Thursday, October 05, 2006

The Legality of Poker Skill vs Luck

There is some hope that poker will be saved while sports betting and other games may vanish because poker is a skill game. If you're interested in a boring, but elaborate article about this topic, check this out.

I've also read some conflicting reports about the legality of playing skill games for money. It seems that there is some precident for making it legal to wager on games where skill predominates. Whether or not poker can legally be defined as a game of skill is a bit up in the air.

The first thing I heard on this topic was several years ago in an article in Cardplayer magazine. The article talked about a tax case where one poker pro argued that poker was a game of skill. As a result, he wanted to pay regular income tax on the money he made instead of the higher tax that he'd be forced to pay if his earnings were considered gambling winnings. He won the case and was allowed to pay the lesser rate.

But I've also read that poker is legally considered a game of chance. One definition says that in order to be a "game of skill" the elements of skill must predominate over those of chance in determining the outcome. The problem with using the definition on poker is in the short run luck dominates, while in the long run skill dominates. If you play one hand, the outcome is 95% luck, while if you play 100,000 hands the outcome is 95% skill. If you play an infinite number of hands the outcome is 100% skill.

One of the most interesting sections from the super boring article I mentioned above is this:

"I suggest that those interested in improving the law on skill v. chance work on expanding that definition to better specify the principal elements that constitute skill and chance. A weighing mechanism that could be considered by a judge or jury should also be set forth. A few states have passed so-called Chuck E. Cheese laws to allow businesses to legally offer low-cost arcade games with prizes of a low value. That law in Georgia includes a definition of "some skill" that is of interest even though it does not cover the real question, which is what does it take for skill to be predominate. Here is the definition from the Georgia statute:

"[S]ome skill" means any presence of the following factors, alone or in combination with one another:
(1) A learned power of doing a thing competently;
(2) A particular craft, art, ability, strategy, or tactic;
(3) A developed or acquired aptitude or ability;
(4) A coordinated set of actions, including, but not limited to, eye-hand coordination;
(5) Dexterity, fluency, or coordination in the execution of learned physical or mental tasks or both;
(6) Technical proficiency or expertise;
(7) Development or implementation of strategy or tactics in order to achieve a goal; or
(8) Knowledge of the means or methods of accomplishing a task.
The term some skill refers to a particular craft, coordinated effort, art, ability, strategy, or tactic employed by the player to affect in some way the outcome of the game played... If a player can take no action to affect the outcome of the game, the bona fide coin operated amusement machine does not meet the 'some skill' requirement of this Code section."


Clearly using the above criterion poker is a game of skill. But, the main thrust of this poorly written piece is that the precident says that poker is a game of chance. In fact the author goes on to say:

"Consider that on any one hand of poker it cannot seriously be contended that skill outweighs chance. Also, the results of any given session of poker (one night, one tournament, etc.) are not likely to be determined based on the preponderant skill of any given player. Perhaps the result of playing many sessions for a whole year is indicative of skill predominating over chance. But, perhaps not. Poker "player of the year" awards have become popular over the past few years. No one has ever repeated as the winner from one year to the next. Indeed few repeat in the top ten of those lists from one year to the next."

While the author says "few" repeat in the top ten from one year to the next, NONE would repeat if it was determined by chance. Also if you look at the top 50 (or the top 100) instead of the top 10 it's mostly populated by the same names year after year. Is it just chance that the same 50 people manage to make a million dollars a year, every year? Are they the luckiest people in the world? Did they all make it to the end of the rainbow and get a shamrock from a leprechaun that allows them to get luckier than their opponents?

What this fellow doesn't mention is that unlike MVPs in major sports where you're dealing with at most a few hundred players, in poker there are at least 10,000 players in the pool for player of the year. Also note that he says "in the past few years" poker player of the year awards have become popular and no one has won twice. How many years is a few? Ten at the most and probably more like 5. Since when does five trials constitute a significant number? Just because no one has proven themselves to be the best in a given year two years out of 5 we're supposed to believe that this is evidence that poker is not a game of skill? In the many decades of the NFL, only one player has repeated as MVP two years in a row. Does that mean that football is all luck? It must be all luck, after all only one team in NFL history has won all of their games. Surely if it were based on skill, the best team would win all their games every year. What about golf? Maybe Tiger Woods is just the luckiest player. After all he's only won 25% of the tournaments he's entered (which all have less than 150 entrants)in his career. Sure, the top 50 players on the PGA tour (and the cardplayer poker rankings) stay MOSTLY the same from year to year, but the order shuffles around and players come and go from that list. It's clearly all luck.

