Why betting small pari-mutuel wagering pools can be tricky

Can the size of a pari-mutuel wagering pool have a significant impact on the betting payoffs generated? The answer is yes, and the bigger the pool, the better the possibilities.

The majority of betting on North American horse racing is conducted in pari-mutuel pools. This means the dollars wagered by every bettor are pooled together, and — after a varying percentage (called takeout) is removed to pay taxes and fund the sport — the remainder is split equally among all winning bettors.

But not all races and tracks attract the same amount of betting dollars. The Kentucky Derby (G1) at Churchill Downs is a great betting race, in large part because it draws millions of dollars in wagers each year. When a betting pool contains a lot of money, the odds are less likely to shift and the payoffs are much better, compared to pools that contain a few thousand dollars.

Suppose you love a 20-1 longshot in a Tuesday-afternoon race at a small track. You’re excited to place a $1,000 win bet on this overlooked contender and expect a payoff of $21,000.

But what if there was only $1,100 in the win pool to begin with? Your $1,000 wager has increased the pool size to $2,100, with just less than half riding on your preferred choice. Now, your 20-1 longshot is favored at around 9-10, and your $1,000 wager will only return ~$1,900. Ouch!

A related outcome can occur in multi-race wagers. Suppose you’ve bet a Pick 4 sequence with 50-1 longshots in all four legs. Miraculously, all four of your 50-1 choices visit the winner’s circle. Surely you’re due for an epic payday! Unfortunately, the Pick 4 payoff will be directly tied to the size of the Pick 4 pool. If only $250 has been wagered in the Pick 4, and the takeout rate is 20%, the most you can win is $200. Not a great return for picking a bunch of 50-1 winners, right? Even a quartet of $2 win bets would have returned $408.

In contrast, these concerns are reduced (or practically eliminated) when you bet into large pari-mutuel pools.

A $1,000 win bet is a drop in the bucket if you wager into a $1 million win pool. It represents just 0.1% of the pool and might not even knock a 20-1 shot down to 19-1. And, if you’re betting a Pick 4 with a $2.5 million pool, four 50-1 winners might award you the whole pool (minus takeout, of course).

The next time you play a smaller track, check out the size of the pools before you place bets. See if there are any guaranteed pool sizes on the agenda. You might want to plan your investments accordingly and avoid spending too much in pools that have little upside.