Palace Malice made his racecourse debut in a maiden race over five furlongs at Belmont Park on July 5, 2012 in which he was ridden by Javier Castellano and finished second, beaten half a length by Carried Interest.

In the Risen Star Stakes on February 23, 2013, he finished a nose in front of Oxbow when taking third place behind Ive Struck A Nerve and Code West.

[12] Palace Malice was one of 19 colts to contest the 139th Kentucky Derby at Churchill Downs in which he was ridden by the 47-year-old veteran Mike E. Smith and started at odds of 23.7/1.

[15] Smith tracked across from a wide draw to position the colt just behind the leaders as Frac Daddy set a fast early pace.

His connections noted that his wide path meant that he traveled 67 feet (20 m) – over seven lengths – more than the winner, and stated that he would run next in the Breeders' Cup Classic.

[18] In the Classic on November 2, Palace Malice started fourth choice in the betting but was never in serious contention and finished sixth of the eleven runners behind Mucho Macho Man.

Palace Malice began his third season in the Grade II Gulfstream Park Handicap over a mile on March 9 and was made favorite despite carrying top weight of 119 pounds.

[19] Mike Smith rode the colt when he was asked to carry top weight of 121 pounds in the Grade II New Orleans Handicap at Fair Grounds Race Course three weeks later.

When Palace Malice was dropped to Grade III class for the Westchester Stakes only three horses appeared to oppose him and he won easily by almost ten lengths at odds of 1/20.

[20] On 7 June at Belmont, Palace Malice returned to Grade I company for the first time since the Breeders' Cup Classic when he carried top weight of 124 pounds in the Metropolitan Handicap over one mile.

Ridden by John Velasquez, he produced a sustained run in the straight to take the lead well inside the final furlong and won by a length from the Breeders' Cup Dirt Mile winner Goldencents.

[22] On August 2 the colt started the 13/20 favourite for the Whitney Handicap at Saratoga in which he carried 124 pounds (equal highweight with Will Take Charge).