The legality of betting on horse racing varies state by state, but its origins date back to the 19th century when the sport first became prevalent in the U.S. By the late 1800’s, horse racing was firmly entrenched as an American institution with over 300 tracks in operation, most of which took bets. However, those opposed to gambling were able to successfully ban bookmakers at the turn of the 20th century, which led to the introduction of parimutuel wagering in 1908.
The parimutuel system is the primary reason betting on horse racing is legal and has flourished. In parimutuel wagering all bets of a particular type are combined into one pool, and bettors aren’t vying against the “house,” as the odds are determined by what their fellow bettors do (i.e. how much money is wagered on a particular horse or combination).
Racetracks take a percentage of each pool —also called takeout — which differs depending on the type of bet, and the remaining amount is paid out to all winning ticket holders. The system eliminates the risk of the house trying to influence the outcome of the event. This aspect of parimutuel wagering is also the reason it is legal in many states to bet on a horse race online but not poker or other games which are easily manipulated.
The late 2010’s has seen the dawn of legal sports betting in America, but it was previously given different treatment from horse racing due to the human element. Infamous betting scandals like the 1919 Chicago White Sox fixing the World Series have been pivotal in framing the public consciousness of sports betting, whereas horse racing has generally been viewed as less corruptible. In essence, horse racing has found the sweet spot between betting on human athletes and the controlled environment of table games.