Horse Racing Betting History

Horse Betting History

In the old days, the only two ways of placing a bet on a horse in a race was either to go to track and do it yourself, or entrust your bet to a bookie who, for compensation of some sort, would promise to go to the track and register the bet for you. Once bookies were outlawed throughout the United States, betting in person was, for a while at least, the only way to accomplish the task. About 100 years ago, an innovation in the way bets were handled brought about a major change in all this. That innovation was pari-mutuel betting.

Pari-Mutuel Betting

The end of the bookie era caused the amount of money wagered at race tracks to fall drastically. This made the purses much smaller, and led to a general reduction in the number horses available to race. In 1909, before racing disappeared entirely, the management of Churchill Downs in Louisville, Kentucky came across some old pari-mutuel machines in storage and reinstalled them. Colonel Matt Winn evicted the on-track bookies and reopened for business under the pari-mutuel system. Other tracks quickly followed suit, and soon, pari-mutuel betting was the rule at every track where horse race gambling was permitted.

The key to the success of pari-mutuel betting is that payoff odds are not set by some bookie or other handicapper, but by the volume of betting by the whole public on a given horse in a given race. Thus, a wager is not evaluated against "house" odds, but against what the "public" thinks about the horse. This is inferred from the distribution of money bet across all the entrants in the race. "Public" in this sense is not the same as the term might be employed in a sports book to describe ignorant bettors. The pari-mutuel public may be well informed, as the "action" can include wagers made by a lot of "sharps." For example, legal gambling syndicates or clubs may be involved, who can wager large sums on behalf of a pool of people who have gone to the trouble to undertake some highly informed handicapping. This activity will surely influence the pari-mutuel odds for any given horse.

Bets, once placed, would periodically be added up on a machine called a "totalisator." The posted payoff odds on a given horse in a race would then be adjusted to reflect the action of all the wagerers. This information was displayed on a chalk board on the field at the track. The horses most intensely bet upon would have their information updated much more often than the others, and their place on the board would become chalky from so much erasing and rewriting. For that reason, pari-mutuel race favorites are often called "the chalk," and betting on the favorite is called "betting chalk." The pari-mutuel payoffs on the horses are also called the "track odds." Pari-mutuel betting brought about a certain transparency in setting the payoff odds, and helped restore the public's confidence in the fairness of the system.

Nowadays a person makes money by being able to place bets so as to out-perform the "track odds," that is, beat the "public's" notions of who will win, place or show in the various races. When a person's handicapping indicates that the public has underestimated a horse's winning potential, that person has an "edge" because the financial prospects for the bet are better than the general betting public has defined in the "track odds." If your handicapping tells you that a horse's "true odds" in the race are better than the "track odds," then that horse is, for you, an "overlay." Likewise, a horse that is more popular with the betting public than he (or she) should be is an "underlay." One key objective of handicapping is to identify an underlay, where the public has "overbet" a horse. This implies that one or more other horses are "underbet." In other words, there is at least one overlay out there, too.

Off Track Betting

After pari-mutuel betting was installed all over the country, it was still necessary to go to the track to place a bet in most states (or to rely on your brother-in-law, or somebody like that, to go for you). State laws may have loosened the prohibition on horse racing as a result of the pari-mutuel betting system, but bookmaking has remained illegal. You are still not allowed to place bets for others in exchange for a fee. What changed all of that was the advent in the 1960's of remote betting outlets, often known (at least in New York) as "Off Track Betting" or "OTB" locations. Unlike the bookies of the 1890's and 1900's, these remote betting locations were not bars and pool halls, but store fronts set up and independently managed by entities formed exclusively for the purpose. In most cases, the state or local government was the operator. As a result of this innovation, tracks these days are not nearly as crowded as they once were, even though betting volume keeps growing. Most modern OTB locations offer closed-circuit simulcasts of all race activity, making it even less important to trek to the track. On top of this are cable and satellite feeds that a die-hard fan can obtain to see racing right at home. Internet gambling has also become a large business. Nowadays, most race fans simply stay in the comfort of their home or in an off-track betting location to make bets and watch the races.

Off-Line Betting

The well-chosen Las Vegas race book is potentially the most luxurious, well-appointed, well-served and high-tech version of the off-track betting location that a race bettor can find. The key difference between the Vegas race book (or the online race book for that matter) and the remote OTB location is that the wagers placed at OTB locations enter into the pari-mutuel pool, whereas bets placed at a Vegas race book or online are not registered in the same way with the track before the race. Even thought the race book may pay "track odds" on all bets placed with it, the "track odds" announced at the track have no knowledge of, and therefore do not consider, any of the betting that goes on in the race books in Las Vegas or on line.