan – $6,000 = +1233
- Saddle Up – $18,000 = +344
- Dunphy – $9,000 = +788
- Imperial Thunder – $25,000 = +220
- Gewurztraminer – $10,000 = +700
- Express Cruiser – $15,000 = +433
The favorite for this race is Imperial Thunder based on the amount of money that’s been staked on the horse. The odds will be +220 meaning that for every $1 staked, you make $2.20 in profit if this horse were to win.
As an alternative to this, if you were to bet on Blue Eyed Soul who has the least amount of money wagered and longest odds (dividend) then for every $1 staked, you will be paid $39 in profit.
Enjoy parimutuel and fixed-odds betting at Bovada.
Parimutuel Betting Example
To outline how this market works, we’re going to run through another parimutuel betting example. This is a race from Hawthorne, Chicago, and has just six runners. Again, the card highlights the runner, jockey, and trainer, with the price set to $0 as it’s not run yet.
We’re going to assume that $100,000 has been wagered and that the offshore betting site is taking $20,000, to leave a total pot of $80,000. The payout and pari-mutuel odds look like this for individual horses:
- Stolich – $60,000 = -303
- King Zion – $3,000 = +2560
- Locomote – $ 1,500 = +5230
- Wicked Surprise – $8,000 = +900
- CFV Nobodycares – $1,500 = +5230
- I’m Your Valentine – $7,000 = +1043
In this example, we’ve got a small race with a massive favorite amongst the punters. Stolich comes with a huge amount of the total pot wagered ($60,000/$80,000) paying out at odds of just -303. This means that for every $1 staked, you would get back just $1.33.
Parimutuel Betting Strategy
It’s tough to apply a parimutuel betting strategy simply because you’re unaware of the odds until after the event. Most betting strategies have relevance to the initial betting line and then you’re looking for value based on this.
However, there are a few areas that you can target this bet type and we’ve outlined them below.
- Low juice – The amount that a betting site takes from a parimutuel bet is fixed at a percentage of the overall amount staked for that market. You’re able to find out what this percentage is with most sites and therefore target those with the lowest juice, which results in a greater return and better odds.
- Target short-priced favorites – Even though the betting site won’t highlight the odds, you can use other fixed odds betting sites to get a rough idea of where the price will be. Targeting short-priced favorites generally offers slightly more value on parimutuel markets given that lines won’t move based on the volume of bets from other selections within a market.
- Bonuses – Some betting sites will offer bonuses that are only linked to sports like horse racing and run on parimutuel markets. These often come in the form of rebates where you can claim up to 10% of losses for all bets made. This makes a big difference in your bottom line come the end of the year.
How Parimutuel Betting Works by Sport
The way that parimutuel. Bets work is going to vary from sport to sport. In this section, we’ve included examples of how it works and how they differ across different sports.
Parimutuel Betting in Horse Racing
Horse racing is the most popular sport for this bet type. Most US-based online sportsbooks will have parimutuel bets instead of fixed odds. For most states, this is down to legislation surrounding betting on horse racing specifically.
The concept of the bet is the same in that, you bet into a pool and then are paid as a dividend based on the amount of money in the pot at the end of the race. You won’t get to see prices before the race starts, but most sites will include morning lines, which give you a guide as to what the pari-mutuel betting odds will be.
The race card is going to include information such as the name of the horse, number, jockey, trained, and the morning line price. You then need to pick the horse you want to back and choose the stakes.
We’ve taken an example from an upcoming race at Yonkers Racetrack in New York. We’re going to use the morning line price for each horse to highlight returns. Payouts will look like this.
- Wildcat Antonia – 9/1 – $10,000 staked
- Hey Hey Dbay – 6/1 – $14,300 staked
- Lightening Leia – 23/1 – $4,200 staked
- Coral Bella – 2/5 – $71,400 staked
- Miki Rose – 8/1 – $11,100 staked
- Lady Dela Renta A – 16/1 – $6,300 staked
- Katys Delight – 29/1 – $3,300 staked
- Better Watch It – 8/1 – $11,100 staked
So, with this the dividend that is simply the odds that we’re highlighted with the morning line. For example, if you wagered $1 on Miki Rose and the horse won, you get $8 in return.
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Parimutuel Betting in Golf
Parimutuel betting in golf is another popular bet type. It lends itself well to golf in that, the number of players in a tournament is vast, generally with around 160 players for most main tour events such as the PGA Tour and DP World Tour.
The benefits of this are that the amount staked across betting sites for the longer-priced players can vary massively. It doesn’t take many large bets on outsiders to win to move the final dividends in a massive way. However, as a result, this comes with an element of risk, which is why it’s not as popular as fixed-priced betting.
Where golf is unique is that it’s possible to use software to bet on home or club games with parimutuel pools. This allows amateurs to wager on a single player or team to win a local competition.
Advantages & Disadvantages of Parimutuel Betting
Like all bet types, there are pros and cons as to why you might choose to use a parimutuel bet over a fixed odds bet. We’ve outlined these below:
- Bigger odds – The unpredictability of the pool means that it’s possible to get bigger odds from this bet type than you typically would from fixed odds. You can use fixed odds betting sites to see where the money is heading and then place a parimutuel bet to try to take advantage of picks that will have a lower volume of bets placed.
- Take on the market rather than the bookie – Bookmakers aren’t bothered about the result of the market in a parimutuel bet. They take a cut of the overall pool of money and then pay out based on the volume of bets taken. This means you aren’t fighting for betting lines, which can mean inflated prices.
- Uncertainty – Some punters like the uncertainty about how much they might win. It can add to the drama and excitement that makes online betting more pleasurable.
- High juice – The juice that’s charged by the sportsbook can be exceptionally high. It’s not uncommon for some sites to take as much as 30% of the pot, which is massive when it comes to the dividend that is paid.
- Can’t find value – If you don’t know the odds to start with, you can’t decide if the bet offers value or not. Not being able to see the odds means that you’re taking an added risk, which is not what betting is about.
Types of Parimutuel Bets
Parimutuel betting can be applied to any betting market. All the examples in this article so far have been related to the win market, so we wanted to highlight other markets where this bet type can be applied to.
- Place – The place bet is where you bet on a selection to finish within a certain number of places. This might include the top 2 or 3 places for most horse races but can be extended based on the sport.
- Show – The show betting market is used in US-based sports and includes the pick to finish first, second, or third. Like the place, it can finish within any of these places and get paid the same amount.
- Across the board – This uses three bet types that include win, place, and show. If the selection wins, then you sweep all three receiving payouts from all pools in the pari-mutuel system, if it finishes second then you win the show and place and if finishes third, you win the show bet.
- Each way – The each-way bet is where you place two bets that cover the selection to win and then to place. The place bet is usually a quarter of the original odds (dividends) and will pay out based on the number of runners in the market.