A dead heat occurs when two or more competitors finish in the same position and cannot be separated — either by the officials, photo finish technology, or the rules of the sport. Rather than paying out all tied participants in full (which would be unprofitable for bookmakers), winnings are divided proportionally.
The dead heat rule divides your effective stake by the number of tied participants. In a two-way dead heat, only half your stake is considered active. Your half-stake is multiplied by the odds to determine your net return. You receive back the inactive half of your stake plus the reduced winnings. The total is therefore materially less than a clean win would have produced.
Golf and horse racing are the sports where dead heats are most significant. In golf, final leaderboard positions are frequently shared by multiple players — especially for places 2nd through 5th. An each-way golf bet can suffer multiple dead heats on the place payout, dramatically reducing the return. This is important to understand before placing each-way golf bets at major tournaments.
In horse racing, dead heats at the finish line are settled by photo finish, but the same principle applies if the stewards cannot separate two horses. Bookmakers settle immediately once the photo finish judge's verdict is released, and dead heat rules are applied automatically.
Example
You place a £10 each-way bet on a golfer at 20/1 (each-way terms: 1/5 odds, 5 places). Your golfer ties for 2nd with another player. For the place part: it is a two-way dead heat, so only £5 of your £10 place stake is active. Return on place = £5 × (20/5 + 1) = £5 × 5 = £25, minus the inactive £5 stake. Total place return = £25, but you only receive £5 back on the inactive portion. Net: you get the active half's return plus the inactive half returned = effectively £5 × 5 = £25 total for the place portion from the £10 placed.