Pari Mutual betting is widely agreed to be one of the oldest forms of betting. It dates back to the 1800s in France, but the concept still remains; all the money wagered on a specific event goes into a single pool, and then all winning bets will take a dividend from that pool of money, with the losers taking nothing. So if there were three winners then the pool would be divided three ways relative to stake size, and so on. If you are familiar with the Tote then it’s fundamentally the same process.
What happens is that each person will place a bet on the selection of their choice with the amount of their choice. You won’t actually find out the true odds for this bet until all bets have been made and the bookmaker can calculate the winnings for each result. Let’s run through a quick example of how these bets work for a little more clarity.
Let’s say that you are betting on a horse race and there are 8 horses running. With a traditional bookmaker you would simply select the name of the horse or even the gate it’s starting from at the odds highlighted. In Pari Mutual betting each horse will be assigned a number and you will place your bet on that horse’s number. Let’s say the money that has been wagered on each of the 8 horses looks like this:
The total in the pot adds up to £1,741. The next step in the process is the commission, or the ‘vig’, that the bookmaker takes off the top. This usually works out around 15% or so, thus leaving us with £1479.85 in total.
Fast forward and the race has been run and horse 4 turns out to be the winner. Now we need to distribute the winnings from the pool to all those who wagered on horse number 4. For this, we simply divide the total remaining pool of £1479.85 by the amount wagered for horse 4, which was £450. £1,479.85 divided by £450 = £3.28. This means that for every £1 you wagered on horse 4 you get £3.28 in return, and ensures people betting higher or lower stakes are treated equally. This amount includes your stake, so the odds for this bet would be 57/25.
Pros of Pari mutual betting
One of the main reasons why these types of bets are still so popular is because of the possibility of getting inflated odds when compared to traditional bookmakers. There is an element of the unknown to it, but the majority of pari mutual friendly sites – such as the Tote for example – will give you some indication of where the odds are likely to sit, although they can’t give a definitive figure until all the money has been pooled.
The Tote actually claims to be the best priced on a wide range of events, mainly down to the fact that it’s essentially the popularity of a selection that dictates the payout, as opposed to a single bookmaker setting their own lines.
The money also makes a huge difference if you can find a bookmaker that offers a lower vig or commission for the bet. In our example, we used 15% for the vig which is fairly standard practice, but some bookmakers offer as low as 3-5% and in events where high numbers are turned over this will make a huge difference to your total payout.
Cons of using Pari mutual
Most bettors like to find value in their bets, they like to look beyond what the bookmaker might see and really work out if a certain price for a certain bet is truly worth investing their hard earned cash in.
Betting on pari mutual markets means you are essentially guessing what price you are going to get so you technically have no idea if you are getting any value from your bet at all. Of course, with a little knowledge you can usually work out a ballpark figure.
Generally, you will find that these things are never far apart, but without certainty comes risk, which is something that a lot of bettors would rather avoid.