Hand-in-cap is an old English trading procedure that gave rise to the modern word handicap.^[1][2] It was used to fairly trade items of potentially unequal value.^[3] Here’s how the procedure works:

1. Appoint an umpire: An umpire is assigned to evaluate the items being traded. If the items aren’t of equal value, the umpire decides the value difference.
2. Place forfeit money: The players and the umpire each put a small amount of forfeit money into a cap. This serves two purposes:
   • It incentivizes the umpire to make a fair evaluation because they can only collect the forfeit if certain conditions are met.
   • It discourages players from being overly stubborn, as they risk losing their forfeit money if they don’t reach an agreement.
3. Make the decision: Both players put their hands into the cap. And then they remove their hands at the same time:
   • An open hand signals agreement with the umpire’s valuation.
   • A closed hand signals disagreement.
4. Determine the outcome:
   • Both agree: The item trade occurs, and the umpire collects the forfeit money.
   • Both disagree: No trade occurs, but the umpire still collects the forfeit money.
   • One agrees, one disagrees: No trade occurs. The player who agreed with the valuation collects the forfeit money.

This game was played in Piers Plowman, a poem from the 14th century.^[4] The concept of a neutral person evening up the odds was extended to handicap racing in the mid-18th century. In handicap racing, horses carry different weights based on the umpire's estimation of what would make them run equally. The use of the term to describe a person with a disability—by extension from handicap racing, a person carrying a heavier burden than normal—appeared in the early 20th century.^[4]