For horses, there were a couple of moves. In a state like Illinois, where you are taxed on the gross (unless filing as a pro), the guy cashing the ticket would have to charge the winner an amount equal to the Illinois tax plus a fee for the overall transaction. If the guy cashing it was a pro, he could also get the tax taht had been withheld returned after he filed a return.
Usually, rather than being a pro, he just had fake ID and didn't get a refund. if there was a W-2G and withholding, it was better to have a pro cash it.

That all being said, I had one guy that I defended that was charged with tax fraud for cashing someone else's tickets.