Money Wagered on Each Horse 

These wagers, shown in both dollars and percentage of pool, total $1,200. Please note that we’ve used small numbers here to make this example easier to follow. In reality, there’d be a LOT more money in the betting pool! Let’s say we decide to back horse number one for $10, and horse number one wins this race.

The betting pool now turns into this:

First, the operator of the pari-mutuel betting takes its cut of 10% (for purpose of this example). The winning wagers (16.7%) are set aside to be returned to their investors. This leaves 73.3% remaining in the betting pool to be paid out to the winning bettors. We then divide this remainder by the amount of winning bets, so 73.3 ÷ 16.7 = 4.3892. This is rounded to the dime (to the nickel in some jurisdictions), giving us odds of 4.4 to 1. Since we wagerd $10 on horse number one, we first multiply the odds by our wager ($10 x 4.4) = $44; plus we get back our initial investment of $10, giving us a winning total of $54!

Let’s express this using dollar amounts instead of odds for just a moment. So $1,200 was bet in total on all the horses. The operator takes its cut of 10% or $120. This leaves $1,080 in the betting pool. $1,080 betting pool ÷ $200 total wagering on that horse = $5.40. We’ll win $5.40 per $1 wagered, or $54.

How Odds are Displayed

The odds are a real-time reflection of money bet in the win pool. Not the place pool, not the trifecta pool, just the win pool. As more money is wagered, the odds change to reflect it. Horses with a higher percentage of money bet on them have shorter (lower) odds, while horses not so popular with the punters have longer (higher) odds.

So, we learned through calculating the win dividend on #1 that it paid odds of 4.4 to 1. Easy enough—but because odds are limited to a two-digit display on screens, they are most often shown as an approximate fraction. Instead of displaying the fraction 4.4/1, the odds will be displayed as an approximate 9/2, or 4-and-a-half/1.

If the first number of the fraction is larger than the second number, the net profit of your horse racing bets will be larger than the amount wagered.

If the second number is larger, you’re betting on the “odds-on favorite,” and your return will be smaller than the amount risked. This occurs when you bet on heavy public favorites – you stand to win less because everyone is betting on the same horse. If the odds-on favorite wins, the betting pool will be split among many winning tickets, netting everyone a smaller portion of the pool.

PRO TIP: The tote board (in the infield) and TV monitors throughout the racetrack show real-time amounts and probable dividends in key wagering pools (Win, Place, Show, Exacta, Double), along with the current odds.

More About Odds

The total amount paid out will always be the same, but the the amount per $1 wagered changes based on the total amount wagered on each selection. The more that was wagered, the smaller the payout per $1. This can be compared to fixed odds betting, where the odds for the favorite (and therefore the potential payout) are the lowest, and the odds for the outsiders are the highest. Although the odds aren’t fixed here, there will typically be more money coming in for the favorite than there will be for the outsiders.

Remember, odds change constantly while you (collectively) bet money into the win pool. When the betting stops—and the race begins—the odds are locked in. Each pool is calculated separately, but other pools tend to closely reflect the trends of the win pool in terms of which horses are favorites and which horses are longshots. Win, place, and show bets are less risky, as they only involve one horse. Show bets are least risky of all. However, the potential reward increases with increased risk, and hitting that superfecta can make for quite a payday—often on a mere 10¢ investment!

The big difference, as we’ve mentioned, is that we don’t know for sure what our potential payouts will be when we actually place our wagers. As we mentioned earlier, pari-mutuel betting operators show the PROBABLE odds prior to the relevant event starting. Although these are described as probable, there’s no guarantee that the eventual payout will be anywhere close. It all depends on how much money has been taken in on the different selections at the time we place our wager.

Odds do not equal likelihood of that horse winning.

Some people may be tempted to interpret horse racing betting odds as an expression of a horse’s likelihood to win a race, but that is not entirely accurate. Although there is usually some correlation between a horse’s betting odds and its skill relative to the other runners, the odds are more accurately interpreted as an expression of public sentiment.

Parimutuel horse racing betting odds fluctuate based on public sentiment. The more money that comes in on a horse, the lower that horse’s odds fall. Similarly, horses with few backers pay more because the total wagering pool will be split among fewer winning tickets.

Public sentiment is often a close approximation of each horse’s relative strength, but do not be fooled into reading horse racing odds as any one runner’s likelihood of winning. The key to successful horse racing betting is learning how to spot the gaps between public sentiment and reality.