What is Pari-Mutuel Wagering??

[EagleEye Po]

If I was attending the UA RTIP Racing Symposium I'd ask stakeholders/panelists how they reconcile the definition of Pari-Mutuel Wager (PMW) with the offering of rebates.

Many (most?) believe that rebates are diametrically opposed to the tenets PMW as PMW requires a level playing field for ALL participants and when rebates are offered the product being sold can no longer be called or defined as PMW. Here are some industry definitions.

A 2004 NTRA Task Force defined PMW as a “type of wagering systems used by racetracks whereby bets placed by participants are formed into a pool in which the participants are wagering with each other, not the racetrack. Money wagered, except for the takeout and breakage, is divided among those who choose the winning betting interests. Thus, under this system, the losers pay
the winners.” https://www.bloodhorse.com/pdf/NTRATaskReportSep04.pdf

Jim Lawson, Woodbine Entertainment’s former CEO was quoted in an April 1, 2022, Play Ontario article, “Horse racing operates on a pari-mutuel gambling system that pits bettors against each other, not the house”.
https://www.playontario.com/news/spo...ng-in-ontario/

Santa Anita VP Steve Lym commented on the unique and competitive nature of PMW. His pari-mutuel comments are made at 1:44 of the recording https://youtube.com/watch?v=k_mBkLIYdQQ .

On Feb 25, 2021, Lisa Foss the Exec Dir of the CPMA while testifying in front of the Senate’s Standing Committee defined PMW as “a form of betting that is pool based where bettors compete with each other for a share of the pool”. The venerable @raypaulick sums it up nicely, "It also might be discouraging to a non-rebated horseplayer knowing that he or she is not betting on a level playing field under the original concept of pari-mutuel wagering. They are still gambling against other players, but some of those players are getting a steep price discount that amounts to a lower takeout"

Dictionary Dot Com simply defines PMW as 'equal together'. Clearly when rebates are offered we are no longer EQUAL TOGETHER and therefore the product should no longer be called or considered PMW.

Thoughts?

[Dave S]

I've heard it defined as: "to bet amongst ourselves."

[BELMONT 6-6-09]

The parimutuel system was invented in 1867 in France

[Dave S]

Just as an aside, I do not see why the industry can't offer a fixed percentage rebate to all players- weather they be high-rollers or just $2 players. That way everyone would have an incentive to wager more money.

[Onesome]

In North America, the least loyal customers are given the best deals and can siphon money from your most loyal customers.


What a f'ed up system.

[Bustin Stones]

In every single industry, the customers who spend the most pay the least. It makes business sense for the companies who wish to retain the business. In this case, the company has us paying the freight instead of paying the customer from the profit margins. That's the difference.

[Andy Asaro]

Twitter

[burnsy]

I don’t work in this industry or know the exact state of finances . But my guess is economically they have to favor large bettors and offer incentives. Fair or not . Let’s face it , this game has been hemorrhaging the causal bettor and fan for decades . A large part of the every day handle is coming from these big bettors . If they discontinue incentives for them and they walk . I have a feeling the game will be exposed to a major problem . The lack of interest and sales (betting) in these times . Can anyone get a guesstimate of what percentage of the total handle these people are responsible for on an average business day ? Not Derby day and the rest of high market days .

[BELMONT 6-6-09]

In my opinion the horseracing game is headed for a drastic change in the future (maybe within 5 years) where a number of small racetracks currently fueled by casino money will close. It will be a major adjustment that will close the weaker tracks and in turn will aid the surviving tracks.

For example the staple tracks around the country:

Belmont Park/ Saratoga/ Aqueduct (until it closes)
Keeneland/Churchill Downs
Gulfstream Park
Santa Anita/Del Mar
Oaklawn Park

There are obvious other tracks that can make this list
Laurel Park and Parx and a host of other B tracks might be able to survive but the Staple tracks listed will have bigger fields and maybe if by miracle a reduction in takeout rates.

[ubercapper]

Originally Posted by BELMONT 6-6-09

In my opinion the horseracing game is headed for a drastic change in the future (maybe within 5 years) where a number of small racetracks currently fueled by casino money will close. It will be a major adjustment that will close the weaker tracks and in turn will aid the surviving tracks.

For example the staple tracks around the country:

Belmont Park/ Saratoga/ Aqueduct (until it closes)
Keeneland/Churchill Downs
Gulfstream Park
Santa Anita/Del Mar
Oaklawn Park

There are obvious other tracks that can make this list
Laurel Park and Parx and a host of other B tracks might be able to survive but the Staple tracks listed will have bigger fields and maybe if by miracle a reduction in takeout rates.

I changed the second row to:
Keeneland/Churchill/Kentucky Downs/Ellis Park/Turfway

All Kentucky tracks have purses supported by HHR (Historical Horse Racing) which can not be decoupled. A set percentage of HHR money is statutorily directed to the KTDF (Kentucky Thoroughbred Development Fund) and must be used for purses. Additionally, the HHR facilities are all owned by one or more tracks themselves.

[BELMONT 6-6-09]

Originally Posted by ubercapper

I changed the second row to:
Keeneland/Churchill/Kentucky Downs/Ellis Park/Turfway

All Kentucky tracks have purses supported by HHR (Historical Horse Racing) which can not be decoupled. A set percentage of HHR money is statutorily directed to the KTDF (Kentucky Thoroughbred Development Fund) and must be used for purses. Additionally, the HHR facilities are all owned by one or more tracks themselves.

Thank you Uber for your information. My list is speculation on my part but money is the key word here and without it these tracks are destined to fail.

[EagleEye Po]

Originally Posted by Bustin Stones

In every single industry, the customers who spend the most pay the least. It makes business sense for the companies who wish to retain the business. In this case, the company has us paying the freight instead of paying the customer from the profit margins. That's the difference.

