Kentucky Horse Racing Bettors Win $1M More Since July Due to Penny Breakage

Since July, horse racing bettors wagering on Kentucky races have been winning more money. It’s not due to better odds on their selections.

Horses speed to the finish line during a Sept. 1 race at Kentucky Downs in Franklin, Ky. Since July, Kentucky racetracks have paid out winnings using penny breakage, which has put more than $1 million more in the pockets of bettors wagering on win, place, and show over the last three months. (Image: Casino.org)

, a horse racing reform bill, officially became law three months ago. The bill, sponsored by (R-Erlanger), equalized the pari-mutuel tax rate for live racing, online wagering, and historical horse racing machines. It also directed more tax revenue to the state’s general fund.

But another aspect of the bill was making Kentucky the first state to essentially eliminate breakage, or rounding down, in its pari-mutuel pools. Now, Kentucky tracks pay bettors including out-of-state bettors to the penny of the true pari-mutuel payout.

Breakage Defined

So, what exactly is breakage?

Previously, pool payouts were rounded down to the nearest dime on a $1 bet. So, if a horse would have paid $2.99 on a $1 bet, the track would have paid out at $2.90. Or $5.80 on a $2 bet, with the track pocketing the rest. While it may only seem like pennies, they do add up rather quickly, especially for high-dollar bettors.

Breakage was a necessity decades ago when wagering was done exclusively at the track. Trying to pay to the penny back then would have been a logistical challenge, especially without computers. But in recent years, technology has made it more feasible. That’s especially true as online advance deposit wagering platforms account for more than half of the wagering nationwide.

Eliminating breakage is also a way for horse racing to attract a broader audience. Fixed-odds online sports betting apps, like and , pay out their wagers to the penny, and those two operators have recently signed deals with Churchill Downs and The Stronach Group, respectively, to include pari-mutuel racing on their sports betting platforms.

Thoroughbred Idea Foundation (TIF) Executive Director Patrick Cummings has been a long-time advocate for eliminating breakage. According to TIF, bettors have pocketed more than $1.1 million because of the breakage reduction, and that’s just for win, place, and show betting in thoroughbred races.

Cummings said in a release that the tracks and tellers needed a little bit of an adjustment period to get accustomed to it. But it’s been a “seamless” transition for online bettors.

Now that customers receive a full dividend, not only is there no going back, but we start looking elsewhere wondering why others are not as progressive as Kentucky,” Cummings said.

Cummings is convinced that tracks will benefit from the move, as he believes it will lead to more churn by bettors.

Breeders Cup to Offer Penny Breakage

The first big showcase for penny breakage occurs next month, when Keeneland in Lexington serves as host for the Breeders’ Cup, the two-day world championship series of races. Bettors nationwide will be able to take advantage of Kentucky s breakage law when they wager on the races, just as they can now for races at any other Kentucky track.

The handle for the races typically ranks among the largest in racing. Last year at Del Mar Race Course, the two-day event generated a record handle of $182.9 million. Of that, bettors wagered $121.6 million on the Saturday card, which features the Breeders’ Cup Classic. The Saturday handle was higher than the total amount wagered for either the Preakness Stakes card ($113.4 million) or the Belmont Stakes card ($112.7 million) last year.

This year, the Breeders’ Cup will take place on Nov. 4-5.

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