The Breeders’ Cup announced the re-introduction of “Head2Head” wagers for its 2018 renewal, a series of seven bets over the two days of the event. The bets were to have a $10 minimum with a 10% takeout.
The Thoroughbred Idea Foundation was particularly pleased to see the $10 minimum implemented on a head-to-head wager given its position advocating for a shift to penny breakage (read more about the topic via our website). A bet whose return is calculated to a $10 stake reduces the overall impact of breakage, as opposed to bets of smaller minimum investments in which breakage would be a larger percentage of an overall return.
Both unfortunately, and unexpectedly, the expected result was not what occurred.
Our assumption that the bet would be calculated to the $10 stake was wrong.
All payouts were calculated to a $1 base, the current requirement under Kentucky regulations, which were not changed in advance of the event. The result was smaller returns for players and higher breakage than anticipated.
We are certain that this was not the intent of the Breeders’ Cup.
Below, you will see the differences paying to a $2 stake and a $10 stake, both to the actual dividend and breakage. Unfortunately, a failure to execute the calculation of dividends to the actual bet minimum left players with lower than anticipated returns.
Five of the seven Head2Head wagers would have returned more if the winning dividends were calculated to a $10 stake. Total breakage would have declined substantially, dropping by 77% and returning over $3,100 more to winning bettors. The positive effects of this extra money being churned through the pools is the main rationale for switching to penny breakage.
There is no denying the well-intentioned effort behind the $10 minimum – with its supporters believing the calculation would follow-suit, limiting breakage and returning more money to horseplayers, positively impacting pari-mutuel churn. An antiquated regulation, left unchecked, did its damage in ensuring the benefits of this minimum would not be realized in 2018.
As the saying goes, you cannot make an omelette without cracking a few eggs. Having learned from this experience, the opportunity exists to move forward and adjust regulations to enable a more customer friendly approach to the offerings made to horseplayers.
The sport needs to do better for its customers – it will be a step towards ensuring its survival if it does.