The Week in Review: Penny Breakage a Welcome Change, but Not a ‘First’

When the .69-to-1 favorite returned $3.38 to win at Ellis Park in the first race on July 15, the to-the-penny payoffs represented a massively positive paradigm shift for horseplayers. Under a new Kentucky law that eliminates dime breakage at the state's tracks, bettors will no longer be subject to the disadvantageous, industry-wide practice of down-rounding that, in the above instance, would have sliced the return on that winning $2 wager to $3.20.

Yes, penny breakage looks a bit odd to the eye. But getting used to the concept will be worth it.

The Thoroughbred Idea Foundation (TIF), which spent four years championing this cause and advocating for any industry entity to make the change, estimates breakage at roughly 0.45% of the nation's total handle.

“That suggests breakage totals at least $50 million per year,” a 2018 TIF study reported, explaining that instead of being retained by tracks, states, or purse accounts, the rightful return of that money to bettors has the potential to generate additional wagering. “We estimate the betting churn from breakage to total at least an additional $200 million in annual handle.”

Those increases could nudge even higher if place and show betting suddenly become more attractive (because the returns on those bets will be greater, percentage-wise). In America's competitive wagering landscape, you'd think that other racing jurisdictions would be quick to follow Kentucky's lead.

There's only one misconception about Kentucky's laudable move to penny breakage: It's not a “first” as has been widely publicized.

In fact, Kentucky itself was among a handful of states that mandated penny breakage nearly a century ago, when pari-mutuels first began replacing on-track bookmakers.

In 1927, Kentucky and Maryland were the two only states with legalized pari-mutuels. The takeout rate for both states (in an era when only win-place-show betting existed) was 5%, with dime breakage.

Pari-mutuel machines were in use in other states despite not being explicitly sanctioned. In such cases, the public had zero knowledge of how much takeout and breakage were being raked out of the pools.

“In other states the amount of the percentage depends entirely on the greed of the pari-mutuel officials,” wrote nationally syndicated newspaper columnist Frank G. Menke in 1927. “How much was deducted in Florida last winter by each of the tracks is not publicly known. [One track] is purported to have apportioned 20% for itself, [another] 25%.”

Such aggressive pool-scraping, Menke further reported, was exacerbated by the all-too-common practice of track officials literally grabbing money out of the tills and pocketing it before it showed up in the mutuel calculations. At one Canadian track, he wrote, mutuels officials made a $10,000 error one afternoon by overpaying bettors. It simply made up the difference the very next day by upping the takeout and liberally rounding down the breakage.

“If such an act is not deliberate theft, then what is theft?” Menke asked rhetorically.

When Illinois codified its new mutuels law that went into effect July 1, 1927, it tweaked the percentages that were standard in Kentucky and Maryland. It set the takeout higher (6.5%), but mandated penny instead of dime breakage.

Half a year later, the Louisiana Jockey Club also saw merit in abandoning dime breakage, and the issue was a big enough deal that the New York Times reported on it. Starting Jan. 2, 1928, the Fair Grounds swapped out a 4% takeout and dime breakage and replaced it with a 6.5% take and penny breakage.

Louisiana officials calculated that bettors would receive “the same net return” under the penny breakage system. But their belief was that the betting pools would be more secure because the change “would render impossible any charge or insinuation that the mutuel calculations have been juggled via the amount of the breakage to return on winning certificates a smaller amount than would otherwise have been the case.”

It didn't take long after that for Kentucky to revisit how its tracks calculated breakage.

A front-page story in the Mar. 17, 1928, edition of the Lexington Herald proclaimed that, “The penny promises to come to prominence on Kentucky race courses during the coming season. At the meeting of the state racing commission here yesterday, a rule was introduced whereby breakage in the pari-mutuels shall be to the penny.”

At that time, Kentucky staggered its takeouts based on a two-tiered system that took into account the population base around each track. Churchill Downs and Latonia (now Turfway Park) in the more populated parts of the state went from a 5% takeout to 6.5%. The more rurally located tracks at Lexington, Raceland, and Dade Park (now Ellis Park) went from 7% takeouts to 10%.

“The new rule favors the players slightly,” the Herald reported.

Yet penny breakage remained the norm in those three states for only a relatively brief window of time. The Great Depression was a major factor in quashing the concept.

As finances became tighter, some tracks in the penny- breakage states went out of business entirely. Others pleaded with state regulators for permission to start chipping away at the winnings of horseplayers by raising takeout rates and restoring dime breakage so tracks could retain more rounded-down money. When new states began embracing pari-mutuels as a form of “sin taxes” to raise revenues, they wrote laws stipulating dime breakage, which once again became established as an industry standard.

Barely three months after the huge stock market crash of 1929, the Fair Grounds did away with penny breakage to start its 1930 winter meet. In 1934, Kentucky went to a 10% statewide takeout and back to dime breakage at the request of its track operators. Illinois also abandoned penny breakage.

It's interesting to note that when penny breakage first came into vogue in 1927 and '28, the idea made national headlines. When breakage reverted to dimes, newspapers rarely reported on it.

Writing in 1937 about Fairmount Park, the St. Louis Post-Dispatch reported that, “When the [1927] mutuel bill went into effect, the property immediately became a dead loss. It will be different now,” the article said, with takeout set at 9% and dime breakage once again a windfall for the track.

In 1938, penny breakage briefly resurfaced at Rockingham Park as the result of an oddball standoff between the New Hampshire racing commission and “Uncle” Lou Smith, the track's owner.

The New Hampshire attorney general had ruled that, unlike mutuels calculations in other states, Rock could not deduct its dime breakage until it had multiplied a bettor's winnings on a dollar by the number of dollars wagered.

