DEFINITION of 'Pari-Mutuel Revenues'

Pari-mutuel revenues is income a gaming company earns from customers' mutual betting activities, most commonly on horse racing. Pari-mutuel is derived from the French, meaning "bet" or "wager" and "mutual." Churchill Downs, the owner of the Kentucky Derby, is an example of a company that achieves a significant percentage of its earnings from pari-mutuel revenues. In addition to pari-mutuel revenues, gaming companies may also earn income from other types of gambling such as online poker and casino games.

BREAKING DOWN 'Pari-Mutuel Revenues'

In pari-mutuel wagering, the top three winning bettors (for "win-place-show") and other bettors who picked "exacta" or "trifecta" combinations share in the earnings of all the pooled bets for a particular race. Rather than betting against the house, the players bet against one another. The rate of return on winning plays that allows one to earn a profit after factoring in losing plays, transaction costs and breakage (the rounding down of winning bets to the nearest dime or nickel) is called the "take."

In the U.S., casinos of any type are heavily regulated. Interstate pari-mutuel betting on horseracing is subject to the Interstate Horseracing Act (IHA) of 1978. Under IHA, racetracks are allowed to commingle bets from different racetracks and wagering facilities. This expands pari-mutuel revenue possibilities for racetrack owners.

Pari-Mutuel Revenues at Churchill Downs

Churchill Downs, the venue for the Kentucky Derby, generated $173 million of pari-mutuel revenues in 2017, accounting for over 60% of the total of this type of revenue (Churchill Downs, the company, also operates casinos). According to the company's accounting policy, pari-mutuel revenues are recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the racing regulatory body of the state where the race occurs. Aside from the standard bets at a race, the company offers gamblers other ways to win money, with bet structures under names like Super High-Five and Single 6 Jackpot.

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