So I've been trying for the last few days to win the Palio race. It seems impossible to me because the AI is effectively cheating and has unlimited stamina. I have the saddle with 80 stamina but it doesn't help.
Is there any way you can beat this race?

when your horse runs out of stamina just block the other guy until it refills.

I read on another forum to tap the gallop button rather than hold it down. Will give it a go later, after finishing another quest now. Otherwise I want a mod with rockets.

mikbhoy nailed it. The AI races dirty - pushing you off to the side and just being a dick. Just gallop to get ahead of them and when you get to a narrow area, slow down and block the AI until you regain some stamina - then gallop to the finish.

My method: just ride slow, then when you close to i think last house/church tap twice and hold shift, get ahead of them and win :D AI cheats but in two ways - it will wait for you to catch up, worked for me at least. good luck