The Truth About Low Takeout

This weekend I had a few folks ask me why the lowest takeout in the nation thing didn’t work in Minnesota. I’ll tell you what I told people when I first heard about it.

Only nerds like me, gambling whales or actuaries may understand the true mathematical benefit of low takeout, and even if they do, the impact is insignificant to real gamblers who can scan the entire universe of racing to select best bets. Taking 3.5% less out of the pari-mutuel pool is simply fractional related to the payoff odds, and those payoff odds are the only thing that can psychologically motivate a risk taker to gamble on one horse at one racetrack over another horse at another racetrack.

You see, racetracks take in 100% of the money bet and put it into pools. They then takeout money for taxes, profits, expenses and other elements. This takeout is generally around 20% on average. They then return only 80% of the money to the winning betters. The payback odds you see on the tote board change constantly because racetracks mathematically recalculate the odds as bets come in. These recalculations make sure only 80% goes back to the betters.

While the ever-changing win bet odds are posted on the tote board for everybody to see, the same constant recalculations take place in all the betting pools. For example, show betting has its own pool, as does place betting, daily double betting, exacta, trifecta, superfectas. pick fours, and the list goes on and on. However, the odds paybacks that are so easy to understand from the tote board on win bets, are only occasionally posted or offered in different places electronically for the other wagers.

With all of this said, when the takeout is decreased even the win odds are barely affected. For example, a horse that has say 3 to 1 odds at a 20% takeout racetrack, would have 3.14 to 1 odds at a 16.5% takeout track. That odds differential would not even show up as a difference on the tote board. Furthermore, the difference in the other wagering pools would barely be recognized. Where’s the motivation?

Of course, the public and gambling community advertise the desire for reduced takeout everywhere. Why wouldn’t they? Nevertheless. to understand the silliness of this mathematical lack of leverage, even if take out were cut in half to only 10%, from the standard blended average of 20%, a 3 to 1 horse would only show as 7 to 2 on the tote board!

When small scale gamblers are not motivated, and large scale gamblers have options to select “overlays” at many racetracks on thousands of horses on any given day, a fractional change in takeout will never direct gambling interests.
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As I always say, if you want to be a winning risk taker in anything you need to understand how the games you play really work.

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