In parimutuel betting, all the money bet on one outcome type goes into a shared pool, the operator removes a percentage called the takeout, and the rest is divided among the winning tickets, so the payout is not known until betting closes. In fixed-odds betting, the price is agreed when you place the bet and your payout is set from that moment. This guide compares the two with the same race priced both ways, shows the payout formula and explains how the cost works in each. It is education only, with no picks and no provider links.
Parimutuel pools are the usual system for racing in the United States, including the Breeders’ Cup, while fixed-odds betting with bookmakers is common in other countries. We use the 2026 Breeders’ Cup as context in our pillar guide, and the general basics are in how horse racing betting works.
What is parimutuel betting?
Parimutuel betting, also written pari-mutuel, is a system in which bettors bet against each other rather than against the operator. Each bet type has its own pool. The operator takes a percentage as the takeout, and what is left is shared among the tickets that picked the winning result. Wikipedia credits the system to Joseph Oller in 1867.
The result is that no one, including the operator, sets the odds. The odds are a product of how the money is spread. A horse with a lot of money on it pays little, and a horse with little money on it pays a lot. The operator does not take a risk on the result, because the takeout comes out first.
What is fixed-odds betting?
Fixed-odds betting is a system in which you bet at a price set when you place the bet, and your winnings are known from that moment. The price is quoted as decimal odds, fractional odds or a moneyline. Wikipedia gives the example that 4/1 in fractions equals 5.0 in decimals, so a £100 stake returns £500 including the stake.
The company offering the odds is a bookmaker, and it builds a margin into the prices. If the price later moves, your bet stays at the price you took. Some fixed-odds bets are paid at the “starting price,” which is set when the race begins, according to Wikipedia. We explain the price formats in our glossary entries for decimal odds and fractional odds and the cost built into them in our fixed odds entry.
How do the two systems compare?
The main differences are who sets the price, when it is fixed, who carries the risk and where the cost sits. The table puts them side by side.
| Feature | Parimutuel | Fixed odds |
|---|---|---|
| Who sets the odds | The money bet in the pool | The bookmaker |
| When the payout is known | After betting closes | When you place the bet |
| Who you bet against | Other bettors | The bookmaker |
| Where the cost sits | The takeout | The bookmaker’s margin (overround) |
| Can the price change after you bet? | Yes, until the pool closes | No, your price is locked |
| Typical use | Racing pools, especially in the United States | Bookmaker betting on racing and sport in many countries |
Neither is a better system in every case. Each has a cost, and each has features that suit different people. The sections below put numbers on the differences.
How is a parimutuel payout calculated?
The payout per $1 is the pool after takeout divided by the amount bet on the winning outcome. Wikipedia sets out the formula: the operator deducts the commission at rate r from the total pool, and a bettor on the winning outcome receives the remaining pool divided by the amount bet on that outcome, for each unit wagered, including the stake.
In symbols, the payout per $1 is the total pool times (1 minus takeout) divided by the amount bet on the winner. Here it is with an invented race.
- Total win pool: $200,000.
- Takeout of 16%: $32,000 removed.
- Paid to winners: $168,000.
- Amount bet on Horse A: $40,000.
- Payout per $1 on Horse A if it wins: $168,000 divided by $40,000, which is $4.20.
A $10 ticket on Horse A would return $42, which is your $10 back plus $32 profit. The 16% rate is the takeout Keeneland lists for win and place pools on its wagering page, used here as a realistic rate. The pool and amounts are invented.
What happens to the payout when late money arrives?
It falls if more money goes on your horse after you bet. This is the biggest practical difference from fixed odds. Suppose another $20,000 is bet on Horse A before the race starts, and nothing else changes.
| Stage | Total pool | Bet on Horse A | Pool after 16% takeout | Payout per $1 | $10 ticket returns |
|---|---|---|---|---|---|
| When you bet | $200,000 | $40,000 | $168,000 | $4.20 | $42.00 |
| After $20,000 more on A | $220,000 | $60,000 | $184,800 | $3.08 | $30.80 |
Your ticket is the same, and your horse is the same, but the payout fell from $4.20 to $3.08 per $1, a drop of 27%, because more people chose Horse A. This is why the odds on a tote board change until the race starts. The board shows an estimate, and the final payout comes from the closing pool.
How does the same race look at fixed odds?
At fixed odds, the price you took stays the same, whatever happens afterward. Suppose a bookmaker offered Horse A at 4.00 in decimal odds, which is 3/1 in fractions, when you bet. A $10 bet returns $40 if it wins, whether the price later shortens or drifts.
Read more: Handicap Races: Weights, Barriers and Odds
| If you bet $10 on Horse A | Return if it wins |
|---|---|
| Parimutuel, early in the pool ($4.20 at the time) | $42.00 only if the payout stays at $4.20, which it may not |
| Parimutuel, after late money (final $3.08) | $30.80 |
| Fixed odds at 4.00 | $40.00 |
In this example the fixed price is better than the final tote payout, but that is a feature of the invented numbers. If the late money had gone elsewhere, the tote payout could have risen above $4.20. In real markets neither system wins every time, and each includes a cost.
How does the cost work in each system?
