In the excitement of cashing a big ticket, players rarely think about what goes on behind the scenes. In aggregate, however, the details of that payout affect the industry.

When you bet on horse racing, all the money goes into a pool. The bettors who pick the winners share the money they receive from the pool, but only after a portion of the total of all betting dollars is taken out. This portion, the “takeout”, covers the cost of the races including taxes, betting duties, operating expenses, purses for races, and profits for the operator. Horse racing could not function without takeout. However, while horseplayers readily acknowledge that takeout is necessary, there is tension over what the rate of takeout should be, with operators often vying for increases in takeout and horseplayers arguing that it should be reduced.

How does takeout in horse racing compare to other gaming?

The Horseplayers Association of North America (H.A.N.A.) is a grass roots organization committed to giving horseplayers a voice. One of their top concerns is reducing takeout rate. President of HANA, Jeff Platt, commented on the issue in a message to Case the Race.

In response to a question about how the takeout rate in horse racing compares to other forms of gaming, Platt responded, “The average takeout on win, place, show, wagers nationwide including breakage and adjusted for the favorite-longshot bias is about 25%... meaning that a newbie bettor not knowing anything about handicapping whatsoever who shows up on track and makes his or her best guess flat betting 1 horse to win each race for thousands of races can expect to see a long term return of about 75 cents for each $1.00 wagered. That same bettor can go to a casino and see a return of more than 98 cents for each dollar wagered if he or she does the same thing with either pass or don't pass bets at a craps table. The same bettor can feed tokens into a slot machine and see a return of more than 91 cents for every $1.00 wagered.”

For dedicated horseplayers who prefer horse racing over craps or slot machines, the difference in return on betting dollars is often overshadowed by their enjoyment of horse racing. But learning to handicap horse races takes time and training. For new players, the added disadvantage of trying to overcome a high takeout rate can make winning money less likely, and betting less fun. Advocates for lowering takeout believe that higher returns for players would help attract more fans to the game. Instead, under the status quo, there is a migration of bettors away from horse racing and into casino games. Platt argued, “If racing offers a product (gaming) and the cost of that product to the consumer is takeout... then YES! Racing has absolutely overpriced its product compared to other forms of gambling that it competes with.”

Current Developments

In a January 16 press release, the California Horse Racing Board (CHRB) announced that they had approved a temporary increase of 2 percent to the takeout on wagers at Los Alamitos. The press release acknowledged that racing commissioners were “aware of opposition among bettors to any increase in takeout” and “mindful of the argument that increasing takeout can lead to lower handle”. As a concession to these concerns, the CHRB imposed a sunset provision.

New York is also considering upping the takeout rate.

How do increases in takeout effect the industry?

As a short terms tactic, increases in takeout do not immediately depress betting revenue. When the Maryland Racing Commission agreed to increase the takeout on Pick Three and Pick Four wagers at Laurel and Pimlico from 14 percent to 25.75 percent, Andrew Beyer pointed out in a February 12, 2009 article for the Washington Post, “Maybe the bettors at Laurel won't be aware when a Pick Four payoff of $860 becomes a $742.40 payoff after March 1. But even if they don't notice the change, bettors are affected by it.”

For Low Alamitos, the increase in takeout rates may help provide a short term fix, but over the long term, the impact of escalating takeout rates may be detrimental for the horse racing industry. The HANA website references an economic analysis indicating that revenue for the industry will be highest if it reaches the “optimal level”. The catch is that the optimal level for most tracks would result in a reduction, rather than an increase in the takeout level.

Tracks with Best Scores

As a bettor, perhaps this leaves you wondering, where can I get the best deal? Where does my favorite track stand? To learn more about individual tracks, HANA has meticulously compiled HANA Track Ratings, an analysis and spreadsheet of 71 North American tracks. According to Platt, the ratings are based on 3 primary factors: takeout, field size, and wager variety.

The top ten rated tracks according to HANA’s Track Ratings are: 1) Keenland; 2) Will Rogers Downs; 3) Churchill Downs; 4) Gulfstream; 5) Oaklawn; 6) Remington; 7) Evangeline; 8) Hoosier; 9) Del Mar; 10) Hollywood.

It is notable that the highest score HANA assigned to any track was a B+. Clearly, the tension, and controversy will continue. According to Platt, “The fact that the highest grade is a B+ should tell you something. No track anywhere is doing a true grade-A job of satisfying the needs and wants of the racing customer.”

More information

To learn more about where your favorite track stands in terms of takeout, visit the HANA website at www.horseplayersassociation.org.