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Racetrack Betting
Introduction
In this part of the guide, we'll clarify the fundamental types of bets one can make when betting at racetracks, detail how payouts are calculated, and explain how the track deducts its share from the overall betting pool. It's worth noting that this guide won't focus on how to select which horse to wager on, as there are other resources for that topic, and it's not an area where I have much expertise. So, if you're looking to understand the essentials of betting at racetracks, you're in the right place.
Pari-Mutuel Betting
The functioning of a racetrack is remarkably similar to that of an insurance company. Bettors collectively contribute their money, usually through an intermediary like the racetrack or an insurer. This intermediary takes a portion of the funds for operational costs and profit, while the remaining amount is returned to those who bet on the winning outcomes.
There are numerous betting formats available at the racetrack. The total amount wagered on a particular type of bet is accumulated into a pool. After the betting period closes, the racetrack will take its portion, which covers taxes, fees to the Racing Association, administrative costs, prize money, and contributions to the Breeders' Fund. For instance, at the Pimlico racetrack in Baltimore, where the Preakness Stakes takes place, the cut taken by the track can range from 17% to 25%, depending on the bet type. The remaining pool is then distributed among the bettors who won.Betting Options
Win : This represents the simplest betting option, where you place a bet on a horse to come in first.
Place : This bet allows you to wager on a horse finishing either first or second.
Show : In this type of bet, you're betting on the chosen horse to finish in the top three—first, second, or third.
Daily Double : This is a bet concerning the first-place winners of two consecutive races, typically the first two of the day. You need to successfully predict both races to win.
Daily Triple/Pick Three : This type of bet focuses on the winners of three consecutive races.
Pick Six : This is where a bettor selects the first-place winners of six consecutive races, usually the last six of the day. If no one wins, the winnings are shared among those who correctly picked five (or fewer winners), with the remaining amount carried over to the next Pick Six pool.
Exacta : With this bet, you must choose the horses that finish first and second in the proper order.
Quinella : This bet focuses on selecting the first and second horses in any order.
Trifecta : This requires picking the correct first, second, and third place horses in the exact sequence.
Twin Trifecta : This involves placing a pair of trifecta bets on two different races. The prize pool is shared between those who win the first trifecta and those who win both trifectas. Those who win the first race trifecta must claim their returns from that portion of the pool and receive a ticket for the second portion.
Superfecta : This bet involves predicting the first four horses finishing in the exact order.
Odd/Even : This is a less common bet that is based on whether the winning horse's number is odd or even.
Typically, the minimum bet amounts are set at $2 for win, place, and show wagers, while for other types of bets, it’s usually $1.
Placing a Bet
The odds for win bets on each horse in the upcoming race, along with combinations for exacta types, will be displayed on the tote board and TV monitors at the racetrack. These odds are updated roughly every ten seconds to reflect real-time adjustments based on betting behavior. Odds are communicated in a 'to' format; for example, if horse number 4 is listed at 8:5, a $2 bet would yield $3.20 in winnings for a total return of $5.20. In contrast to sports betting, the bettor is not tied to the odds at the moment of placing their bet, as these odds may fluctuate right up until the race starts, at which point all bets are frozen.To successfully place a wager at the betting window, ensure you clearly state the racetrack (if not specified, the home track is assumed), the race number, the amount you wish to bet, the type of wager, and the horse's number. There is minimal room for casual conversation or hesitation at the betting window, as others in line do not want to miss out on placing their bets, so be as efficient as possible.
About a minute after a race concludes, the tote board will indicate the payout amounts for winning tickets based on a $2 bet. For instance, you might see something like this:
2011 Preakness
| Number | Name | Win | Place | Show |
|---|---|---|---|---|
| 5 | Shackleford | $27.20 | $10.20 | $6.80 |
| 11 | Animal Kingdom | $4.20 | $3.60 | |
| 1 | Astrology | $8.00 |
This indicates the payout amounts for winning $2 win, place, and show tickets, which includes the initial $2 wager. So, for a $2 place bet on Shackleford, you'd receive a total of $10.20 ($8.20 in winnings plus the initial $2 stake).
The tote board will also provide insights into payouts for winning exotic bets. In some instances, there may be inquiries post-race that can lead to the disqualification of a horse. Therefore, it's wise to wait a few minutes after the race is finished before discarding any losing tickets, as the disqualification of another horse could potentially benefit yours. I remember taking my wife to the racetrack once, where she ended up winning a trifecta due to a horse being disqualified.
Payoff Calculation
When it comes to bets that have only one outcome for winning, the total pool after the track takes its cut is distributed among the winners based on their individual betting amounts. Payouts for every $2 bet are typically rounded down to the nearest increment of 10 or 20 cents, a process known as 'breakage,' which can result in a noteworthy amount of extra revenue for the racetrack.For example, if total wagering on win bets amounts to $1,000, and $200 of that is bet on the winning horse, the payouts for the winning tickets would be calculated as follows. First, the racetrack withholds its share, let's say 17%, leaving $830. The amount bet on the winner is subtracted next, resulting in $630 available for payouts. The ratio of payouts to bets on the winning horse is $630 divided by $200, which equals 3.15. Applying this ratio to the minimum $2 bet, 3.15 multiplied by $2 gives you $6.30. This amount is rounded down to $6.20, which will be the final payout for each $2 wager. All winning bettors will be compensated at this ratio; for instance, a $100 bet would yield a total return of $310 (calculated as $100 multiplied by $6.20 divided by $2). Winners collecting their bets will also get their original stake back; therefore, in this example, someone with a $2 winning ticket would receive $8.20 ($6.20 in winnings plus their $2 bet).
