Horse Racing Odds
How Horse Racing odds are computed, the Parimutuel system, and how horse racing payoffs are determined.
Horse Racing payout tables, and odds calculations.

How horse racing odds are computed.
The sport of horse racing uses a system called Parimutuel odds to determine the payouts on races.  This system was developed in Paris, France as a way to insure a fair betting system and also allow bookmakers to make a guaranteed profit on a horse race no matter what the outcome was.  A fixed odds system was previously used, and is also still used by bookmakers at some European tracks.  In a fixed odds system the bookmaker gives the gambler a set price on a horse, say 3:1, and once that bet is "sold" the price remains fixed for the purchaser.  In the Parimutuel system the odds are determined by the betting pool. In this system if you make your bet on horse number 7 when the tote board says the odds are 3:1, you are not guaranteed to get that payout, the odds will rise and fall prior to the running of the race when the pools are closed.

The table to the left shows the Parimutuel odds, the percentage of the pool that those odds reflect, and the payout for those odds.  For example, if a horse goes to the post at odds of 7:5 that means that approximately 41% of the money in the pool has been bet on that horse to win.  If he wins, the payoff would be $4.80 - your original $2 back plus $2.80 in profit as your share of the losing bets in the pool. The horses true odds are determined by using this formula:}

( [Payout - wager] / 2) or ($4.80-$2.00) / 2 = 1.40 to one.

When handicapping a horse race it is helpful to think in terms of odds as a percentage for the potential success of a your pick.  If your handicapping of the race leads you to believe that a particular horse has a 20% chance of winning, then the fair odds for that horse would be 4:1, anything more would be a bargain and anything less should lead you to make another selection for better value.

In this system, the track makes a profit no matter what the outcome of the race is.  The "take out" is a percentage of the total pool, and the track takes that before any payoffs are made.  The larger the betting pool, the more money the racetrack makes.  The takeout is removed from the pools before odds are shown , so what you are seeing on the tote board reflects the odds after the track has taken its cut.  The takeout varies by state and goes not only to the racetrack but back to the host state in the form of taxes, to the horsemen as purses to fund the race, breed enhancement funds and others.

The  takeout varies by state and by pool.  The takeout from the win/place/show pool is usually the smallest, and the rake gets bigger for exotic bets (exactas, trifectas, etc.) and multi-race bets (pick-3, pick-4, and pick-6 wagers).

As you can see from the takeout chart on the left, the WPS pools (Win, Place, Show bets) have the lowest takeouts.  At Churchill Downs 16% of the money bet in the WPS pool is taken out before odds are shown or payouts made.  The takeout for the exotic bets are higher - 19%.  The more difficult the bet is to win, the more money the tracks take.  Hitting a pick-6 is difficult enough, but at Woodbine racetrack in Canada they are taking over 26% of the money bet on the pick-6 before making a payout so take that into consideration when you are trying to hit the big one!  These takeout percentages change often with new tax rules, so check with your local racetrack to get the latest and most accurate information.