Giving It Away

It is that time of year again. The NCAA Tournament and the Masters are over, baseball has just begun, the NBA championship series is a month away and football, college and pro, is months away. It is the one time a year that Thoroughbred racing takes center stage in this country with the Kentucky Derby. It also happens to be the best day to make money at the track.

Returns on ordinary winning bets would be extraordinary in any other investment environment. A sprint race can take about a minute to run. The favorite wins at 2-1 and you receive $6 back from your winning bet. What investor wouldn’t be ecstatic with a 200% return? In one minute!

A nominal payoff for an exacta (when you correctly pick the first two horses in exact order) is $20, most are much higher. Still, a 1000% return. But at the vast majority of tracks almost every day of the year there is very little liquidity in the betting pools. Since this betting is pari-mutuel, meaning among ourselves, this lack of liquidity stifles payouts. In essence, everyone bets into a pool and the track takes its commission off the top. (Usually that takeout commission is way too high

Leave a Reply