Legal Definitions - parimutuel betting

Parimutuel betting is a system of wagering where all bets of a particular type on a specific event, such as a race, are collected into a common pool. After the event concludes, a predetermined percentage is deducted from this pool by the organizing entity to cover operational costs and taxes. The remaining funds are then distributed among all individuals who placed winning bets. Crucially, the final odds and payout amounts are not fixed beforehand but are determined by the total amount of money wagered in the pool and the number of winning tickets.

• Example 1: Horse Racing

  Imagine a bustling racetrack on Derby Day. Thousands of spectators place bets on various horses to win, place (finish second), or show (finish third). All the money wagered on a specific horse to win is collected into one large "win" pool. Similarly, all "place" bets go into a "place" pool, and "show" bets into a "show" pool. Once the race is over and the winning horse is declared, the racetrack operator deducts its commission and applicable taxes from each pool. The remaining money in the "win" pool is then divided among everyone who bet on the winning horse. The exact payout for each winning ticket depends on the total amount in the pool and how many people correctly picked that horse. If fewer people bet on the winner, each winning ticket receives a larger share.

• Example 2: Greyhound Racing

  Consider a local greyhound racing track where people bet on the outcome of the races. For a particular race, bettors might choose to wager on a specific greyhound to win, or perhaps on two greyhounds to finish in the exact order (an "exacta" bet). All the money for the "exacta" bets from that race is combined into a single "exacta" pool. After the race, if a bettor correctly picked the first and second place greyhounds in the correct sequence, they would share a portion of the "exacta" pool. The track first subtracts its operating fee and taxes, and the remainder is distributed among all the successful "exacta" bettors. The more winning tickets there are for that specific combination, the smaller the individual payout for each winner.