Sports bettors are accustomed to fixed odds wagering, where they lock in their price at the time of their bet. But horse racing betting is, quite appropriately, a horse of a different color.
All Thoroughbred and harness tracks in North America operate via pari-mutuel wagering. If you’ve never placed a pari-mutuel wager before — or have no idea how it works — fear not, as our handy guide will make understanding this system as easy as possible ahead of the 2024 Kentucky Derby.
What is pari-mutuel betting?
Unlike fixed odds wagering, where the bettor is effectively betting against the bookmaker, pari-mutuel betting is essentially wagering against your fellow bettors.
Odds are determined by the amount of wagers placed on a horse — or combination of horses, depending on the wager type — by the betting public, minus the track takeout. This is not unlike playing Texas Hold ‘Em at a casino, where the players all throw their money into the pot, and the winner gets his or her share, minus the house rake.
For pari-mutuel win wagers, a standard track takeout is 16%. Wagers with bigger payouts, like trifectas for example, usually see takeouts above 20%.
Another major difference between fixed odds and pari-mutuel betting is the fluctuation of odds. Fixed odds are exactly as they sound — they don’t move one way or the other once you lock in your bet.
For pari-mutuel betting, the odds can change drastically as post time approaches for any given horse race, especially if pool sizes are small. The smaller a pool, the smaller a bet or series of bets would have to be to manipulate the odds in a significant way.
Horseplayers never know for sure the odds they will receive on their selection until the start of a race. It is not uncommon to see win odds increase or decrease by multiple points inside the final two minutes of betting. This can work to the advantage or disadvantage of a pari-mutuel bettor, depending on who they wagered on.
How pari-mutuel wagering works
Pari-mutuel betting is sometimes referred to as "pool betting" because the bets for each wager are broken up into separate wagering pools. From these pools, the racetrack takes the appropriate percentage off the top before paying out to the betting public.
Payoffs are rounded down to the nearest dime in most jurisdictions — this is often referred to as "breakage." Many jurisdictions impose a minimum payout of $2.10 on a $2 wager, which can create what’s called a "minus pool." This happens when a horse has taken a significant chunk of the bets (otherwise known as "handle" or "action") so that the true odds would actually be $2.09 or less on a $2 bet.
Minus pools are rare, and practically unheard of when discussing the Kentucky Derby odds or the Breeders’ Cup odds.
Pari-mutuel payoffs are determined by three factors:
- The amount of money placed on the winning horse or combination of horses
- The track takeout
- Breakage
If 40% of the win pool is wagered on one horse, the wagering public would effectively be saying that the horse in question is a 3-2 proposition. But factor in the track takeout, and that potential payoff would drop to 4-3 (which would display as 1-1, or even money, on your screen). Then breakage could take away up to nine cents per every $2 wagered.
Types of pari-mutuel Bets
Win bets
Win bets are as simple as they sound — they only pay off if your selection wins the race. A win payoff could be a low as 1-9 (risking $9 to make a $1 profit), but they can also be much higher.
Place bets
A place bet pays less than a win wager, but is a bit easier to cash. Your selection can come in first or second place in a race, and your bet would be a winner.
Show wager
Show bets are even easier to hit than place bets, but once again, the payoff is reduced. Your selection came come in first, second, or third place in order to cash.
Across the board
The "across the board" wager is actually three separate bets — one to win, one to place, and one to show. So if your base wager is $2, the cost to bet a horse across the board would be $6. If your selection wins, you collect the win, place, and show mutuel. If it runs second, just the place and show mutuel, and so on.
Exacta bets
The exacta requires the bettor to determine the first and second-place finishers in a race in the exact order. There are many strategies to playing what’s considered the easiest of the "exotic wagers," as bettors can play them "straight," "boxed," "wheeled," or "part-wheeled."
A straight exacta example would be: 2/3
This means the No. 2 horse has to finish first, and the No. 3 horse second, or else the bet loses.
If the bettor wished to "box" horses No. 2 and 3, the size of the wager would double, as two combinations are being covered. You can box as many horses as you wish in a race, but a three-horse box would cost $12 (six combinations), and so on.
