Penny breakage may have helped Kentucky handle go up

One of the biggest takeout reductions in the history of horse racing went into effect July 15 in Kentucky, but did it affect player behavior?

Penny breakage required Kentucky tracks to stop rounding winnings down to the nearest dime on the dollar but, instead, to the cent. Rather than ending with zeroes, payouts on $2 bets at Kentucky tracks end with an even number that is double what the odds to $1 show.

To best compare handle in 2022 in the post-breakage era to 2021, Horse Racing Nation did not include Breeders' Cup dates from either year because because it was in Kentucky in 2022 (Nov. 4-5 at Keeneland) but California in 2021 (Nov. 5-6 at Del Mar).

Handle from July 15 to Jan. 2, not counting Breeders' Cup, was $5,717,948,654. Of that, $5,125,222,458 (89.6 percent) was bet outside Kentucky and $592,726,196 (10.4 percent) inside the commonwealth. Last year, the total was $5,871,945,724 with $5,350,611,935 (91.1 percent) outside Kentucky and $521,333,789 (8.9 percent) inside.

Put another way, for every $1,000 wagered on North American Thoroughbred racing, $16 shifted to Kentucky, which might not sound like a lot but over the course of a year that's $160 million based on $10 billion in handle.

Handle outside Kentucky was down 4.2 percent during the period but up 13.7 percent in Kentucky, which ran 2.7 percent more races while everywhere else ran 1 percent fewer races. Still, on a per-race basis, Kentucky was up 10.7 percent July 15-Jan. 2 while everywhere else was down 3.2 percent. So for every race in the penny-breakage era, Kentucky gained $139 of every $10,000 wagered per race. Again, these numbers do not include the two Breeders' Cup days at Keeneland in 2022 and Del Mar in 2021.

Pat Cummings, executive director of the Thoroughbred Idea Foundation, which worked with the Kentucky legislature to push for penny breakage, said that $2.6 million in the win, place, show pools alone has gone back to bettors because of penny breakage. That represents a 1.1 percent takeout reduction in those pools alone.

Penny breakage can return as much as 8.1 percent more to bettors in instances where the odds are 19-100 ($2.38 on a $2 bet) instead of 1-10 ($2.20).

Breakage always rounds down, so there is no instance where penny breakage is not better for bettors over the nickel or dime variety. Because of regulations related to historical horse racing, the minimum for show payouts remains $2.10 instead of $2.02.