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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 an automatic totalisator or the "tote board". The first was installed at Ellerslie Racecouse, Auckland, New Zealand in 1913, and they came into widespread use at race courses throughout the world (the U.S. introduction was 1933 at Arlington Park, Chicago).
Parimutuel gambling is frequently state-regulated, and offered in many places where gambling is otherwise illegal. Parimutuel gambling is often also offered at "off track" facilities, where players may bet on the events without actually being present to observe them in person.
There may be several different types of bets, in which case each type of bet has its own pool. The basic bets involve predicting the order of finish for a single participant, as follows:
In Australia
In the United Kingdom
Depending on the facility rules, which might vary from event to event, other bets may also be offered which allow the user to pick the finish of more than one participant, or more than one event. These are called exotics, and generally have higher payoffs. However, the facility's take is usually higher for these bets as well. The chief North American and Australian exotics are:
Unlike many forms of casino gambling, in parimutuel betting the gambler bets against other gamblers, not the house. The science of determining the outcome of a race is called handicapping .
It is possible for a skilled player to win money in the long run at this type of gambling, but overcoming the deficit produced by taxes, the facility's take, and the breakage is difficult to accomplish and few people are successful at it.
Independent off-track bookmakers have a smaller take and thus offer better payoffs, but they are illegal. However, with the introduction of Internet gambling has come "rebate shops". These off-shore betting shops in fact return some percentage of every bet made to the bettor. They are in effect reducing their take from 15-18% to as little as 1 or 2%, still ensuring a profit as they operate with minimal overhead. Rebate shops allow skilled horseplayers to make a steady income.
See also Bet exchange, Bookmaker and Spread betting.
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