A person watching the outcome of an event wished to become a full part of the event. And while in the beginning interested people made bets with similar amateurs by placing bets, over time the situation changed fundamentally – the industry was taken over by corporations. But the initial essence remained – whoever guesses gets all the money.
Although betting dates back to ancient Rome, a few stories from later pages of human history are most notable. In the 18th century, for example, the Duke of Queensberry became famous throughout Europe for the biggest bet – he bet practically all his money on the outcome of a fist fight.
It is noteworthy that the truly passionate people do not care what to bet – there were cases where bets were made on which raindrop on the glass will reach the window frame first.
The main condition for betting is that it must be either in terms of money or for the individual to gain some benefit. And while today it’s mostly money that’s put on the line, earlier people would put their possessions, expensive horses, wives, houses and other things on the line.
There is a poem in Chinese literature from the early 6th century. Its characters – two beggars who bet on which side of the birch leaf, which was plucked from a tree by the wind, would fall. Since there was nothing to bet, the loser’s ears were at stake.
A simple conclusion that ensues from this is that in order to make a bet, a person needs another person who is also willing to stake a certain amount or property, but has an opposing opinion. With the passage of time, large bookmakers emerged who accepted bets from everyone on any outcome.
How did betting shops come into being?
Businessmen quickly realised that they could make good money on human vice. Gamblers enjoy betting big and small on particular events.
In order for the venture to be truly successful, the bookmaker must collect the highest number of bets that will be profitable for him personally and not for the player. This explains the odds that are set in the betting shops – the percentage of the profits must necessarily be in favour of the betting company.
A simple example – let’s say you want to bet on a sweepstakes. There are 7 horses in the race, but the most profitable odds are 5 to 1. So, if there are 7 players, each of them betting on one of the horses to win, the bookmaker stays in any case, with any outcome.
The auction pool
One of the key pages in the history of betting is the advent of auction pools, where the amount of winnings was determined automatically by the betting participants The betting participant (in this case, the horse) is “sold” in the auction to the person who was willing to bid the highest amount for it. As a result, if the horse won, the highest bidder made a profit. The only disadvantage of the auction pool at that time was that the person who had the highest bid for the horse could win.
Auction pool underwent serious changes in 1872 – that’s when Pierre Oehler, a native of Paris, modified the system and proposed to enable anyone who wished to buy a ticket for an auction. Pierre did not forget about himself by introducing a commission. So a rather hefty sum was collected and the proceeds were divided between the holders of the winning tickets (those who bet money on the winner).
The author himself, by the way, dubbed the system “pari mutuel”, which translates into Russian as “betting amongst yourselves”. The system has gained immense popularity and replaced the classic auction pool. Despite the fact that betting was frowned upon by the French authorities at the time, the system was officially recognised by the rulers as the only legal way to bet.
What is a totalizator?
In this section of our article, it is worth talking about a special device that appeared in the 19th century and was called by no other name than a totalizator. Before us – a mechanical device that was invented in New Zealand back in 1880. In its essence, the totaliser is an arithmometer sharpened for a specific function. Incidentally, the electric tote was invented in 1913.
In the States the tote was called the “Australian tote”, today all these devices have been replaced by computers.
How does it work? The system works according to the following principle: the bets placed by the betting shop’s clients are added up and taken into account. Once the event has happened and the winner (the winning outcome) has been determined, the system calculates the payout percentage and determines how much of the winnings will be paid (margin and taxes are calculated from this amount).
The system shows decent results but its implementation was not easy – not every player wanted to deal with a mechanical “chump” so to speak and being very conservative they did not want to change their habitual betting with live people for a deal with a machine.
The sweepstakes had a rather serious disadvantage – players did not know what the payout would be until betting closed completely. There were situations when odds on a horse were 4 to 1 and then the odds would fall to 2:1. There were also situations in which race organisers themselves put serious money into the box office by placing large bets, deliberately reducing the odds.
Later, official authorities intervened in the betting industry, demanding improvements in the devices and introducing a taxation system.
Paris invention in the US
In the 19th century, the system invented by Pierre Oehler started to be introduced in the US. It was not until the beginning of the 20th century that success was achieved, namely in 1908, when it was introduced permanently in Kentucky. By 1940, the only state where betting was illegal was New York and the maximum that could be legally used here was the pari-mutuel system.