How does pari-mutuel betting work in horse racing?

Pari-mutuel wagering is a system developed in France in which all bets of a particular type are placed together in a pool. Then, after taxes and the track “takeout” are deducted, the remainder is divided among all winning bettors.

In U.S. horse racing, and in most other countries, the Tote board that displays the odds is part of a complicated computer system that tallies bets in real time as they pour in and constantly recalculates each entrant’s odds based on the wagering.

It’s an ingenious system, but there are drawbacks. For instance, you can buy a win ticket on a horse at 5-1 and watch the odds plunge when late money pours in on your horse. When you go to collect, you might only get paid at 3-1.