Pari mutuel is a term you might come across when betting on a game of some sort. If you thought the term was French, you were correct. In English, it means mutual betting. This also hints at how the process works, but we’ll go into it in more detail now.
The term describes a method for betting on the outcome of a specific event. This could be a horse race or a spin of the wheel in roulette. All the bets go into the same pot and are added together. In some cases, taxes might be due to be paid on those amounts. If so, they are taken from the total. Since the house, usually a casino, would need to take a slice as profit from the bets, they would take their slice after the taxes have been settled.
So, let’s suppose the total bets taken amount to $2,000. And for sake of argument, we’ll say the taxes amount to $50. We’ll also say the house is due $50. Those amounts are withdrawn from the pot, leaving the total bets left at $1,900.
The event then takes place to decide what happens and what the result is. If you were incorrect with your guess, you lose your bet, as you would imagine. If you were correct, you get a slice of the money in the pot. If you were the only person to guess correctly, you would get $1,900. If four people guessed correctly, each person would get $475 in winnings.
This describes the pari mutuel form of betting. It works with all scenarios, sports, and events, but it always covers a specific process. All bets are taken, taxes are deducted, and then the casino (or similar outlet) deducts its cut. The remaining cash is then distributed among one or more players who correctly guessed the outcome of the event. This could be one person or many. Regardless, the amount left is split between one or more people as described above.
You only tend to hear about pari mutuel betting in certain circumstances. We gave the example of roulette above, but other games and sporting events can use this system as well.