What about bridge? Or all other card games? Are they all just luck?

How about trading in stocks? Some stocks go up and others go down. Is it just the luckiest people who tend to pick the ones that go up? If that's a skill based process then why hasn't one trader proven himself to be the best two out of the last five years?

When you get down to the core of the issue, the key isn't history or "these people have done this, while these other people have done this". The fact of the matter is that poker is a game of decisions and these decision affect the outcome of the game. Any time you have a game that involves a complex decision making process some people are going to make better decisions using the same information than others. It's this abliltiy that seperates the good players from the bad.

If you want to read more about what I have to say regarding luck vs skill in poker in general you can read my post from July 20th titled "What makes a good poker player."

The Latest on the Internet Gaming Ban

It's amazing to me how my feelings about the significance of this bill passing have changed over a three day period. On Monday, it was like being hit on the head with an acorn. On Tuesday I was sure the sky was falling. And, by Thursday, it was like being hit on the head with an apple. The sources I've used to come up with this latest analysis are: An e-mail discussion group that I belong to who's main purpose in the past has been to analyze sports betting (this group is filled with smart guys who are in the know, including WSOP Media Director Nolan Dalla), an article in the San Francisco Chronicle, a 3 minute piece on CNN, and various online articles that have come my way.

First to clear up a few vague points that I made in my original post. The bill that contains the "Unlawful Internet Gambling Enforcement Act of 2006" is the "Safe Port Act of 2006" in case anyone wanted to look for more info on it. The person who is most directly responsible for this act is Republican senator Bill Frist. The Secretary and the Board of Governors of the Federal Reserve System have 270 days (after the bill is signed by the president) to come up with enforcement policies and procedures. Apparently there are 23 million online poker players in the US and in every place that I've heard about this bill I haven't heard one person interviewed or quoted as saying they were for this bill (with the exception of the people who wrote it). Furthermore according to Sen. Frank R. Lautenberg (D-NJ), no one on the Senate-House Conference Committee had even seen the final language of the bill before it passed.

So what's the latest news? Well it looks like the publicly traded websites (party, paradise and pacific which is also know as 888) will probably jump ship on the US market when Bush signs the bill. But Fulltilt, Bodog, and most importantly Pokerstars are all private companies and could very well continue normal operating procedures.

Apparently there are going to be plenty of challenges to this bill in the courts. I could see websites using the angle that they'll keep the status quo while there are active challenges to the bill in the court system. If this is the case I won't have anything to worry about because I'll be long dead by the time the case and all of the appeals get resolved.

I've read conflicting reports about this but Allyn Jaffrey Shulman says in an article published yesterday (you can read the whole article here) "Do not panic. First and foremost, this bill does not criminalize playing poker. In fact, the bill does not speak to the poker player at all." While I wasn't going to stop until people started getting arrested or the websites blocked me from playing, this can't be bad news if this is true.

Another interesting angle I've read is that as a way of pulling out of the US market the websites (even the publicly traded ones) will stop accepting "payments" from US players. While this might dry up the supply of weak players from the US, there are plenty of worldwide players who will be free to keep pumping their money into the system. What about me? I've made one "payment" and that was $500 in January of 2004. Since then it's been all withdrawals. Of course, the amount that I would think of as a safe bankroll would probably go up, but I'd be able to keep playing indefinitely.

There is some hope that poker will be saved while sports betting and other games may vanish because poker is a skill game. I've created another post discussing the merits of this angle.

I'm sure I'll have more to say about the online gaming ban in the coming days as more info comes my way.

Tuesday, October 03, 2006

More on the internet gaming ban

I'll have plenty more to say tomorrow I'm sure, but for now

here

is a LONG and detailed article written by one of the leading experts regarding gambling and the law.


The more I hear the less dire things seem.

A Comment Response

In response to my most recent post Tim commented "My cynical take is that some of these folks are less worried about Mrs. Jones gambling away all her savings and leaving the family on the street, and more worried about the effect the growth of online gambling is having on the casinos in their own jurisdictions."

First of all let me say thanks for your comment. I LOVE COMMENTS! It lets me know that people are actually reading. I have a few responses. First of all, in an interview I saw with one of the bill's architects he spun it as an attempt to protect America's youth from the dangers of gambling addiction. He even compared gambling addition to drug addiction. I've been around my share of gambling addicts and while it can be a problem ALMOST ALL people who enjoy gambling are NOT addicts. A much larger percentage of drug users are addicts and the addiction as well as the effects of said addiction are MUCH more severe. Comparing gambling addiction to drug addiction is like comparing a cold to Ebola.

