A Parimutuel Pool is a betting system in which all bets of particular outcomes are placed together in a pool; house rake is removed, and payoff odds are calculated by sharing the pool among all winning bets in proportion to the amount wagered.
Parimutuel betting is often used in gambling on sporting events of relatively short duration in which participants finish in a ranked order and is often used with horse races. Parimutuel betting differs from fixed odd betting in how the final payout is determined. With fixed odds betting, the payout is determined at the time the wager is made, whereas with parimutuel betting the payout is only determined after betting has ended. Parimutuel betting is unique in that gamblers are betting against other gamblers and not the house.
Example of Parimutuel Betting
Consider a hypothetical event, which has eight possible outcomes. Each outcome has a certain amount of money wagered:
Thus, the total pool of money on the event is $1028. Following the start of the event, no more wagers are accepted. The event is decided and the winning outcome is determined to be Outcome 4 with $110 wagered. The payout is now calculated. First the commission for the wagering company is deducted from the pool; for example, with CoinRoster’s house rake of 5% the calculation is: $1028 × 0.05 = $51.40. This leaves a remaining amount of $976.60 in the pool. This remaining amount in the pool is now distributed to those who wagered on the winning outcome Outcome 4: $976.60 / $110.00 = 8.87 ≈ $8.87 per $1 wagered. This payout includes the $1 wagered plus an additional $7.87 profit. Thus, the odds on Outcome 4 are 7.87-to-1.
The most important aspect of parimutuel betting to remember is the odds displayed before as bets are being accepted are the odds according to what is in the pool at that moment. As users make bets, the odds for each outcome will change according to which outcomes are being bet on. So its to the bettor’s advantage to wait until a time close to the entry deadline to place bets. This way, bettors can use the most up to date information to decide on which outcome might give them the best value based on the odds implied by the pool.