Pari-mutuel betting is the system of legalized betting used at all racetracks in the U.S., which was developed in France in the mid-1800s.

The term "pari-mutuel" means "betting amongst ourselves." In this type of betting, the number of possible outcomes is determined and then people wager money on each possible outcome. The total of all money wagered on the race is then placed into a pool, and when the outcome of the race is decided, the pool of money is divided among all the people who bet on that outcome.

Before the money is distributed to the winners, a state-regulated commission is taken out. The commission goes back to the state, therefore justifying the allowance of betting.

The calculations for horse racing are extremely complex, due to the different types of bets that can be placed and won. Below are some common bets:

• Win - to pick the winning horse
• Place - to pick the first- or second-place horse
• Show - to pick the first-, second- or third-place horse