As far as casinos being for or against online gambling (especially poker) I would say they are for it. There is nothing more boring than playing regular casino games (blackjack, craps, roulette etc) online and very few people actually engage in this dark side of online wagering so there really isn't much competition there. Casino sports books might be taking a small hit, but the only place they are legal is in Nevada.

When it comes to poker I think the casinos have to be all in favor of online play. From a first person perspective I can tell you that every poker room in every casino I've been in is MUCH busier now that it was before 2003 when online poker started getting big. Furthermore a shitload of new poker rooms have been opening in casinos in Las Vegas that didn't offer poker in the past. I'm certain that the Harrah's corporation, which is the largest casino chain in the world, is really pissed about the ban, because they own the WSOP and that's going to suffer substantially without online qualifiers. Also I'm sure the big casinos would like online gambling to be fully legalized so they could get in on the action.

Thanks again for your comment.

Online Gaming Ban (BOOOOO!)

While there have been whispers of an online gaming ban for the past few months, one passed last week. This ban applies to all online wagering including regular casino games like blackjack and craps (yes they have online craps), sports betting and poker. It was attached to the port security bill. I can't think of too many things that are as unrelated as online poker and port security. It's never made sense to me that our law makers should be allowed to get pet projects squeezed through congress by sneaking them into important legislation. This is clearly a dishonest and virtually fraudulent practice that wouldn't fly in any other business or social setting.

I don't know how the gaming regulations would have done on their own, but I know none of the members of congress want to have the fact that they shot down a port security bill on their record. I'm sure they're all envisioning an opponent's ad during their next campaign. "Steve Johnson opened the door to terrorists! He invited them into your living room and told them to sit on your couch and drink your beer! The terrorists want to blow up everything from your house to your little dog Fluffy. Steve Johnson voted against the port security bill which could have stopped the terrorists from getting near Fluffy. Do you hate Fluffy? If not, vote against Steve Johnson. Steve Johnson - terrorist loving, dog hating, stink factory. Is that who you want representing you?"

So what are the implications of this bill? Basically it makes it illegal for banks and credit card companies to transfer money directly to and from gambling sites. This in and of itself is not a big deal. With most credit cards in the U.S., the issuing banks have blocked these type of transactions for years. And while it's convenient to transfer directly to and from your checking account, there are several intermediaries already in place that make it easy to circumvent this process. In fact, I've used a company called Firepay (which is just like neteller and similar to pay pal) for about half of my online transactions, because in many cases it's quicker and easier than direct transfers.

The bill stipulates that whoever is supposed to take care of this stuff has 270 days (people I've talked to seem to think this is about a third of the time it would actually take) to put in place the means to enforce these new rules. The banks are going apeshit because it means they have to sort through billions of transactions to weed out the ones that aren't kosher. This is going to cost them an insane amount of money. In fact, I've heard that it might not be possible in the sense that it would cost so much to do it, that it would put the banks that tried out of business. While it seems to me that they could come up with some cost effective way to do it using technology, they are not happy about it and may be the biggest ally of the poker community.

The real problem is that the bill takes what was a grey area before and explicitly says that placing any type of wager over the internet is against the law. As a result, many of the websites have said that they're going to pull out of the U.S. market when the bill gets signed into law. CNN says that should happen sometime in the next two weeks.

Needless to say, I'm not happy about these developments, but it's not the end of the world. I'm going to keep playing online as long as I can, and I think the chances of losing any money that I have deposited online is remote. But, just in case I've withdrawn a good chunk of the money I had in my online accounts. I suspect that some of the websites will remain in operation in the U.S. and all of them will remain up and running for worldwide customers. I am also betting that there will be some kind of grace period where I'll be able to remove any remaining dollars. Although I suspect that the few hundred dollars I have in season long football wagers (i.e. will the Colts win more than 11.5 games this year) may be gone forever. Now I hope they all lose! HA!

If it turns out I can't make my living online anymore, it will be back to the brick and mortar casinos for me. Luckily, I live in an area where I can still make my living playing poker. Of course, I won't be able to play 6 games at a time anymore, but I'm almost certain I can make just as much money. The main downside is I won't be able to work from home anymore. But, I'll still be able to work whenever I want.

There is some chance that this could prompt Jen and I to move to the LA area. There's always been some chance that we'd end up down there since Jen grew up in Orange County and her family still lives there. But, more to the point, that area is home to 3 or 4 of the largest card rooms in the world. Even though I've had mixed luck in the few times I've played at The Commerce and The Bike, it's clear that the games are EXTREMELY soft.