Wheeling and part-wheeling involve using one horse (or more) fixed in one slot of the exacta wager, and using two or more horses along with it.
For example: A $2 exacta part-wheel 2/3,4,5 would cost $6, as you’re betting three exacta combos:
- 2/3
- 2/4
- 2/5
A wheel is just taking a horse and placing it Over (or Under) the entire field, so the wager looks like 2/all.
The cost of a wheel (or back-wheel, which would read all/2) would depend on the field size. In the 20-horse Kentucky Derby, a wheel would cost $38 for $2.
The typical minimum wager on an exacta is $1.
Quinella bets
The quinella is similar to an exacta in that the bettor must determine the first and second-place finishers in a race. However, the quinella is essentially an exacta box, as the horses you use can finish in either order, and the wager would be a winner. The quinella typically pays half of what the exacta does, which makes sense, as there are half as many combinations for bettors to consider.
Trifecta bets
The trifecta requires the bettor to determine the first, second, and third-place finishers in a race in the exact order.
Just like the exacta, trifectas can be boxed, part-wheeled, or wheeled, but the addition of another slot to fill can make costs more prohibitive. However, many tracks take the trifecta in increments as low as 50 cents.
Superfecta bets
The superfecta requires the bettor to determine the first, second, third, and fourth-place finishers in a race in the exact order.
The cost of building a superfecta wager can be even more prohibitive than a trifecta, but the minimum bet can be as low as 10 cents at many tracks.
Pick 6 and other multi-race bets
The Pick 6 requires the bettor to pick the winner of six straight races, usually the last six races on a wagering program. There are other multi-race wagers like the Daily Double (pick the winner of two straight races), the Pick 3, the Pick 4, and the Pick 5, but the Pick 6 typically gets the most attention because of its propensity to trigger "carryovers."
A carryover pool happens when a Pick 6 or similarly difficult wager to hit has no winning tickets on a given day. A portion of the pool will be carried over to the next racing day at the track in question, and the new money is added to that pool. These carryovers often attract a great deal of attention as bettors try to claim their share of "free money."
Weighted betting
Weighted betting is the balancing of a bunch of wagers in a given race to reflect the bettor’s thinking more accurately than a standard "box."
Depending on the odds, a bettor may wish to put different amounts of money on different outcomes.
For instance, if he or she believes the No. 3 will beat the No. 4, but wants to have an "insurance" wager on a 4/3 exacta, he or she could wager this way:
- $4 exacta 3/4
- $2 exacta 4/3
How pari-mutuel payouts are calculated
Pari-mutuel payouts are a matter of division, regardless of the size of the pool.
Whether there are millions in the win pool of the Kentucky Derby, or only a few thousand in the win pool of a bottom-level claiming race held on a Tuesday at a random North American oval, payouts are determined based on the amount of money wagered on the winner, minus track takeout and breakage.
If there’s 50% or more wagered on one horse to win, the payout will be less than an even-money proposition. If 5% or less is wagered on the winner, a large $2 mutuel will be the result.
A brief history of pari-mutuel betting
The pari-mutuel system was invented by Joseph Oller — founder of the famous Moulin Rouge — in 1867, and it was eventually adopted by French race tracks in 1891. Pari-mutuel wagering was quickly adopted around the world in the years that followed.
The first "totalizator" or "tote board," was installed in New Zealand in 1913.
Pari-Mutuel Betting FAQs
A pari-mutuel bet is a wager that pays off based on the amount of money placed on that outcome in a given wagering pool. The greater percentage of handle on the winning outcome, the smaller the payout will be.
Pari-Mutuel odds are not locked in at the moment a bet is placed. The odds can fluctuate up until wagering is closed on the event in question, based on how much money is bet on each potential outcome. Fixed odds mean that your odds are locked in at the moment you place your bet and will not change.
Pari-mutuel odds are calculated by the percentage of money from a pool placed on each available outcome, minus the track takeout and breakage. The standard takeout on a win wager is 16%, and breakage means the rounding down of a payout to the nearest dime for every $2 bet.
