I could be totally wrong but this is how I remember it.

Each bettor's wager is calculated as a ratio of the total bets on each fighter. Then the winnings are disbursed from the total of wagers on the loser, using those ratios.

Say for example there are four bettors:

Bettor A bets 500tc on Tori
Bettor B bets 1500tc on Tori
Bettor C bets 750 on Uke
Bettor D bets 750 on Uke

(2000 on Tori, 1500 on Uke)

Bettor A's wager accounts for 25% of bets on Tori, and Bettor B's wager accounts for 75%. If Tori wins, Bettor A will receive 25% of the wagers placed on Uke and Bettor B will receive 75%. In this scenario since 1500 was bet on Uke, Bettor A would receive 375tc (plus his or her original wager back of course) and Bettor B would receive 1125TC.

However, if Uke wins, Bettors C and D will each receive 1000TC--since both of their bets are equal in ratio, and bets on Tori totaled 2000tc.

Further, note that the maximum earnings for an individual bettor caps out at five times the amount the user bet. I.e. if I bet 1000 TC, the most I can get back is 4000 (plus my original 1000), regardless of my wager ratio.

I have no clue how it works with /house, though.