Like in all sports the odds are extremely important in horse racing.  It is the odds and the potential return on your bet that determines is a horse is a smart bet or not.  For this reason it is extremely important that you understand how the odds in horse racing work.  And for those of you who don’t know, fixed odds are not often used in horse racing.

Parimutuel betting is the system most often used in horse race betting.  Unlike fixed odds, where you are locked in at the odds you received when you placed your wager, the odds and subsequent potential payout can change in parimutuel betting.

Parimutuel Betting Explained

The easiest way to understand parimutuel betting is to realize that you are not betting against the house (racebook).  Instead you are betting against the other gamblers who are wagering on the same race.  All of the same bets on one race go into a pool.  The “win” bets are in one pool, the “place” bets in another, the “exacta” in another and so on.  As the bets are being placed the amount of money on each horse in the pool changes, which subsequently affects the potential payout (odds) if that horse wins.  Whichever horse has the most money on it is the favorite and will have the lowest odds because the total pool of bets will have to be split more ways if that horse wins.

Think of it this way: for every $1 in the pool that is one person saying that horse will win the race.  Whichever horse does win, every $1 that was on that horse receives an equal share of the dollars placed on other horses.  So if there is $200 on horse “A” in a pool of $1000, then every $1 bet on horse “A” will be paid out as $5.  This would make the odds for horse “A” 4/1.  Now if one bet came in just before the race of $600 on horse ‘A’ the odds would all of a sudden drop to 1/1 for horse “A” because half of the money in the pool would be on horse “A” ($800 of $1600).  This is obviously a very small scale example because most races you will bet on have millions of dollars wagered on them, but you get the idea.

How Does the Racebook Make Money

In the example I just used above it may seem like the house doesn’t make any money, but we all know this can’t be true.  In reality the racebook takes a percentage from the pool of bets placed on the race.  This percentage varies depending on the race and which racebook you use.

Winning With Parimutuel Betting

Even though you are betting against other gamblers it is still very difficult to make a steady profit betting on horses because of the percentage of the pool that the racebook takes.  That being said many online racebooks, such as Bovada, offer rebates which gives some of the racebooks take back to the horse bettors.  Add in some very inexperienced gamblers and some straight up dumb bettors and it becomes very possible to make money betting on horses through the parimutuel betting system.

History of Parimutuel Betting

Parimutuel comes from the french term for “mutual wager” because you are wagering against other individuals.  It was invented back in the 1867 by Joseph Oller.  A betting machine called the totalisator was created to help with the calculations required for the betting system.  This is where the UK terms “tote” and “tote board” came from.  The first installment of a tote board came in 1913.  By 1923 parimutuel betting was introduced to the United States and now it has become the most popular way to bet on horses around the world.