How Does Horse Betting Work?

Unlike casino betting where bets are placed against “the house,” horse racing wagers are based on the pari-mutuel system where each bet is placed in an individual pool that is shared by the winners. In this sense, bettors are really betting against one another. The host track makes money by extracting a percentage of the pool known as the “takeout” with the winning bettors sharing the remainder. 

Horse Betting Odds Explained

Regular horse players are always keenly aware of the odds of the horse they choose to support as the odds dictate the payouts they will receive. Odds are continuously updated at the track and displayed on a large screen known as the tote board. Initially, odds are established by a track employee who handicaps the race and attempts to assign a fair value to each horse.

Once wagering opens, however, the odds are dictated by the amount of money wagered on each betting interest in the race. For a quick illustration of how odds are configured, let’s consider the following fictitious race using just five betting interests to keep things simple.

Horse # Amount Wagered
1 $110
2 $275
3 $500
4 $68
5 $47
Total Pool $1000
Total Pool (-15% Takeout) $850

In this illustration, the 3-horse has clearly dominated the wagering with half of the pool before takeout – $500 in this case – settling on his chances to win. We can surely expect the 3 to be an overwhelming favorite, but first let’s factor in a standard takeout percentage of 15% at a major track like Belmont Park for a win bet. The host track collects takeout from every pool on every race because, hey, they’ve got to make money too. $1000 minus 15% ($150) equals $850.

How Money Bet Translates To Wagering Odds

Now calculating the win odds on each wagering interest is a simple matter. Just take the total pool minus takeout ($850) and divide by the amount wagered on each horse.

For example, for the 1-horse, take $850/$110, which is equal to $7.72. This means that for every dollar wagered on the 1-horse, the bettor would receive $7.72. This payout includes the $1 wagered plus $6.72 in profit. Odds are always expressed as a fraction on the tote board, so in this case, the 1-horse would be represented as 6/1 with the bettor pleasantly surprised to rake in an additional 72 cents if the bet were successful. The table below illustrates what the win odds would look like for the five horses in this field:

Horse # Win Odds
1 6/1
2 2/1
3 3/5
4 11/1
5 17/1

A quick comparison between the odds and the amount wagered on each horse shows the correlation. The 3-horse is the public’s choice. 3/5 means that a bettor would have to wager $5 to earn a $3 profit. Thus, a $5 bet on a 3/5 choice would return $8 in total – the original $5 wagered plus $3 profit. Conversely, the longest shot on the board is the 5-horse, who would return a whopping $17 profit for every dollar wagered.

Finding A Comfort Level With The Odds 

Once a bettor understands how the odds are calculated, the task of finding fair betting value is essential. Because betting odds are fluid, and not fixed until the horses enter the starting gate and wagering is closed, many bettors prefer to track the movement of the odds closely until just a few minutes before post as odds can sometimes change drastically reflecting the ebb and flow of wagering dollars entering the pool in support of a particular interest.

In some cases, a horse that figures to be a favorite may open at odds much higher than the morning line. Novice tote watchers may be fooled by this action and support another betting interest only to watch the odds gradually drop as more money comes in on the morning line favorite and the start of the race draws closer.

Experienced bettors are confident in their selections well in advance of the race and are not as easily influenced by the movement of the odds. Savvy bettors are also quite skilled at predicting what the final odds will be based on their knowledge of how the public bets certain tracks.


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