The 2023 renewal of the Kentucky Derby will be the first in modern history where wagering payouts are calculated to the penny, instead of the dime, a product of a Kentucky law change which has returned millions to horseplayers since the law took effect in July 2022.

“Lawmakers made the sharp decision that ensures, at least until other states catch up, that racetracks in Kentucky pay winning bettors – wherever they place that bet - more,” said Patrick Cummings, executive director of the Thoroughbred Idea Foundation (TIF) which advocated for the change following its 2018 white paper on the topic.

House Bill 607, which passed in March 2022 and garnered bi-partisan support, standardized many other elements of pari-mutuel taxation. It was sponsored by Representatives Adam Koenig and Al Gentry while Senate Majority Leader Damon Thayer guided its passage in that body. Governor Andy Beshear signed the bill soon after passage.

A year ago, more than $75 million was bet in the win, place and show (WPS) pools for the Kentucky Derby, with over $112 million in those pools across the entire day. TIF estimates that over $745,000 was withheld from winning bettors as breakage from the 2022 Derby Day WPS pools.

While 81-1 longshot Rich Strike shocked the field for the win a year ago, favored Epicenter finished second, paying $7.40 to place and $5.20 to show. If today’s penny breakage provision had been in place in the 2022 race, Epicenter’s place payout would have been $7.52, and the show payout $5.38.

Prior to the law passing, winnings were rounded down to the dime. Bet-takers – racetracks, off-track betting sites and most often now, advanced deposit wagering platforms via the Internet – keep breakage, a practice initiated in the early 1900s to facilitate a smoother customer experience when all bets were made in person, in cash, at the track hosting the race.  

It is estimated that the total of all breakage on U.S. Thoroughbred racing exceeds $60 million annually.

On a favored outcome, such as a horse that pays just $2.40 to show for each $2 bet, it is possible that more than 30% of a horseplayer's profit is kept by the bet-taker because of antiquated breakage provisions.

2022 - Cummings, Thayer, Koenig Celebrate Penny Breakage.jpeg
PHOTO: Patrick Cummings (center) presents commemoratives
celebrating the introduction of penny breakage to Rep. Adam Koenig (left) and
Sen. Damon Thayer (right) in December 2022.

“Rounding winning dividends to the penny has put more money back in the pockets and accounts of horseplayers choosing to wager on Kentucky’s races,” Cummings said. “Thanks to the legislative leaders here in the commonwealth that brought this bill to the fore and their many colleagues that supported it,” Cummings added.

Since penny breakage has been in place on Kentucky’s races, an additional $3.4 million from WPS pools alone, and in total well more than that, has been distributed to winning bettors.

“For the greater horse racing industry, this money is better back in the hands and accounts of horseplayers.”

While there are many factors which impact overall wagering, notably the effective takeout rates paid by massive computer-assisted wagering teams, wagering on Kentucky’s races appeared to grow far more in 2022 than other states.

“The penny breakage provision likely played a very small, but meaningful, role in Kentucky’s pari-mutuel successes from 2022. But every penny counts and we hope other states and track operators follow suit and recognize the sport and world has changed, and it is far beyond time to pay customers the entirety of their winnings.”

The 2023 Kentucky Derby will be contested on Saturday, May 6, but the penny breakage provision exists for every live race conducted in Kentucky.


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