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Pari-Mutuel Betting in Horse Racing (Payouts Explained)

Mitchell South

by Mitchell South

Updated May 16, 2024 · 7:31 AM PDT

  • Unlike most other sports, horse racing does not rely on fixed odds set by bookmakers
  • Odds and payouts are determined by demand, and bettors wager against one another rather than the house
  • Learn to make informed wagers with the pari-mutuel betting system used with horse racing

Want to get started betting on horse racing, but aren’t sure how the odds, payouts, or basic betting rules work? When you’re gearing up to place a wager on a horse race, there are a few things you’ll need to know to avoid confusion. Not to worry, we’ve got you covered.

Horse racing betting doesn’t rest upon fixed odds that bookmakers create as most traditional sports do. It’s important to know how to read horse racing odds before you get started. Once you know the basics of horse racing betting, read on to figure out how horse racing odds and payouts are generated.

Pari-Mutuel Odds Explained for Horse Racing Payouts

Horse racing differs at the core from betting at a sportsbook in terms of the way odds are calculated and the manner in which wager are paid out. There are a number of differences between reading and calculating odds for traditional sports, and reading and calculating odds for pari-mutuel horse racing.  At a casino or online sportsbook when you bet on a football team, for example, the odds are fixed, meaning that they’re locked in when you wager and you are betting against the house.

In horse racing, the pari-mutuel wagering system means handicappers are betting against each other. This happens both at the track on race days and at online sportsbooks.

The odds on a horse are dictated by how much money is wagered on the horse in question. The house takes a percentage off the top (generally 10-30% depending on the sportsbook or track you’re betting with), but all the remaining money is pooled together and odds are calculated when the horses break from the gate.

The size of the payout is determined at the conclusion of each race, dependent on how the horses placed.

The pari-mutuel system means handicappers are betting against each other, not against the house.

For example, say 90% of the money on a given race were bet on the same horse and only 10% percent of the cash was distributed among the rest of the field. If the favorite won, 90% of the tickets would be winners and the money put into the betting pool by that 10% of losers would pay out the large group of winners. This means that the payoff distributed to winners would be mere pennies.

On the flip side, if the 90% horse lost, there would be a ton of cash to pay out and only a small percentage of winning tickets to collect that large amount.

Odds are a reflection of how much money is being bet on each individual horse. A big favorite (who’s receiving a ton of betting volume) may return as little as five or ten cents for each two dollars bet, so a $2 winning bet could hypothetically bring back as little as $2.10.

That being said, horses that are 100/1 win occasionally, meaning a $2 win bet can pay in excess of $200.

Calculating Payouts on Exotic Bets

The odds on exotic bets, exactas, trifectas, Pick 3’s, and Pick 5’s are calculated the same way as pari-mutuel odds. There are separate pools for each wager, so if you bet an exacta, your money is being bet against everyone else playing an exacta. If you bet a Pick 3, strictly Pick 3 cash is in the pool.

What makes exotic bets both more difficult to win and more lucrative is the number of possible winning combinations. If there are eight horses in a race that means there are only eight possible outcomes, one of the eight horses has to win. In a Pick 3 if there are eight horses in race one, eight horses in race two, and eight horses in race three, that creates 512 possible combinations (8 x 8 x 8 = 512 different possible outcomes).

Obviously, picking one out of eight to win is easier than one out of 512.

What Does ML Mean in Horse Racing?

We just discussed the importance of the betting odds, which change as people bet. Very low odds mean a strong likelihood of winning but with a minimal payout. Higher odds are more profitable but less likely.

The morning line (ML) is an expert’s guess at what the final odds of a race will be. It’s not always exactly accurate, but it’s a critical tool for estimating each horse’s odds and payouts, especially for new bettors.


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Someone who works on-track makes an educated guess when horses are entered into a race what each of their odds will be when the gate opens to begin the race. The person who sets the morning line could be the race caller (announcer), a writer who covers the races on a daily basis, or really anyone with experience handicapping.

Essentially, anyone with a feel for the racetrack who has a strong sense of how the public will bet based on past performances and human connections for each horse sets the morning line.

When the ML experts arrive at their estimated odds, they factor in past results, trainers, jockeys, owners, what tracks the horses have been running at, and each horse’s unique history. Essentially, they examine everything a handicapper looks at.

The ML is helpful to know as you determine what horses you like, and it can sometimes help you consider different horses and get a feel for how much a bet may pay.

What Is a Scratch in Horse Racing?

A horse that is entered to run in a race, but the owner or trainer decides he or she is not going to participate is scratched. To be scratched is to be removed from the race before it begins.

A horse may have sustained an injury, be sick, or not like the track conditions because it is raining or overly hot and dry. Other times, the connections (owner/trainer) just change their mind and think there is a better opportunity for the horse to run on another day.

If you bet on a horse to win and he or she is scratched, your money gets refunded. This is a key feature of horse racing betting and this unique rule gives bettors some insurance in case their preferred horse drops out of a race like the Kentucky Derby. The only thing similar in more traditional sports betting is when baseball bets are conditional on the starting pitcher playing.

Different tracks have varying rules about horses scratched in other types of bets, but generally, you get a refund, a consolation payout, or sometimes in the case of a Pick 3 or Pick 5 you can have your winning horse changed to whoever the favorite in the race is. In order to know what’ll happen to your wager in the case of a scratch, be sure to scrutinize your sportsbooks’ terms and conditions.

Pari-Mutuel Betting FAQs

What is pari-mutuel betting in horse racing?

Pari-mutuel betting in horse racing refers to a betting system in which all bets are put together in one pool.

How do payouts work in pari-mutuel betting?

Payouts in pari-mutuel betting are based on the size of the pool you're betting in and how many people chose the winner. You will not know the exact amount of the payout when you place your bet.

What is the difference between pari-mutuel and fixed odds?

The primary difference between pari-mutuel and fixed odds is that fixed odds betting gives you the amount of the payout when you place your bet. In pari-mutuel betting, the payout is determined after the pool money is calculated and the event is over.

There’s More!

All betting can be intimidating at first, but our horse racing guides are designed to make you feel comfortable and confident in the bets you place. Get familiar with the terminology first and you’ll have a much easier time making sense of what this sports is all about. Once that is down, open an account at one of the best horse racing betting apps to start putting this knowledge into action. Seeing the bet types and races first hand helps to cement this information quickly.

For more information on the basics of horse racing betting, check out our guide to the different types of horse racing bets you can make.

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