Pari-Mutuel Betting – What It Is and How It Works

Pari-mutuel betting is a sports gambling system that often confuses people. It’s used most often in horse racing and is an important concept to understand for all levels of gamblers, from novices to experts.

Pari-mutuel betting, otherwise known as pool betting, started in 1867, making it one of the longest-standing betting systems. The fact that it pits one gambler against another has allowed it to be legalized in more places across the US and helped it spread.

Whether you are an experienced pari-mutuel bettor looking for clarification, or new to the term, this guide will have something for you. Everything is in here, from the basics to advanced concepts.

What is pari-mutuel betting?

At its core, pari-mutuel betting is a type of betting system which pays out winnings in a different way compared to the odds system. Instead of individual bets having individual returns, it works differently.

Pari-mutuel betting is a system where the odds change depending on how much money is placed on each selection, but the kicker is that they can change even after you have placed your bet.

The lack of fixed odds in pari-mutuel bets can make it difficult to use a sports gambling strategy. Pari-mutuel betting is legal in most parts of the world, including New York, and used in any sport with a ranked finish.

How does pari-mutuel betting work?

There are no fixed odds as in most sports. Instead, there are probable odds that will change depending on the amount of money gambled.

The total money wagered is all pooled together and then redistributed to people with winning tickets. The returns are dependent on the initial bet size.

Unfortunately for gamblers, the total pool of money does have some cash withdrawn before it pays out the winnings. This money is taken for fees as well as a commission for the oddsmaker. Despite the oddsmaker taking these fees, there is still money to pay out the winners due to the manipulation of the odds.

The different types of parimutuel bets

Pari-mutuel betting is used in a few different types of horse racing bets. Here are some of the most common explained:


A place bet is one of the simplest bets to understand. Pick a horse that you believe will come first or second and if they finish in one of those positions you win.

The returns are a bit lower than predicting the winner, as the money is split between the top two finishers. Most place bets have a minimum stake of $1 or $2.


A show bet is like a place bet, but it includes the third-place finisher as well. If your selection finishes in the top three, you win, but if it finishes in any other position, you lose.

The returns for a show bet are lower than a place bet as you’re afforded an extra finishing spot, though your bet will still be a winner.

Across the board

An across the board bet entails picking a horse where you’re paid out if it finishes anywhere in the top three. If your chosen horse finishes in the first place, you will collect all three payouts for first, second, and third.

If your horse finishes second, you collect place and show bets, and if your horse finishes third then you collect only the show bet. If your horse misses the top three, you’re out of luck.

Each way

An each way bet is two bets in one. The first bet is on your selection to win, and your second selection is for your pick to come within a specified place.

The returns on your second bet will be at a fraction of the odds compared to the first, as it will be more likely to occur.


The exacta bet offers a higher risk/higher reward option for gamblers. You must select the top two finishers in the race and get them in the correct order.

A small stake can turn into a huge return which makes exactas popular among sports gamblers.


The duet bet is only available on horse races with at least eight contestants. It involves choosing two of the contestants to finish in the top three. For this type of bet, the order of the finishes doesn’t matter.


The largest possible profit out of all these bets is the trifecta. It involves picking the top three finishers in order, which is very difficult.

Trifectas can return thousands of dollars from a stake of only a few dollars and are very popular among novice gamblers. The high-risk/high-reward nature of trifectas makes them like a lottery ticket in some ways, as luck plays a large factor, but the reward can be huge.

What states allow pari-mutuel wagering?

New York was one of the first states to allow pari-mutuel bets, but since then, many other states have legalized and regulated it. While other forms of sports gambling have been slow to spread across the country, the history of pari-mutuel betting has it entrenched in the fabric of the nation.

The only states that have yet to legalize pari-mutuel betting are the following:

  • Alaska
  • Connecticut
  • Georgia
  • Hawaii
  • Mississippi
  • Missouri
  • North Carolina
  • South Carolina
  • Tennessee
  • Utah
  • Vermont

Besides this list of eleven states, pari-mutuel betting is legal and regulated in every other state, including New York.

Key difference between pari-mutuel vs. fixed odds betting

The largest difference between the two different betting systems is the fact that in a fixed-odds system the payout is defined at the time of the wager. In a pari-mutuel system, the odds are merely a projection based on the money wagered to that point.

Another key difference is the fact that in a pari-mutuel betting system every winning gambler will receive the same odds upon payout. This is in contrast to a fixed-odds system where the betting lines fluctuate and different gamblers can receive very different lines.

One more difference between the two systems is the fact that in pari-mutuel betting other people’s wagers affect the size of your payout. In a fixed-odds system, you could be the only one making a wager on the match and it would not matter at all.

This means that in a pari-mutuel system you compete against other gamblers much more than a fixed-odds system. In a fixed-odds system, your only competition is the bookmaker.

Is pari-mutuel betting only used in horse racing?

Horse racing is the sport in which pari-mutuel betting is the most common by far. However, that doesn’t mean that pari-mutuel betting isn’t used in other sports.

Pari-mutuel betting can be used on any athletic competition which finishes with a ranked order. Besides horse racing, pari-mutuel betting is used on other races including those with greyhounds and people.

Certain lottery systems use this system as well.

How are pari-mutuel payouts calculated?

Let’s go through an example of how a pari-mutuel bet might work when you’re at the race track. As an example, let’s say eight horses are running in the race. You bet on a horse named ‘Lucky’ and at the time of your bet, the pari-mutuel odds are 6/1.

Before the race, some news comes out about a horse favored over Lucky who is feeling sick. Gamblers rush to the window to put some more money on Lucky. By the time that the race starts the odds have moved to 4/1.

When Lucky wins the race, you’re returned $400 instead of the $600 you would have won had the odds stayed the same. This is an example of how added wagers can affect the odds in a pari-mutuel betting system.

Because of how the odds move, it’s generally thought to be a smart idea to wait until the latest point possible before making your selection. By doing this you will ensure that you’re making the most informed decision possible.

When was the pari mutuel betting system invented?

Pari-mutuel betting was started by Joseph Oliver in 1867.

You may also hear the word ‘tote board’ and that is the machine invented to keep up with all the calculations involved with a pari-mutuel betting system.

The system first arrived in the United States in the late 1920s and led to the proliferation of racing tracks in the state of Illinois. It spread around the country and the rest is history.

Wrapping up pari-mutuel betting

Heading to the race track to watch the horse races is a tradition that has become popular for many, and gambling is an essential part of that activity.

Pari-mutuel betting allows the horse racing gambling system to thrive. While in New York there is legalized sports gambling, in many states where it’s still not regulated, pari-mutuel betting allows for a different option.

The competition against fellow gamblers allows for a different feel and new strategies. Your bet’s odds could change at any second and thus make it harder to develop a systematic approach to gambling.

Hopefully, this helped you understand the pari-mutuel betting system and how it all works. Next time you’re at the race track you’ll be in a position to make some money and help educate those around you.