A few days after new standards for tax reporting and withholding of big wins in pari-mutuel wagering were put in place Sept. 28, professional horseplayer Mike Maloney hit a Pick 6 that returned $46,000.
Even though he was well aware of the new standards—he's been pushing for the changes for 15 years—he recalls an odd feeling when the ticket was processed.
"It felt so weird, because it paid over $46,000 and it went right through the machine and paid all the money," Maloney said. "It was different."
In late September the U.S. Treasury and IRS put the new rules in place that redefine how 300-1 odds are determined, now basing them on the entire cost of a pari-mutuel ticket into a wagering pool. The changes have greatly reduced the instances of both reporting—necessary on payouts above $600 at odds of at least 300-1—and withholding—needed on payouts above $5,000 at odds of at least 300-1.
For instance, in previous instances where Maloney hit a Pick 6, the 300-1 odds would have been based on the cost of each wager on a ticket, say 500 $2 wagers. But as his tickets routinely include hundreds of combinations, the total cost of the ticket is much more than $2—500 combinations would cost $1,000. In that case, the 300-1 threshold would require a return north of $300,000.
The previous withholding standard would have seen 31% of Maloney's $46,000 payout immediately withheld, $14,260. For a player like Maloney, who wagers for a living, this would result in large sums of money being tied up.
"In all of the years I've been a professional horseplayer, I've had to keep a line of credit on my house that I've had to access most every year because so much money would be withheld throughout the year that I couldn't stay in business, I couldn't keep churning the money unless I brought in outside money to keep me going," Maloney said. "That was the way I did it for years and years. It was kind of uncomfortable and it was a big ask of my wife to go along with that."
While Maloney is thrilled to see the changes, he also is frustrated at how long it took to make them reality. He recalls telling a racing executive about the problem in 2002, who told him he was wrong. He recalls discussing the issue on a panel in 2004 that saw now retired Daily Racing Form publisher Steven Crist outline the problem in a column that helped get that ball rolling.
Maloney thought that ball would quickly crush the outdated standards.
"It was so long overdue," Maloney said. "It was a big dropping of the ball to let that go on all of those years. It kind of illustrates to me the difference between casino leadership and management and racing leadership and management. When we try to go head to head, it seems like the casinos are almost always one step ahead of us. They understand their customers better; they understand the regulatory landscape better; They're just sharper from a lot of perspectives than we are."