What is takeout, and how does it affect betting profits?

Profile Picture: J. Keeler Johnson

May 23rd, 2021

If you’re a fan of fine dining at home, you’re probably a wholehearted supporter of takeout. But if you’re a bettor, then takeout comes with a much different definition.

What is takeout?

Takeout, in essence, is the price of betting on a sporting event. In pari-mutuel betting on horse racing, it’s the percentage of every wagering dollar extracted before payoffs are calculated. The money generated by takeout is used in part to pay taxes and fund the sport.

But the takeout rate isn’t universal. It varies from track to track, and from one bet type to another. You won’t notice the difference when placing wagers; a $10 trifecta costs the same at every track, regardless of takeout. But you might notice a different in the payoffs when you win.

How does takeout affect payoffs?

Let’s say you’re heading into the weekend with plans to play a 50-cent Pick 5. There are two enticing options on the table—one at Racetrack A, and the other at Racetrack B. The sequences look similar in every regard except for their takeout rates; Racetrack A has a takeout rate of 25% for Pick 5 wagers, while Racetrack B offers a 12% takeout rate.

All else being equal, the Pick 5 at Racetrack B is the superior betting proposition. Suppose each pool attracts $100,000 in wagers, from which 20 winning tickets are sold. At Racetrack A, 25% of the pool ($25,000) is extracted as takeout, leaving $75,000 to be split among the 20 winning bettors to the tune of $3,750 apiece.

But at Racetrack B, just $12,000 is removed from the pool by takeout, which means the 20 winning bettors split $88,000 for payoffs of $4,400 each. That extra $650 marks a 17% increase from the payoff at Racetrack A.

Takeout affects all wagers

The above example is a bit extreme, but takeout does affect all wagers, even when it’s subtle. If $100,000 is wagered in a win pool where the takeout rate is 20%, and $16,000 is wagered on the winning horse, every successful $2 ticket will return $10. The exact same occurrence at a track where the win pool takeout rate is 17.5% would see each $2 ticket return $10.30.

Of course, even at tracks where takeout rates are high, it’s possible for skilled handicappers to make long-term profits by picking a higher percentage of nice-priced winners than other bettors. Odds are subjective, so handicapping prowess is still the most important factor in coming out a winner.

But the best handicappers keep takeout rates in mind when planning their bets, and they spend more time betting tracks (and specific wagers) with low takeout rates. Every time they cash a winning ticket, they’re enjoying greater profits, which add up in the long run and help keep them in the game.