What is 'Breakage'?
Breakage is the pennies that are left over when pari-mutual payoffs are rounded out. It is most commonly split between the track and the state and will sometimes also be split to breeding and other funds. The proportions vary from place to place.
Pari-mutual betting is a system
in which a pool is created using all bets of a particular type. After taxes and the house take are deducted, payoff odds are calculated by sharing the pool between all the winning bets. This system is frequently used in gambling associated with horse racing
and greyhound racing, as well as most other short-duration sporting events where participants are ranked at the finish.In some cases of pari-mutual betting, the amounts paid out are rounded to a denomination interval; this might be a 10¢ interval in the United States, for example. Any loss during this rounding is known as breakage and is retained by the betting agency, broken down as part of its commission.An example of this happening could be when an overwhelming favourite wins in horse racing. The winning payout
might be calculated as very small (say $1.02, for example, on a $1 bet), but legal regulations might require a larger payout, perhaps of $1.10 on a $1 bet. In this instance, the betting agency would retain the excess 8¢ breakage as its commission
.Breakage must always be taken into account when making a strategy in a pari-mutual betting system. It is possible, but difficult, to win money in the long term, but the obstacles to overcome include breakage, as well as taxes and the facility's take. Few are able to beat the deficit these things produce, but a skilled player may be able to accomplish it. Unfortunately, breakage is the least predictable factor when calculating potential winnings.