Parimutuel betting or Pool betting is the concept of betting based on deriving odds from a total pot of all bets in a certain race or outcome. It is also called a totalizator or Tote betting and it is used mostly for betting on horse or greyhound racing. Odds on a certain outcome are unknown until the race starts and that is the main difference from fixed odds betting we are so much used to.
The system is simple. There is a certain number of horses or dogs entering a race and you can place any amount of money you want on any of them. When betting pool is closed, bookmaker sums all stakes, then divides it by the stake on each horse/dog. Bookmaker also takes the cut that is called "house-take" or "vigorish" from total stakes as a fee for organizing betting on this event.
On fixed odds betting, bookmaker's cut is already in-calculated into odds you are taking and it is called margin. Margin on horse betting in fixed odds betting (especially online betting) is usually 15-20% while house-take in parimutuel betting is usually around 8-14% which means that parimutuel betting costs you less money in the long run.
Brief history of Parimutuel betting
The parimutuel system was invented in 1867 by Joseph Oller, a Spanish entrepreneur who lived in Paris for most of his life. His family emigrated to France when he was a child. He became fond of cockfighting and started his career as a bookmaker when he moved back to Spain to study. He is also known for being a co-founder of cabaret Moulin Rouge.
Due to the fact that on horse racing you can place a large number of different bets, the calculation off payout is very complicated. This led to the invention of a specialized mechanical calculating machine known as a totalisator, automatic totalisator or tote board. Tote board was invented and first installed on tracks in Australia, but soon spread around the globe.
Advantage of Parimutuel betting
Total stakes you can put on some horse are much higher than in normal online betting. Online bookmaker will not agree for a million pounds risk on 1 horse with fixed odds as it might destroy their business entirely. When you bet on Tote, then bookmaker excludes himself from participating in risk and much higher bets can be made.
This on the other had leaves also a lot of space to exploit the information advantage you can have against other punters. If, on example, you have the information that some underrated horse has a very good chance to win while at the same time the main favorite is feeling sick today, you can achieve much better result in parimutuel betting than you would if you placed on fixed odds betting. This is because other punters do not have the information that you have. On fixed odds betting money that is in stake is an information itself and bookmaker tries to balance the risk by changing odds while at the same time it keeps their margin twice as high as it would be on parimutuel betting.
This is one of the reason why this type of betting attracts millions of pounds per pool. It is a sport for those who have information and the money.
Disadvantage of Parimutuel betting
The main disadvantage is not knowing which odds are you taking. At the point of making a wager, you might be facing potential odds of 7/1, but by the time the race starts this might drop to 1/2 making it not worth of risking money. In fixed odds betting - the odds that are written on your ticket and the payout you will collect in case of a win no matter what happens with other stakes.
Parimutuel bet types
Bettors and bookmakers in different countries and continents have developed different bet types for parimutuel betting. Some of the most common bet types are:
- Win: Runner must finish first.
- Place: Runner must finish within the first two places (in a 5–7 runner race), three places (8–15 runners and non-handicaps with 16+ runners) or four places (handicaps with 16+ runners).
- Each-way: Charged and settled as one bet to win and another bet to place (for example, a punter asking for a bet of "five pounds each way" will be expected to pay ten pounds).
- Scoop6: Pick the winner (for the win fund) or a placed horse (for the place fund) from the six advertised Scoop6 races. Saturdays only.
- 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.
- 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.