The history of Parimutuel horse betting system goes long way back in time. The name comes from two French words, pari mutuel, that means mutual betting.

The betting system was invented Joseph Oller in 1867 on a basic principle: the players are betting against each other, not against the house. Around 1927 Parimutuel was declared legal by the Parliament and was adopted on all racetracks in United Kingdom and in few years as well in United States.

Unlike other types of bets, Parimutuel has no fixed odds, so the final payout is calculated after all bets are made (usually after the race starts). After the betting is stopped, all bets made are added to the prize pool. The house takes out the commission and then the prize pool is divided among winning players.

If we take for example a hypothetical event with 6 possible outcomes and bets made in US dollars as follows:

 1. $42
 2. $28
 3. $75
 4. $53
 5. $12
 6. $60

Total wagered money: $270

Let’s consider that the winning outcome is no. 6. First the house or racetrack takes out the tax or commission, let’s say $15, remaining a prize pool of $255. After that, the payout is calculated by dividing the prize pool to the total winning wagers:

$255 / $60 = $4.25 for each $1 wagered.

Often the bookmakers provide before the event “approximates” that suggest what will be the payout for each outcome in case no more bets are made.