Through its legislative approval of penny breakage, Kentucky has embraced churn in its pari-mutuel wagering and the early returns have been impressive. Now it will receive the showcase treatment at the Keeneland fall meeting and Breeders' Cup World Championships.
Breakage refers to how winning payoffs are rounded, which in Kentucky had been rounded down to the nearest 10 cents on a $1 bet—a practice in place at most other racing jurisdictions. In the spring Kentucky lawmakers approved reducing that rounding from 10 cents to a penny, which applies to every track in the state.
The reduced breakage debuted July 15, the second weekend of the Ellis Park meet with the first win payout returning $3.38 for a $2 wager, up from what would have been a $3.20 payout under the previous breakage.
The first two meets with the penny breakage in place each saw positive handle trends. Without digging too deep into the many factors that impact handle—and noting that these two meets aren't ideal for comparison as they each saw changes to their number of race days from 2021—Ellis saw average race-day handle increase 19.7% while Kentucky Downs reached a record $80,175,928 in wagering, up 8% from last year's record.
The Thoroughbred Idea Foundation, which advocates for horseplayers and owners and pushed for penny breakage since its 2018 founding, said from the July 15 launch through Sept. 25, penny breakage in win, place, and show pools has put more than $630,000 in bettors' pockets. (Penny breakage is in effect in all pools but is more difficult to track in exotic wagers.)
That $630,000 has come from the bet-takers, which these days are largely ADWs and other off-track outlets. With more money going to bettors, TIF believes more churn—putting winnings back into other bets—has been generated for the racing industry. TIF believes going to penny breakage will encourage additional interest and increased pari-mutuel wagering, which generates money for the industry.
"The more money our industry gets back into the hands of bettors, who can then churn it back through the pools igniting another takeout cycle, the better our industry will be," said TIF executive director Pat Cummings. "Cost matters and the penny breakage provision, overall, increases the amount of money returned to winning bettors on Kentucky's races."
As racing these days largely competes for attention through its ADW and simulcast signals, Cummings believes bettors are starting to notice the increased value in Kentucky. And, he suspects that will increase in the coming months.
While Ellis is an important meet to the Kentucky circuit, it can be overshadowed by summer meets like Saratoga Race Course and Del Mar. Kentucky Downs is hugely popular with core players—and those bettors most assuredly spread the word on the increased value—but its short seven-day meet may not have the reach of some other meets when it comes to attracting new players or increasing interest in beginning players. That's where the upcoming Keeneland fall meet—capped by the Breeders' Cup World Championships—figures to bring the most attention yet to this added value.
"The biggest impact will be felt at the Breeders' Cup, held in Kentucky this year at Keeneland and of course Kentucky Derby week next year," Cummings said. "Until another state joins the penny breakage camp, Kentucky has an undoubted advantage in attracting bettors.
"Kentucky pays you more. End of story."