The best possible outcome here is for the bill to bring online poker out into the open. Apparently there are fifty million poker players in the US and while only a small fraction of those are online players we are still a force to be reckoned with. Along with the banks, the poker players, anyone affilitated with the WSOP or ESPN, and the poker publishing industry, I'm sure any groups with the goal of protecting our civil liberties would be against this bill. This seems like a clear case of right wing nut jobs trying to regulate our morality, instead of protecting out freedom. I'm hoping enough people get outraged, that online poker makes a resurgence in some new fully legal and regulated form. I've always said that full blown legal online poker would be worth at least $100,000 more a year to me, so if this is what it takes to make it happen down the road, then so be it.

I'm going to make sort of a game time decision about whether or not to keep playing online once the ban goes through and I'll keep the blog posted with whatever developments come my way. But, you should all get ready for some tearful phone calls where I put my wife on the phone and make her ask to borrow money so we can pay our gas bill (it's just so tough now that pokerstars closed down..sob..sob). We'll then use this money to buy expensive bottles of wine and cigars, which we'll then light with more money that we've squeezed out of you saps! HA HA HA!

Monday, October 02, 2006

WCOOP Final Thoughts

While the WCOOP wasn't a financial success it also wasn't a failure. I played in 51 statellites with buy-in's ranging from $16 to $280 and lost a total of $451. I played 10 of the WCOOP events with buy-ins totaling $5,355. I finished in the money in 3 of the 10 and lost a total of $302.

If I'd had one or two hands go differently I could have shown a solid profit instead of a small loss.

In the heads up matches, needing to win 3 matches to make the money I had my opponent out chipped 5,500 to 500 in the second match. I put him all in 5 times and was unable to win any of the five. While there were no guarentees that I'd have won the third match I was close to advancing.

In the NL hold'em with rebuys I finished 363 out of 2,081 and if I could have made it to 270, I would have picked up another $1,184.

In the $530 pot limit event I finished 198 out of 1095 needing to get to 150 to pick up $876.

And of course in the $1,050 limit event if I would have been able to move up 3 more spots from 21 to 18, I would have made another $2,400.

The point is, I was close. I could have made the money in an insane 6 out of the 10 events. I'm really happy with how I played and I'm already looking forward to my next series of big tournaments. For now it's back to the unglamorous, but profitable world of $100 single table tournaments.

I'm sure some of you have heard about the anti internet gambling legislation that got tacked on to the port security bill and cleared the senate a few days ago. I have plenty of comments about what I think it means and my expectations for the future of internet poker. But, you'll have to wait for my next post which will be coming in a day or two.

Thanks again to my backers and everyone reading this blog.

Sunday, October 01, 2006

Congrats to Matt!

My good friend Matt Lessinger had a great poker day today and I thought I'd wish him congratulations and tell you a little about it. Today Matt played a $1,200 buy-in poorly run NL hold 'em tournament in Fresno, CA. The main benefit of the event was the final 6 would be on TV. ESPN? No. Fox Sports? No. Bravo? No. I'm not sure how you pronounce it, but I think the official name is "Central California Backwards Ass Hillbilly Network" or CCBAHN. TV is TV, and I've never made it to a televised final table, so maybe I should shut it...no...that's crazy.

Anyway the tournament started with 90 players, 10,000 chips per player and 40 minute limits. Sounds o.k. right? The problem is $200 of the $1200 buy in went to the house! This is an unheard of, insane, ridiculous percentage. Also whoever came up with the way the limits increased was also a total nut job. When I first heard from Matt there were 28 players left (sweet), he had 57,000 chips (sounds good), average was 32,000 (o.k.) and when he got back to the table the blinds were going to be 2,000/5,000 (WHAT!?!?). Never, ever, ever should the big blind be 1/6th of the average stack. This is just bonkers.

When they made it to the top 10, Matt had turbo-ed up to 210,000 and was in first place. The blinds were at 10,000/20,000, but once they got down to the top 6, the blinds would drop back down to 1,000/2,000 to make the TV coverage more interesting.

The next time I heard from Matt, they were down to 3 players and he was in first with 500,000 playing against a 300,000 chip stack and a 100,000 chip stack. It seemed like 10 seconds later he called back and told me he's won!

This was clearly a strong performace and while I'm happy for Matt who won over $31,000 for this effort, I'm also happy that I took 5% of his action. As a result I picked up $1,500 while sitting on my ass watching football today. SWEET! What have your friends done for you lately?

In all seriousness, congratualtions to a good friend on a fantastic victory.

My WSOP 2023 Plans and Missions

After four and a half years working for StubHub I wrapped up my time there in March. I've been at the poker tables 3-4 days a week since...