Parimutuel betting (French for mutual betting) is a betting system in which all bets of a particular type are placed together in a pool; taxes and a house take are removed, and payoff odds are calculated by sharing the pool among all placed bets.
The parimutuel system was invented by Parisian perfume maker Pierre Oller in 1865 when asked by a bookmaker friend to devise a fair system for bettors which guarantees a fixed profit for the bookmaker.
The large amount of calculation involved in this system led to the invention of a specialized mechanical calculating machine known as a totalisator, "automatic totalisator" or "tote board".
The first was installed at Ellerslie Racecouse in Auckland, New Zealand on 1913. Since then totalisators came into widespread use at race courses throughout the world. The first totalisator in the US as installed at Arlington Park, near Chicago, Illinois in 1933.
The parimutuel system is used in gambling on horse racing, greyhound racing, jai alai, and all sporting events of relatively short duration in which participants finish in a ranked order.
A modified parimutuel system is also used in some lottery games such as Lotto South.
Parimutuel gambling is frequently state-regulated, and offered in many places where gambling is otherwise illegal. Parimutuel gambling is often also offered at OTB facilities, where players may bet on the events without actually being present to observe them in person.
Parimutuel betting differs from fixed odds betting in that the final payout is not determined until the pool is closed - in fixed odds betting, the payout is agreed at the time the bet is sold.
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