What is Parimutuel Betting?
In horse racing, the type of betting used is called "pari-mutuel betting." Developed in France in the late 1800s, this form of betting pools all bets together before the race. Once the outcome has been determined, the winnings are then distributed among those who were able to correctly guess the outcome of the race.
As opposed to fixed-odds betting where the final payout is determined beforehand, in a pari-mutuel system, the final amount of winnings is not concluded until the pool is closed when no more bets are taken. This form of gambling is often state-regulated and may well be the only legal form of betting available in states and other areas around the world where gambling is considered illegal. Because of this, the pari-mutuel system reduces the chances of illegal gambling.
The theory behind the pari-mutuel system is that the participants pool their funds together so they could get a larger return. The bettors will have an idea of the amount of the money they get the chance to win when the odds and potential returns have been calculated. While the total pool represents the money bet on the horses, it does not mean that it will be the actual amount that will be paid to those who have made the winning bets.
The house or the track sponsoring the event will generally get a "take" of the total pool that ranges from 14%-20% depending on the state you are in. They use this "take" to pay taxes, as purse money for the horsemen, track maintenance expenses, and profit. This form of wagering is set up in such a way that it works on and off track. Bettors may place their wagers with bookmakers even if they aren't at the racetrack. The more bets are placed, the higher the prize payout gets.
The pari-mutuel system gives each bettor a chance to make a large amount of money. This usually happens when he wagers against long odds that end up as the winner. They also stand the same chance of losing their wagers when they fail to bet correctly.
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