Being raised by professional gamblers, the racetrack was a familiar place for me growing up. As a child, I found the water truck and tractors more interesting than the races themselves. But over time, I came to appreciate the excitement and athleticism of the sport.
When I first researched wagering angles in the 1980s, I spent considerable time and energy trying to find a way to beat the races. I succeeded with other sports, but not with the ponies.
So I became a thoroughbred owner. One of my biggest thrills then was standing in the winners’ circle with my trainer Art Sherman, who later won the Kentucky Derby with California Chrome.
Why Horseracing Is So Difficult
Hanging out on the backstretch with Artie, I soon learned one of the reasons why making an earn with the horses is difficult. Parimutual racing is a negative-sum game. You are competing with others, some of whom have better information then you do. Trainers, jockeys, and jockey agents often know which horses are sound and which are not. This gives them a competitive edge.
The second reason it is hard to profit from horseracing is the high track take of around 17% for straight wagers and 25% for exotics. In contrast, the hold sports bookmakers have is around 4.5%. If you shop lines among multiple books, you could get that down to under 4%. You can get it down to 2% if you use reduced juice books or play into a dime line in baseball. There is a tremendous disparity between 17% with horses and less than 4% with sports.
Another reason horseplayers do worse than sports bettors is their lack of selectivity. Before off-track wagering became common, you had to visit a track to make your bets. After traveling there, paying expenses, and settling in for the day, it was hard to bet only a few races. Unlike other sports, horseraces are over in less than two minutes. This gives you plenty of wagering opportunities.
Another disadvantage horseplayers face is high variance. In sports, you have binary outcomes. Point spreads tend to equalize the probability of success to around 50%. In horseracing, you have many possible outcomes. Instead of an expected win probability around 50%, horseplayers are lucky to have 25% winners unless they bet a lot of favorites. This can lead to prolonged losing streaks and poor bankroll management. Longshots are often over bet on the last race of the day as losers try to get back to even. There is also a general longshot versus favorite bias that is known as a lottery preference in the investment world. Bettors prefer extreme payouts and overbet horses that promise this. They tend to shy away from favorites more than they should except in legs of multi-wager bets like exactas and trifectas. If I were to play the horses now, I would focus on modestly priced horses.
What Is Different Now
Much of this changed with simulcasting and internet wagering. You can now wager at more than a dozen tracks from the comfort of your home. This means you can be more selective. That gives you an advantage over playing on only one track.
Tracks have also become more competitive to attract simulcast wagering dollars. This has led to reduced takes at some of the better tracks. Major New York tracks now take out 14% of wagering dollars on straight bets, 21% on two-horse wagers, and 25.75% on other exotics. Major California tracks take 15.4% on straight bets and 20.2% on exotics. Major tracks in Kentucky take out 16% on straight bets and 19% on exotics.
The internet has also brought us rebates. You need to have a large volume of bets to get meaningful rebates wagering in the U.S. But some offshore books offer rebates to anyone at the major tracks. Rebates can be 7% and sometimes a little more. These reduce the hold on bets at the tracks above to 7% on single wagers and 13% on exotics. You are still at a big disadvantage. But those who are good and who carefully pick their spots may have a chance.
Offshore rebates usually don’t go apply to wagers with 3 or more horses. But your disadvantage is reduced as you add more horses to an exotic. For example, if you parlay 6 sports bets with a 4% hold on each, your net return is 96% multiplied 6 times. That works out to be a hold of 22%. This is comparable to the track take on exotics. In fact, some tracks reduce the take on pick 6 wagers to 15% or less. You should stay away from the Rainbow Pick 6 when the entire pool is paid only if there is a single winner. The hold on that bet is over 50%. Otherwise, 5 or 6 horse bets are not bad compared to sports betting based on the hold. But the variance on multi-horse wagers is extremely high.
What to Do Now
The advice I give those who say they want to bet on horses is the same I give to those who feel like they want to buy options: “Lie down until the feeling goes away.” But if you are going to play the ponies anyway, here are some suggestions:
1) Be selective. Play only when you are confident in your choice.
2) Play at the major New York, California, and Kentucky tracks.
3) Whenever you can, get rebates.
4) Because of high variance, keep your bet sizes modest.
