The word “parimutuel” is taken from the French term, “Pari Mutuel”, meaning “mutual betting”. A parimutuel pool is the cumulative sum of all wagers on a particular horse race, minus commission (the track’s share). Just as all bets go into the pool, all prizes are paid out from the pool. Thus, the payout for any particular wager can shift based on how many wagers are being made, and the cumulative total of all those wagers.
For example, let’s say the horse in lane 1 is favored to win. Hours before the race, the payout for him to win is 1/1 (win $1 for betting $1). However, as the race nears, so many people are betting on this horse that the odds drop to 1/2 (win $1 for betting $2). A shift in odds is sometimes mandatory to ensure the pool is large enough to cover all bets made.
Just as the odds can down-shift on the most popular ponies, they can up-shift on the least favorites, too. If the horse with the highest odds (worst chance to win) gets good action, its payout will be decent. However, if no one is betting on it, the payout can skyrocket to astronomical heights by the time the race starts, simply because there’s enough money in the pool to cover it.
Example Odds Per Possible Outcome
There are 8 horses in a race, therefore 8 possible winners. The possible outcomes are actually much larger, due to the immense range of bets available, but to make this easy to understand, we’ll use those 8 potential winners as the 8 possible outcomes of a race.
Let’s say that combined, everyone bet the following amount of money on each of these 8 possible outcomes.
The total amount wagered was $750. Before any of that money can be awarded, the track will skim its commission off the top. Tracks can rake as much as 15%, so let’s calculate that.
750 * 15% = 637.5
This leaves $637.50 to be split among the winners.
Now, let’s assume that Outcome 5 was the result. $150 was wagered on this outcome, so the payout will be 637.5/150, which breaks down to…
637.5 / 150 = 4.25, or 4.25/1
So, everyone who bet on Outcome 5 will receive a payout of $4.25 per $1 wagered (plus their wager back). Everyone else loses.
By this evaluation, you should have a reasonable understanding of how the odds can shift and fluctuate leading up to the start of a race.