Horse racing betting works in one of two ways: you bet against a bookmaker at a price fixed when you bet, or you bet into a shared pool where the final odds depend on how everyone else bet. The pool system is called pari-mutuel, and it is the main system at US tracks. In it the track keeps a fixed share of the pool, the takeout, which was between 19% and 30% at one Pennsylvania track in 2017, depending on the bet.
This guide explains both systems, how a pari-mutuel payout is calculated, what the common bets mean, how each-way bets work in the UK, and what the takeout costs you. The takeout rates come from a Pennsylvania Racing Commission document, and the payout and cost figures are our own calculations with the working shown.
How does horse racing betting work?
There are two systems, and the one you meet depends on where you bet. In fixed-odds betting, you get the price shown when you place the bet. In pari-mutuel betting, all bets on a type of wager go into one pool, the track removes its takeout, and what is left is shared among the winning tickets. The final odds are not known until betting closes.
A pari-mutuel bettor is betting against other bettors, not against the track. The track’s cut is taken first, whatever happens. That is why the takeout, not the odds on a single horse, sets the long-run cost of betting.
New Jersey’s racing rules describe the same structure in legal language. They define a combination wager as one that wins only if the selected horses finish in the chosen positions, and a multiple-race wager as one on the outcome of several races, where each combination has its own odds, under N.J.A.C. 13:70-29A.7.
How is a pari-mutuel payout calculated?
The payout is the pool, minus the takeout, divided by the amount bet on the winner. Take a win pool of $10,000 with a 17% takeout. The track keeps $1,700, which leaves $8,300 to pay the winners.
If $2,000 of the pool was bet on the winning horse, each $1 on that horse returns $8,300 / $2,000 = $4.15. That includes the stake, so the profit is $3.15 per $1, which a tote board would show as roughly 3-1. Real payouts are usually rounded down to a set interval, called breakage, which lowers them slightly.
The same formula gives the payout for any share of the pool. The table shows the return per $1 for horses that attract different shares of the money.
| Share of the win pool bet on the horse | Return per $1 at 17% takeout | At 25% takeout | At 30% takeout |
|---|---|---|---|
| 40% (heavy favorite) | $2.07 | $1.88 | $1.75 |
| 20% | $4.15 | $3.75 | $3.50 |
| 10% | $8.30 | $7.50 | $7.00 |
| 2% (long shot) | $41.50 | $37.50 | $35.00 |
The same horse pays less in a pool with a higher takeout. That is the takeout’s cost, in every pool, on every horse.
What are the main bets in horse racing?
The simple bets are on one horse. Exotic bets combine several horses or several races, and they have higher takeouts.
- Win: the horse finishes first.
- Place: the horse finishes first or second.
- Show: the horse finishes first, second or third.
- Exacta: the first two horses in the correct order.
- Trifecta: the first three horses in the correct order.
- Superfecta: the first four horses in the correct order.
- Multi-race bets: a daily double, pick 3 or pick 4 picks the winners of consecutive races.
Exotics are hard to hit because the number of possible outcomes grows quickly. In a 10-horse field, there are 10 x 9 = 90 possible exactas, 10 x 9 x 8 = 720 trifectas and 10 x 9 x 8 x 7 = 5,040 superfectas. A random exacta ticket wins about 1 time in 90, a random trifecta ticket about 1 time in 720.
Boxing a bet covers every order of the horses you choose. A $1 trifecta box of three horses costs $6, because three horses can finish in 3 x 2 x 1 = 6 orders. Boxing four horses in a trifecta needs 4 x 3 x 2 = 24 combinations, so a $1 box costs $24. The box raises your chance of winning and raises your cost by the same factor, so it does not lower the takeout you pay.
What does the takeout cost you?
The takeout is a percentage taken from every dollar in a pool, and it differs by wager type. A Pennsylvania Racing Commission takeout document lists the 2017 wagering format for The Downs at Mohegan Sun Pocono.
| Wager type | Takeout at that track (2017) |
|---|---|
| Win, place, show | 19% |
| Double, exacta | 20% |
| Pick 3, Pick 4, High Five | 25% |
| Trifecta, superfecta | 30% |
The takeout sets the average return. In a pool that pays out exactly what comes in, the average return per dollar bet is one minus the takeout: 81 cents on a 19% win bet and 70 cents on a 30% trifecta. A bettor who stakes $20 on each of nine races on win bets puts $180 at risk and loses about $34 on average at 19%. The same $180 on trifectas at 30% loses about $54 on average.
The only way to do better than the average is to be better than the crowd at judging each horse’s chance, because the pool is made of the crowd’s money. That is a hard standard to meet, and the takeout has to be recovered first.
How do fractional odds and each-way bets work?
In fractional odds, the first number is the profit and the second is the stake. According to Great British Racing, 4/1 returns 4 units of profit for every 1 staked, and 5/2 returns 5 units for every 2. Odds-on prices are written the other way, so 1/2 returns 1 unit for every 2 staked.
An each-way bet is two bets in one: a win bet and a place bet of equal size, so a $10 each-way bet costs $20. The place part pays a fraction of the win odds if your horse finishes in the paying places. Great British Racing lists these usual terms:
| Race | Places paid | Place part pays |
|---|---|---|
| Fewer than 3 runners | None | Win bets only |
| 3 or 4 runners | 1st and 2nd | 1/5 of the odds |
| 5 to 7 runners | 1st and 2nd | 1/4 of the odds |
| 8 or more runners | 1st to 3rd | 1/5 of the odds |
| Handicap, 12 to 15 runners | 1st to 3rd | 1/4 of the odds |
| Handicap, 16 to 21 runners | 1st to 4th | 1/5 of the odds |
A worked example: you place $10 each-way on a 5/1 horse in an 8-runner race, which pays 1/5 of the odds for the first three. If the horse wins, the win bet returns $10 x 5 + $10 = $60. The place bet at 1/5 of 5/1 is 1/1, so it returns $10 x 1 + $10 = $20, a total of $80 for the $20 outlay. If it finishes second or third, only the place bet pays, returning $20 for your $20, so you get your money back. If it is unplaced, you lose the $20.
What are the common horse racing betting mistakes?
The mistakes usually come from ignoring the takeout or the number of combinations. The usual ones:
- Betting exotics for the big payout. The takeout is higher and the chance of winning is smaller.
- Boxing too many horses. Each extra horse multiplies the cost.
- Assuming a favorite is good value. A favorite wins often, but its price already reflects that, and the takeout still applies.
- Betting every race. More races mean more takeout paid.
- Using the odds before betting closes. In a pool, odds on the board can still change.
What does horse racing betting cost?
It costs the takeout times the total you bet, plus whatever you lose to the crowd’s judgement being better than yours. A $2 win bet at a 19% takeout costs about 38 cents on average. A $2 trifecta ticket at a 30% takeout costs about 60 cents, though you will win rarely and lose often.
Set a budget for the day before you go to the track or open an account, and stop when it is spent. Our guide to setting a gambling budget and time limit shows how, and the Safer play toolkit lists tools and support. If betting is causing harm, visit our get help page.
Betting on horse racing is legal in some places and not in others. See is gambling legal where you live before you bet.
Where should you go next?
To turn a price into a probability, read probability and odds in plain language. If you bet several races together, see parlays and accumulators for why combining bets multiplies the cost. For sports where the odds come from a bookmaker, try football betting basics.