Pari-Mutuel wagering is not like every single industry despite what the industry may tell you. What makes it unique is it requires a level playing field. When one group is given a mathematical advantage vs the others it is no longer pari-mutuel wagering.

[paulbenny]

The term pari-mutuel means that all the money on a particular bet is pooled together from all bettors, and a standard percentage is deducted from the winning bettors based upon the particular bet, pari-mutuel track specific rules and other factors to net out the total paid out to the people who actually made that particular bet in that pari-mutuel pool. This takeout rate is important for horse racing bettors to understand so they know how to calculate payouts and this percentage may vary by betting pool. For example, if you bet on a horse to finish first, then you would wager on something called a win bet in the win bet pari-mutuel pool, and the payout would be based upon that pool only.
An example of an exotic bet would be an exacta bet which focuses on two horses where you are trying to predict what horse would finish first and what horse would finish second in the same race in the exacta pari-mutuel pool. The biggest payout will often come in exotic wagers like the superfecta where the pari-mutuel betting pool for this exotic bet requires you to predict who will finish first, finish second, finish third and finish fourth in that exact order for that betting pool called the superfecta pool. It is not an easy task to pick the first four horses!
Keep in mind that odds fluctuate until the pari-mutuel pool is closed, the race begins and no more betting pool activity occurs. More specifically, while you are looking at various odds and horse racing bets you must keep in mind the odds of winning go up and down and you will not know final odds and final payout until no additional betting is allowed and it is post time and the race starts.
Here is a simple horse betting example showing how the odds work for a race that includes eight horses, and assumes that the track takeout, as a standard deduction, is 18 percent on the wager which is in this example, a win bet pool. In other words, after all the money is bet, and there are no additional bets taken, the computers in the track system take out 18 percent and the remaining pool calculated to be 82 percent is left to distribute to the people who have bet on the winning horse. The table below shows the payout based upon the odds of the each horse after the 18 percent deduction.
Calculation of a $2 Win Bet Payout Assuming $1,000 Pool and 18 Percent Takeout

# HORSE NAME $$$ BET $$$
Needed
To Total $820 Exact
Odds to $1 Rounded Actual Payout For $2 Wager
1 Big Smitty $137 $683 $4.99 $11.80
2 Leap 400 420 1.05 4.00
3 Great Czar 97 723 7.45 16.80
4 Fratello 78 742 9.51 21.00
5 Aggie Dancer 55 765 13.91 29.80
6 Upstart Bred 56 764 13.64 29.20
7 Calcium 65 755 11.62 25.20
8 Bolder Rock 112 708 6.32 14.60
Total $1,000
Takeout @18% 180
Remaining Paid To Winners $820

The winning horse no. 4 Fratello paid $21.00 dollars for a $2 dollar wager. Here is how that was calculated.
1. The total pool was $1,000 and since the track takeout is 18 percent, $820 is left for the winning bettors.
2. A total of $78 dollars of the $1,000 dollars was bet on no. 4 Fratello and that means that the $78 dollars is paid back to those bettors since they are winners, plus an additional $742 dollars or a total of $820 dollars which is the amount left to pay out after 18 percent was deducted.
3. The $742 dollars has to be converted to an amount paid back for each dollar wagered to calculate the actual odds of the horse. So if you divide $742 by $78 you see that means $9.51 is going to be paid to people in addition to each dollar wagered.
4. Tracks convert odds adjusted for decimal, tote-related rules and rounding and that may vary slightly but in this example the horse betting odds are 9.5 to one.
5. The track will then pay the person based upon a total of 9.5 dollars per each dollar bet or a total return of $21 dollars for a $2 dollar win bet as their final payout.
If you assume the betting favorite no. 2 Leap had won the race the payout would have been $4 on a $2 dollar bet as shown in the table. No. 2 Leap is the shorter odds runner in the field compared to no. 5 Aggie Dancer which is the longer odds runner who would pay $29.80!
This pari-mutuel calculation approach is applied to all betting pools for all types of wagers including exotic bets for every race.

One critical aspect of pari-mutuel racing that is not understood by the average player is the degree to which there are incentives provided to wager that are cash flow back to the players. This includes but is not limited to bonuses if you wager on a particular race, bonuses if you are wagering to win and finish second or third, incentives to bet with a particular entity that result in cash back in the players pocket and other programs.

[burnsy]

Yeah , but my question is . What happens without the “incentive “ . How bad does it get ? If big bettors walk . How much more does handle decrease ? The fact is I believe the incentive is them dealing with a rock and hard spot .

Furthermore, legal sports betting . I bet football . I’m not a huge bettor but I bet . Draftkings gives me bonuses and a cash out price early if my bet is winning and I don’t want to risk waiting for the end result . I’m not some Whale , but it’s way easier for me to make money doing this over horse racing . And I get the incentives to boot .

If anyone is thinking they can level the playing field in horse racing. My belief is , it’s too late and the competition is just going to eat their lunch in the long run. How do you beat , the takeout , the short fields and the diluted odds going against the big money . Pari Mutuel my ass !

[paulbenny]

The pari-mutuel nature of horse racing is a fact. There are other forms of wagers as you well understand in sports, or for that matter on politics. The gambling dollar had migrated away from horse racing a while ago with the advent of lotteries for example. I am not a sports bettor and have read most of the bills when I did some consulting work for a UK based company and understand the business aspect and revenues to the states. I also understand your viewpoint regarding the difficulty in staying with horse racing. Things change and now that it is well under two percent of all legalized gambling recorded in the U.S., it is not only the pari-mutuel nature but the alternatives available make it a clearly dying game unfortunately.