In this fall’s Breeders’ Cup races at Keeneland you’ll see win-place-show payoffs that will look something like this: $12.49, $6.87, $4.03.

What? That’s because “penny breakage” has come to Kentucky race tracks where, thanks to a new state law, mutuel prices aren’t rounded down and more money is being returned to the bettor. That started last Friday at Ellis Park in Henderson, KY where the win price on the first-race claimer, Zelig, was $3.38 compared to $3.20 under “dime breakage” rules at most other U.S. tracks. That meant someone betting $200 on Zelig would have received $338 instead of $320, a difference of $18.

What’s happening in Kentucky is being cautiously eyed by Canadian tracks which could eventually go that route if the breakage laws in Canada are changed.

“It’s the next logical step in right-sized pricing,” predicts Assiniboia Downs’ CEO Darren Dunn.

“We plan to monitor it across racing jurisdictions in North America,” says Woodbine’s communications director, Jamie Dykstra.

“I very well think this is the start, but how long other jurisdictions take to adopt, I am not able to venture a guess,” says Century Mile managing director Paul Ryneveld.

“Who knows? It’s hard to say (whether this comes to Canadian tracks),” adds Hastings Racecourse announcer/spokesperson Dan Jukich.

Penny breakage is the biggest thing to happen in racing since, hmm, common-pooling? Suddenly, race fans around the continent are wrapping their heads around the concept of “breakage” which is a term even long-time players hadn’t heard before. Breakage is simply the difference between the amount players should be getting for a winning wager and what they actually receive.

Canadian players actually get a better deal than their US counterparts because Canadian law rounds down breakage to a nickel while U.S. rounds down to a dime. That’s why win-place-show prices in the US end in 20, 40, 60 and 80 cents (such as $2.80) but in Canada you’ll see 30, 50, 70 and 90 cents as well. New York tracks also break to a nickel for payoffs under $10.

Actually, penny breakage isn’t brand new. There was a time in the late 1920s when a few tracks in the eastern US had penny breakage, but the awkwardness of dealing in pennies led to the adoption of dime breakage. There is little concern these days, of course, with dealing in pennies because most betting is not done at a mutuel window but in betting accounts or at touch-tote terminals where a player inserts a betting voucher.

Whether it’s a nickel or a dime breakage, though, it still means a lot of money isn’t finding its way into players’ pockets or accounts. The Thoroughbred Idea Foundation (TIF), a non-profit think-tank based in Lexington, KY, estimates .45 per cent of players’ bets are retained as breakage. That works out to $50 million annually which could produce $200 million more in wagering through the churn factor, the TIF says.

Canadian tracks see the .45 per cent as too high. “I believe we are seeing closer to .30 per cent due to the fact we break to the nickel,” said Century’s Ryneveld. At Woodbine, Dykstra said “about half of what they reported would be a more accurate estimate.” And Assiniboia Downs believes the percentage is much less than that.

Where does breakage money go? At Century, it’s split monthly between horsemen associations and the track. At Woodbine it is absorbed into the racing operation and at Assiniboia Downs breakage helps support purses.

So what are the chances Canadian players will see the benefit of a break from breakage? “This could take five to 10 years (or never) if you look at previous law changes such as full-card simulcasting, ADW [Advance-Deposit Wagering], etc.,” said Century’s Ryneveld. Echoes Woodbine: “In Canada, five cent breakage is written in the Criminal Code of Canada and changes to the criminal code would take a significant amount of time and process.”

And who should players thank for setting the reduced-breakage ball in motion? A Kentucky politician and passionate race fan, Adam Koenig, who lives five minutes from Turfway Park in Florence, KY. He said he “tucked the idea in the back of my mind” after hearing Patrick Cummings, executive director of the Thoroughbred Idea Foundation, promoting penny breakage on Steve Byk’s At the Races radio show which runs each day on Sirius radio.

“We’ve taken care of the tracks [by allowing the operation of highly profitable historical horse racing machines], we’ve taken care of the breeders, trainers and jockeys,” the Republican state representative said. “My God, (now) I’m going to take care of the bettors ‒ not just because I’m one ‒ but we need to take care of the folks without whom we don’t have an industry.”

His bill reducing breakage to a penny proved very popular, attaining almost unanimous support from both legislative houses. The past five years has seen $35 million in breakage collected from Kentucky races. Tracks and horsemen split on-track breakage while off-track and ADW bets accrued to the bet-takers. That money will now flow back to the players.

It helped to have a dedicated horseplayer sponsor and guide the bill through the Kentucky legislative process. What about other states? Koenig suggests there should be an effort to get lawmakers out to big race days to attune them to the interests of horseplayers.

And what about Canada? Is there an Adam Koenig among federal politicians?

A stark example of the impact of breakage was seen in Justify’s Triple Crown run in 2018. In those three races at Churchill, Pimlico and Belmont, a hefty $1 million was extracted from the betting pools for breakage. One million!

Now, at least in the Kentucky Derby, the odd-looking payoffs will be the result of bettors getting all the winnings they’re entitled to.