Pari Mutual betting is widely regarded as one of the oldest forms of betting. The history of it dates back to the 1800’s in France, but the concept still remains. It’s essentially where you bet into a pool of money and then all wining bets will take a dividend from that pool of money as there winnings. If you are familiar with the Tote, then it’s fundamentally the same process as this.
What happens is that each person will place a bet on the selection of their choice with the amount of their choice. You wont 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 horse that are running in the race. 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 from there you will place your bet on that horses number. Let’s say the money that has been wagered looks like this:
The total in the pot now equals £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.
The race has been run and horse 4 turns out to be the winner. Next we need to distribute the winnings from the pool to all those who wagered on horse number 4. For this we simply divide total pool, in this case £1479.85 by the amount wagered for horse 4, £450. £1,479.85/£450 = £3.28. So, this then means that for every £1 you wagered on horse 4 you get £3.28 in return. This amount includes your stake, so the odds for the bet would be 57/25.
Pros of Pari mutual betting
One of the ain reasons why these types bets are still so popular is because of the possibly of getting massively inflated odds compared to other bookmakers. There is an element of 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 site, but cant give a definitive answer until all the money has been pooled. The Tote actually claim that they are best priced on a wide range of events through this type of pool betting, mainly down to the fact that it’s essentially the popularity of a selection that dedicates a payout, not simply 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 the 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 really worth investing their hard earned cash in. Betting on Pari mutual markets means you are essentially guessing what price you are going to get and you essentially have no idea if you are getting any value from your bet at all. Generally, you will find that these things are never far apart, but without certainty comes risk, which is something that a lot bettors would rather avoid.