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 of 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
editIn 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 (or, expressed as decimal odds, 8.01).
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 (14.25%), 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 (winning horses) and complex commission calculations.
Sometimes, the amounts paid out are rounded down to a denomination interval — in California,[1] Australia,[citation needed] and British Columbia,[2] 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 (or shows or places).[3] The parimutuel calculation results might call for a very small winning payout (say, $1.02 or $1.03 on a dollar bet), but legal regulations might require a larger payout (e.g., minimum $1.10 on a dollar bet).[4] This condition is sometimes referred to as a minus pool.
Algebraic summary
editIn an event with a set of n possible single-winner outcomes, with wagers W1, W2, ..., Wn the total pool of money on the event is
After the wagering company deducts a commission rate of r from the pool, the amount remaining to be distributed between the successful bettors is WR = WT(1 − r). Those who bet on the successful outcome m will receive a payout of WR / Wm for every dollar they bet on it.
When there are k possible winners, such as a North American "place" bet which has k = 2 winners, the total amount to be distributed WR is first divided into k equal shares. If m is one of the k winners, those who bet on outcome m will receive a payout of (WR / k) / Wm for every dollar they bet on it.
History
editThe parimutuel system was invented by French-Catalan entrepreneur and showman[5] impresario Joseph Oller in 1867.[6]
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.[7]
Strategy and comparison with independent bookmakers
editUnlike 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.
See also
editNotes
editReferences
edit- ↑ "49th Annual Report of the California Horse Racing Board" (PDF). Archived from the original (PDF) on 2020-02-09.
- ↑ "Breakdown of the Handle" (PDF). Archived from the original (PDF) on 2013-07-27.
- ↑ "Time for show bettors to get paid what they deserve".
- ↑ "'Show' Us the Money? The Plight of a Simple Wager". 12 July 2017.
- ↑ "What Does Pool Betting mean? Guide to placing pool bets". Basketballinsiders. 22 September 2023.
- ↑ Ferran Canyameres, L'Homme de la Belle Époque, Éditions Universelles, Paris, 1946.
- ↑ Steven A. Riess City Games: The Evolution of American Urban Society and the Rise of Sports pg. 188, University of Illinois Press (1991) ISBN 0-252-06216-7