Pari-mutuel vs. fixed-odds wagering: How are they different?

March 23rd, 2022

Sports bettors are accustomed to fixed-odds wagering. Horse racing bettors are widely familiar with pari-mutuel wagering. But how do they differ? And is one better than the other?

Let’s define and explore the differences between pari-mutuel and fixed-odds betting:

Fixed-odds wagering

The fixed-odds wagering offered by bookmakers (such as sportsbooks) is easy to understand. When you’re ready to place a bet, you examine the odds offered by the different betting interests, make your selection, and lock in your price. Once your bet is placed, the odds can’t change, hence the term fixed-odds wagering. If you place a bet at odds of 5-1, your odds will stay at 5-1 no matter how they shift for subsequent bettors.

Pari-mutuel wagering

Pari-mutuel wagering works in a very different manner from fixed-odds wagering. Let’s use the win pool of a horse race as an example. Every dollar wagered is pooled together, and—after a certain percentage is removed as takeout—the remainder is distributed equally among all winning bettors. In other words, you’re betting against other bettors rather than a bookmaker, and the host of a pari-mutuel pool doesn’t have a vested interest in any specific outcome.

Of course, the pooled nature of pari-mutuel wagering means final odds cannot be calculated until the betting has closed. Thus, the odds can change between the time you place your bet and the time payoffs are calculated.

What are the upsides and downsides of fixed-odds wagering?

The biggest benefit of fixed-odds wagering is the ability to lock in a fixed price, which makes it easier to evaluate risk vs. reward and plan betting strategies. If you’re ahead of the game in identifying a popular choice, you can lock in a great price. If you’ve placed a bet at 4-1, and the odds drop to 2-1 as the contest approaches, you’ll still receive the 4-1 odds from the time you placed your bet.

The downside is that fixed-odds wagering usually involves betting against “the house,” or a bookmaker. Fixed odds must be carefully managed to reduce risk and ensure long-term profitability, so you may encounter limits on how much you’re allowed to bet or win.

What are the upsides and downsides of pari-mutuel betting?

Pari-mutuel betting has a notorious pitfall: the fluidity of the odds. It’s possible to bet an 8-1 longshot and see the price dip to 4-1 by the time betting closes, significantly reducing the payoff you were anticipating. This drop can even be triggered by your own betting—if you place a large win bet in a small pool (theoretically, there’s no limit to the size of your bet), you can cause the odds to plummet.

On the other hand, it’s also possible to catch bigger payoffs. The general public might latch on to a favorite and bet heavily, driving up the odds on a logical opponent and allowing you to cash a higher-than-expected payoff.

The good news is, both fixed-odds and pari-mutuel wagering can be profitable for skilled bettors who know their sport. After all, a winning bet is a winning bet regardless of the type!

Find the latest horse racing odds on