I would also be concerned that such an individual might get bred anyway once it has left my care and I feel that for the purposes of conservation such fish should not be a part of the gene pool.
This is why I do cull (kill) fry who are deformed. I've come across "I wanna breed him/her anyways" bull, that I really don't like to see. If you are not breeding for the breed, don't breed at all. And that goes for ANY animal, not just fish.
Culling (killing methods)
I have had Betta fry who were constantly weak or sick, and those ones were culled. Other ones that are culled are ones whose quality of life is hindered or survival chances are small. This means deformed spines, chronic SBD, swimming vertically or sideways without correcting itself... Most of these will never go on the market.
Depending on the age of the fry: I may feed off to a larger fish, such as a previously bred Betta who could benefit from the protein. This would be for small fry or fry that are about a month or younger. I'll use ice water for fry older than that, or I use clove oil.
I know there is the "smashing with a hammer" method, but I cannot personally do it. Though it is humane, as it is swift... It's gross. Even if I don't see it, I still imagine it. Blech.
Culling (not killing)
For some lucky deformed fry, such as ones with a bent spine, there are a few people who would like to have a little "handicap fish"
. These people give the fish everything it needs, including lower and wider/longer water to ensure they can reach the surface for air. You may find some people on here who do this. the people who take them also know they should not breed that fish - which is a good thing to know that you can trust them on that.
For ones whose fins are unappealing or colors/patterns that I do not desire, they are sold or given away. These guys are usually cheaper than the ones with better form (body and finnage), and better colors/patterns.
I deal with the mom n' pop shop here who would gladly take some of the fry off my hands. Otherwise Betta enthusiasts ask for them - especially since females rarely ever sell in stores. I don't send females to the store no matter what, just for that reason.
I also do not cull (kill) breeders. They are retired and either stay with me as a pet, or sent to new homes as a pet.
Each breeder has their reasons and their methods. There is no right and no wrong way - which has already been mentioned. Though I don't suggest just tossing them in the garbage can... That would probably be frowned upon.