Smith told the New York Times that such a rule “discriminated against the $2 bettors” who comprised 84% of Rockingham's patronage and provided 55% of the handle.

“We are faced with the alternative of closing our track or giving up the entire breakage to avoid discrimination against the $2 bettor,” Smith said. “We voluntarily choose to give up the breakage,” relying on revenue solely from the track's cut of the 10% takeout.

This required the Rock money room to have 220,000 pennies on hand each day to make exact change. The stalemate was resolved in time for the 1939 summer meet, which opened with a takeout hike to 11% and breakage reverting back to a dime.

New York's racing commissioners advocated for penny breakage when legalizing mutuels there in 1940, but they had to settle for nickel breakage (still a significant improvement over a dime). “The general public pays little attention to breakage,” the New York Times dismissively reported when briefly mentioning the concept in its annual recap of the racing season.

Penny breakage then went into a long, long slumber. History is just now repeating itself.

This time around, here's hoping the bettor-friendly “Keep the change!” mentality takes root and grows.

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Diversity in Racing: Deshawn Parker

He grew up on the racetrack, mainly at the old Latonia, spending many a morning and afternoon there with his father Daryl, who worked as a jockey agent, an exercise rider and a racing official. And everywhere he went, Deshawn Parker saw people just like him. Young, Black and eager to make a name for themselves in the sport. It was the ’70s and the ’80s and at whatever track you went to, the majority of backstretch workers were African Americans. Today, they make up a small fraction of a workforce that is dominated by Hispanics.

It’s shocking,” he said. “It went from being mainly all black and now there aren’t many black people back there at all. Honestly, I have no clue why that is. I look at it and think about it every day, but I don’t have an answer for you.”

While he can’t answer why the demographics have changed so much, he is convinced that the absence of Blacks on the backstretch is a reason why there are so few African American jockeys today.

“I grew up on the racetrack and on the backside and that’s why I became a jockey,” said the 49-year-old veteran. “There were a lot of people back there who wanted to be a jockey and the backstretch is where they got their start. Now you don’t have a lot of Black families on the backside anymore, so you don’t have Blacks who want to be a jockey. You don’t get many people who didn’t grow up in racing who decide they want to be jockeys.”

The history of Black riders in this country is well known. They dominated the sport in the 19th century. In the first Kentucky Derby, in 1875, 13 of the 15 riders in the field were Black. Since 1922, only two Blacks have had mounts in the race, Marlon St. Julien in 2000 and Kevin Krigger in 2013.

Today, there are other African American jockeys who have tasted success, but not many. Kendrick Carmouche won numerous riding titles at Parx and can usually be found in the top 10 in the standings at the NYRA tracks. C.J. McMahon rides first call for Karl Broberg at Evangeline Downs and Delta Downs, where he was the second leading rider at the 2019-2020 meet. Parker would like to see ain influx of new Black riders, but he doesn’t see that happening.

But, if a young African American were to come around, they couldn’t find a better role model than Parker or his father.

In 1986, Daryl Parker became a steward, the first African American in U.S. racing history to achieve that position. Deshawn was 16 at the time and, at 5-11, appeared to be too tall to be a jockey. But his father told him that if he finished high school he had his permission to be a rider.

The elder Parker has had to take some time off while battling cancer, but his son said he’s doing well and should return to the stewards’ stand soon. He works in Ohio at Thistledown and Mahoning Valley.

“I idolized him and always tried to learn from the way he did things,” Parker said of his father.

Parker struggled, winning just 60 races total over his first five years of riding. But he kept improving and by the late ’90s was an unstoppable force at Mountaineer Park. In 2010, he led all riders in the nation with 377 wins, becoming the first Black jockey to hold that title since 1895, when James “Soup” Perkins was the leading rider in the nation. He was again the leading rider in the nation in 2011. When Mountaineer cut back on its scheduled and lowered purses, Parker left in 2016.

He’s currently the leading rider at Indiana Grand. Entering Tuesday’s card there, he had won 5,728 races from 34,379 mounts. He’s 22nd among all jockeys in lifetime wins and seventh among active riders.

He has become far more than just the best Black jockey in America.

“While it’s an honor to be the all-time leading Black jockey, you definitely want people to look at you as a good jockey, period.” he said. “You don’t want to be categorized by your color or as just a good Black jockey. It’s the same with a female or a Hispanic, most people just want to be known as a good jockey, period.”

Does he feel that he might have done even better or made it to a top circuit if not for the fact that he is Black?

“Sometimes I think the color of my skin has held me back,” he said. “I’ve never had anyone say anything racist to me to my face. I don’t know what they are saying about me behind my back. But I’m not one to make excuses or find something to blame. If things aren’t working out what I do is just try harder.”

He is a popular veteran, well-liked in the jocks room.

“I might be blind to a lot of things, but what I do is treat everybody with respect,” he said. “When I treat people with respect I expect the same in return. I always try to be polite and treat people the way I would like to be treated.”

Though he has several more good years to come, Parker has already set his goal for when he does retire. He wants to be a steward and envisions some day working alongside his father. If that happens, he will again be a rarity, an African American steward. He wishes there were dozens of Black stewards, but understands why that isn’t the case.

“[African Americans] are not around the track as much as we used to be and I can’t understand why,” Parker said. “Back in the day, it was all Blacks back there, working hard and busting their butts and looking to move up. Now, it’s mainly Hispanic people.  I don’t know what happened or where all the Black people went. But when you don’t have Blacks working in racing at any level, who is going to move up the ranks? You just don’t have many Blacks on the backside or anywhere around the track anymore. It’s a shame.”

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