What Does Parimutuel Mean In Sports Betting?
Parimutuel betting is a form of betting most commonly used in horse racing. It can also be found in sports like greyhound racing and jai alai. It comes from French, and means mutual betting. Essentially it is a system in which you bet into a pool of bets, and the odds are determined by how much has been bet on each horse or entrant. It is the opposite of a fixed-odds betting system that is familiar in most of sports betting. The gambling provider - the racetrack, for example - will collect the money and administer the system, and will take a percentage of the money bet as a commission for their services.
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We can use a very simple example to illustrate the basics of how a parimutuel system works. Let’s say that there are eight horses in a race. A total of $1,000 has been bet on the race, and for simplicity the track won’t take a commission. Horse A has 2 bettors betting on it to win. Horse B has 4 bettors backing it to win. Horse C is the favorite with 10 bets to win. Horse D also has 4 bettors on it. All bets are for the same amount - $50 in this case. If Horse C wins as the favorite then the $1,000 would be split among the 10 bettors. Each bettor would receive $100 - one-tenth of the total pool because there are 10 bettors. They bet $50 so their profit would be $50. The odds on that horse, then, were 1/1. If Horse B or Horse D win then the $1,000 would be split four ways among the backers, so each would receive $250. They bet $50, so the profit is $200 - they received 4/1 odds. Horse A is the long shot, so the two bettors would be paid handsomely for their risk if the horse won. Each bettor would receive $500. Remove the $50 they bet and they would receive odds of 9/1 on the horse.
When you make a sports bet at fixed odds then the odds that are in place when you make the bet are the odds you get. They can’t change once they are printed on your wager ticket. Even if the line was to shift dramatically - you bet at -3 and the game moves to -7, for example - you get the more favorable price. That’s not the case in parimutuel betting. The odds at the time you place your bet are irrelevant. You get the price that is set at post time once all bets are in. There can often be a big shift in odds over the time that bets are taken - especially at smaller tracks with smaller pools that can be shifted dramatically by a single big bet. Parimutuel betting, then, requires a very different understanding of value and bet selection than fixed-odds betting does.
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