For place and show bets, the total pool is evenly divided among each winning horse. For example, if $1,000 is placed in total on place bets, and the horses that finish first and second are denoted as x and y, respectively, with $100 on x and $200 on y, here's how it works. The racetrack first takes its 17% cut, which leaves $830. After deducting the winning bets totaling $300, there remains $530 to distribute to the winners. Each winning horse will receive half of this amount, so $265 will be allocated to the winners of each horse. This results in a winnings ratio of $265 for horse x against $100 bet, which equals 2.65, and for horse y, it calculates to 1.325 against $200. The unrounded payouts for $2 on horse x become 2.65 times $2, which is $5.30, while for horse y, it becomes 1.325 times $2, which is $2.65. After rounding down, the payouts are $5.20 for x and $2.60 for y. Including the original wager, winners with $2 bets on x will collect $7.20, while those on y will get $4.60.
At times, if a heavily favored horse wins, particularly in show betting, the payout might round down to nothing. In such cases, the racetrack is obligated to pay a minimum of $2.10 for every $2 bet, even if that means they incur a loss. Occasionally, this minimum can rise to $2.20 for a $2 bet. To ensure they meet the minimum payout of $2.10 for show bets, the racetrack might need to draw funds from the winnings of the other two horses if necessary. It’s not uncommon for all three winning show bets in a race with a thoroughly dominant favorite to result in a payout of $2.10.
The Track Cut
As mentioned earlier, the percentage taken by the track varies depending on the betting type. The following table summarizes the house cut applicable for different tracks and bet types.House Edge in Horse Racing
| Track | State | Win/place/show | 2 horse picks1 | 3+ horse picks2 |
|---|---|---|---|---|
| Prescott Downs | Arizona | 18.5% | 22.5% | 22.5% |
| Oak Lawn | Arkansas | 17% | 21% | 21% |
| Hollywood Park | California | 15.43% | 20.18% | 20.18% |
| Arapahoe Park | Colorado | 18.5% | 25% | 25% |
| Delaware Park | Delaware | 17% | 19% | 25% |
| Tampa Bay Downs | Florida | 18.9% | 25.9% | 25.9% |
| Les Bois Park | Idaho | 18% | 22.75% | 24.75% |
| Arlington Park | Illinois | 17% | 20.5% | 25% |
| Prairie Meadows | Iowa | 18% | 24% | 25% |
| Churchill Downs | Kentucky | 16% | 19% | 19%3 |
| Delta Downs | Louisiana | 17% | 20.5% | 25% |
| Laurel | Maryland | 17% | 19% | 25% |
| Great Lakes Downs | Michigan | 17% | 20.5% | 20.5%4 |
| Fonner Park | Nebraska | 15% | 23% | 23% |
| Meadowlands | New Jersey | 17% | 19% | 25% |
| The Downs | New Mexico | 22% | 22% | 25% |
| Aqueduct | New York | 15% | 20% | 25% |
| River Downs | Ohio | 18% | 22% | 22% |
| Remington Park | Oklahoma | 18% | 20% | 20% |
| Portland Meadows | Oregon | 18% | 22% | 22% |
| Philadelphia Park | Pennsylvania | 17% | 20% | 30%5 |
| Lone Star | Texas | 18% | 21% | 25% |
| Colonial Downs | Virginia | 18% | 22% | 22% |
| Emerald Downs | Washington | 15.1% | 22.1% | 22.1% |
| Charles Town | West Virginia | 17.3% | 19% | 25% |
- Two-horse selections relate to daily doubles, quinellas, and exactas.
- Three or more horse selections pertain to trifectas, Pick 6, and other more challenging bets.
- The takeout for odd/even bets stands at 5% at Churchill Downs.
- For Pick 3 bets, the takeout is set at 25% at Great Lakes Downs.
- At Philadelphia Park, the takeout for Pick 3 bets is slightly higher, at 26%.
Taxation of Winnings
If a single ticket's payout reaches odds of 300 to 1 or more and totals over $600, the racetrack is required to issue a W2G form that must be reported to the IRS as gambling income. Additionally, if a single ticket earns 300 to 1 odds or greater and totals more than $5,000, a mandatory withholding of 28% will occur.
Sources
Information on the track cut is from DRF.com , the site of the Daily Racing Form. Your Comprehensive Handbook for Betting at Racetracks by David K. Rosenthal guided me in refreshing my knowledge of the essentials. The rules set by the Washington State Racing Commission for racing serve as a reliable source for understanding the specific rules associated with each type of wager. Barry Meadow offered invaluable assistance in matters related to taxation on winnings and the intricacies of pick-six carryovers. Lastly, I extend my sincere gratitude to Kevin Hill for patiently addressing all my queries concerning horse racing bets.