The cost in parimutuel betting is the takeout, and the cost in fixed-odds betting is the bookmaker’s margin, called the overround. Both are a percentage taken from the money bet, and both show up as returns that, across the whole market, are less than the money staked.
For a parimutuel pool, the implied probabilities from the payouts add up to more than 100%. With a 16% takeout, the sum is 1 divided by 0.84, or 119.0%. For a bookmaker, the implied probabilities from the prices also add up to more than 100%. We explain the idea in our guide to implied probability.
Here is an invented four-horse fixed-odds market.
| Horse | Decimal price | Implied probability (1 divided by price) |
|---|---|---|
| A | 2.00 | 50.0% |
| B | 3.00 | 33.3% |
| C | 5.00 | 20.0% |
| D | 8.00 | 12.5% |
| Total | 115.8% |
The total of 115.8% is the overround. If you spread $100 across all four horses in proportion to those probabilities, you would receive back about $86.33 whichever horse won, a cost of about $13.67. Compare that with a 16% takeout, which costs $16 per $100 on average. The two costs are not directly comparable, because bookmaker margins differ by market and by price, and tote takeouts differ by pool, but the idea is the same: each system keeps a share.
What does a whole parimutuel board look like?
A whole board shows how the pool turns money into prices for every horse at once. Here is an invented four-horse win pool of $200,000 with a 16% takeout, so $168,000 goes to winners.
| Horse | Money bet | Share of pool | Payout per $1 | Implied probability (1 divided by payout) |
|---|---|---|---|---|
| A | $70,000 | 35% | $2.40 | 41.7% |
| B | $60,000 | 30% | $2.80 | 35.7% |
| C | $45,000 | 22.5% | $3.73 | 26.8% |
| D | $25,000 | 12.5% | $6.72 | 14.9% |
| Total | $200,000 | 100% | 119.1% |
Two things stand out. The payouts follow the money: the horse with the largest share has the lowest payout. And the implied probabilities add up to 119.1%, which is 1 divided by 0.84. That excess is the takeout in another form, the same role that the overround plays in a bookmaker’s prices.
The board also shows why a favorite is not a promise. Horse A has the lowest payout because most people picked it, not because it is certain to win. With a total of 119.1%, the takeout is paid on every ticket, so a bettor must beat the crowd by more than the takeout just to break even over many races. That is a high bar, and most bettors do not clear it.
What is breakage?
Breakage is the rounding of tote payouts down to a set unit, and the operator keeps the difference. Wikipedia says payouts may be rounded down to a set denomination, such as 10 cents in California, Australia and British Columbia, and that the rounding difference is kept by the operator as part of its commission.
An invented example: suppose the calculated payout is $4.264 per $1. If the rule rounds down to the nearest 10 cents, the payout is $4.20, and the 6.4 cents of difference is retained. Over thousands of tickets this adds to the operator’s share. It means the real cost of a tote bet is slightly higher than the stated takeout.
The Straight reported in July 2026 that in Australia, some national tote changes would round dividends down to the nearest 10 cents, so the same idea applies there.
Which pools and bets use each system?
Parimutuel pools are used for win, place, show and the exotic bets, as explained in our exotic bets guide. Each bet type has its own pool and is settled separately, according to Wikipedia. Sweden’s V75 splits its pool 40%, 20% and 40% among bettors with seven, six and five correct picks, which shows how pool rules can vary.
Fixed odds are used by bookmakers for racing and for many other events. In Australia, both are available on the Melbourne Cup, and our Melbourne Cup betting guide shows how the tote and fixed-odds prices work there. Which is offered where depends on the country and the law.
How did the tote board come about?
The tote board exists because the calculations were hard to do by hand. Wikipedia says the Australian engineer George Alfred Julius invented the mechanical totalisator, with the first installed at Ellerslie Racecourse in Auckland in 1913, and the United States adopted it in 1927. Today the calculations are done by computer, and the board updates as bets arrive.
That history explains why the odds on a tote board are called “approximate” until the pool closes: they are recalculated as each bet arrives. A fixed-odds price is a quoted number, while a tote price is a running calculation.
Does one system suit casual viewers better?
Neither system is built for casual viewers, and both can be enjoyed without betting. If you only watch, the tote board is a handy way to see what the crowd thinks, because the percentages show where the money is. If you do bet, the main practical difference is timing: a tote payout is final only when the pool closes, and a fixed price is final at once. Choose based on what you can check and afford, not on which sounds better.
What should you check before choosing?
Check the rules, the cost and the timing. For parimutuel betting, look up the takeout for the pool, the minimum bet and the rules for scratches and dead heats. For fixed odds, check the price, how the bet is settled and any terms on each-way or place bets. For both, set a limit first and remember that the cost applies to every bet.
- Cost: find the takeout or compare the prices across a market.
- Timing: a tote payout can change after you bet. A fixed price cannot.
- Rules: scratches, dead heats and place terms differ.
- Legality: what is allowed depends on where you live. Our guide on whether gambling is legal where you live is a starting point.
- Limits: our budget and time limit guide and Safer play toolkit explain how to set them, and our Get help page lists free support.
What should you read next about racing bets?
- The event these examples draw on: Breeders’ Cup 2026 guide
- Combination bets and their odds: Exotic bets explained
- Reading the program: Racing programs and past performances
- How odds turn into chances: Probability and odds in plain language