Did you know that it is estimated that 1.6 billion people gamble at some point during a year? It is also estimated that 4.2 billion people have gambled at some point in their lives.

With so many different ways to win money through gambling, such as sporting events, lotteries, and online casinos, it's no wonder so many people engage in gambling. Some feel disheartened when they don't win, however, there are ways you can improve your chances of winning money.

Keep reading to learn all about pari-mutuel betting, including what it is and how it works, to find out if this type of gambling is right for you.

What Is Pari-Mutuel Betting?

Pari-mutuel, also known as pool betting, is a type of betting where instead of placing wagers against a bookmaker, the bettor places wagers against other bettors. Placing wagers against other bettors on the same event creates a pool of money, which is shared out among those who choose the winning circumstances. 

A small amount of all the total wagers is usually deducted by the 'house', which is either a state-run organization or a private company that provides the betting services. 

This type of betting is commonly used for greyhound racing and horse racing, but it can also be used for other sporting events such as golf. Pari-mutuel betting is legal in 43 states across the US and in other countries around the world. 

Pari-mutuel payouts depend on how many bettors placed bets on the sporting event and how many of those selected the winning outcome. This means that it's difficult for people to develop a betting strategy as there aren't any fixed odds. Regardless of the lack of strategy, pari-mutuel betting remains a popular gambling option for both professional and amateur bettors.

How Do Pari-Mutuel Bets Work?

Pari-mutuel betting is a very straightforward betting process, once you get your head around it.

When a bettor first places their pari-mutuel bet they won't receive a fixed odd. When you first place your bet, you'll instead get probable odds, which are calculated based on the betting pool. This is where a pari-mutuel bet differs from other types of bets because there are no fixed odds.

It's very likely that the probable odds will change as the sporting event happens. Once the event has taken place, the bets will all be added up, with the house taking some of the profits. The money that remains in the pool will then be divided between the bettors that made the right selection. 

The payout each bettor receives depends on how much their wager was. 

Pari-Mutuel Horse Racing Example

Although the betting strategy is straightforward, it can be a difficult concept to grasp from the beginning. So to help you better understand pari-mutuel betting, we've created a horse racing example. 

There are five horses in the race and you decide to place a $10 bet on Horse A.

The house has accepted these bets on the horses:

• Horse A - $400
• Horse B - $200
• Horse C - $300
• Horse D - $100
• Horse E - $150

The house calculates that the bets come to $1,200. The house takes a 10% cut (which is $120) leaving the betting pool total at $1,080. The payouts for each horse is then calculated by dividing the remaining balance by the total bet amount on each horse.

For Horse A, the payout is $1,080 divided by $400, which equals $2.70.

For Horse B, the payout is $1,080 divided by $200, which equals $5.40.

For Horse C, the payout is $1,080 divided by $300, which equals $3.60.

For Horse D, the payout is $1,080 divided by $100, which equals $10.80.

For Horse E, the payout is $1,080 divided by $150, which equals $7.20.

If Horse A won, the payout of $2.70 would be $27, because, for every $1 that was wagered, you receive $2.70. This means that you would win an additional $17 on top of the $10 you used to bet on the horse. This example uses smaller numbers, to keep it simple, but many pari-mutuel events have big money up for grabs.

Similar to betting that relies on fixed odds, the odds for the favorite to win will always be the lowest, resulting in less money. Whereas the underdog bets will always be higher, meaning that if they do win the race, you're more likely to win big.

Pari-Mutuel Top Tips

It's better to place your bet as close to the start of the race as possible. This is because as the event draws nearer, the odds can change. Odds that change at the last minute could result in you losing a lot of money you thought you were going to win. 

For example, sometimes horses may have odds of 5/1 five hours before the race, so you put $100 on that horse to win (which would result in you receiving $500). But an hour before the race, during the warm-up, the horse has some problems and the odds drop to 3/1 (which means you would only win a maximum of $300). This could lead to a whole lot of heartache on your side, especially if you don't even check the odds again before the race.

Do your betting on a personal level, this will ensure you get more of your hard-earned cash. Live bookies might take a cut from your winnings (after the house has already taken their cut). Stick to placing your bets at the track, over the phone, or on the internet through the sporting events website.

Give Pari-Mutuel Betting a Go and See If You Can Win Big

Now that you've learned more about pari-mutuel betting and how it works, why not try your hand at it? Remember that you can find pari-mutuel bets for various sporting events, such as horse racing, greyhound racing, and golf. Larger pari-mutuel organizations often attract more bettors, so these are the events where you might be able to win big.