Argument: A Case for Poker Legalization
As you may know by now online poker in the United States is in a harmful state because it is not explicitly illegal. If you are determined to play poker online for real money, you are limited to offshore sites. This is because it is illegal for business owners to operate a site in the United States that accepts bank deposits from Americans for any form of betting. That is not to say, however, that you are in the clear to deposit your hard-earned money on a strange site hosted in Siberia. There are still risks involved for you and the owners. You are still at risk of losing your deposit or being cheated out of your money by a poker bot. The site owners are at risk as well because they can have their whole business shut down and be thrown in the jail. Online poker in America was not always in this state, however, in fact, it was not until the Unlawful Internet Gambling Act of 2006 that a bank accepting deposits was outlawed. Despite its passing it was not enforced until 2011 when the biggest sites in America were shut down — Full Tilt Poker, Cereus, and PokerStars. Online poker was outlawed rather than addressing its issues at that time. For example, Full Tilt Poker, one of the large poker sites in 2011, was discovered to be a Ponzi Scheme when they were shut down (Harris). Other sites such as Cereus and Poker Stars, although not scamming users, were shut down leaving players with nowhere to play. Ultimately, the owners of all three were charged with money laundering and fraud. The owners argued in court that poker was exempt from the law because poker is a skill-based game. Despite their defense, all the owners would be convicted and have their sites shutdown. In short, poker should be legalized because it will prevent the harmful underground scene from operating, and it will spur economic growth online.
I got into poker a little over a year ago, and I was surprised to hear that people believed that poker had no element of skill involved. I had been winning money online, so it was a no brainer to me. Even as recently as spring break I won $900 in a poker tournament — at a physical casino, however — and my friends and family still thought it was luck. It also did not make any sense that such a large industry would be shut down. Full Tilt Poker, when they were ousted as being as scam, was supposed to be holding half a billion in user deposits, so clearly, them and the other poker sites had to have been bringing in large amounts in revenue(Harris). So, nonetheless, hearing this sentiment and reading about it on the internet shocked me, but I could not show them my graphs from Poker Tracker and the books on poker theory that I own. Instead, I decided to try to look for research proving the element of skill in poker. Surely, in a community filled with people obsessed with mathematics and statistics someone would have found a way to formally quantify poker skill, and luckily, they had.
In fact, a popular economist and author from the University of Chicago produced the first piece of research that I came across. His research was straight forward; he took the data from the previous World Series of Poker and used that as a filter for skilled and unskilled players. Then he would compute each player’s return on investment from the current WSOP then compare it to his filter and the results are cited as evidence of skill in poker. The results of his research said that the players who were grouped into the skilled category earned an average return on investment of thirty percent while the unskilled players lost fifteen percent of their initial investment (Levitt and Miles).
Poker skill goes much deeper than a player’s return on investment from a major tournament, but thankfully there has been research on poker strategy. Specifically, game theory optimal, otherwise known as GTO strategy. Game theory optimal strategies are used by poker players to make their opponents indifferent to either calling or folding to a bet that they may perform with a given range of hands(Polk). Researchers from Germany were able to use game theory, which is the study of how mathematical models conflict, to develop a winning strategy for a variant of poker. The variant they used is called Heads-Up Limit Hold-em, and in Heads-Up limit two players face off and bet sizes are limited to the size of the pot. The researchers were able to program a simulation that computed how exploitable a strategy was at every part in the game’s decision tree. The researchers were able to find a strategy that was unexploitable. So, a player could employ this GTO strategy against a lesser opponent and be successful(Bowling et al).
However, given how complex poker is, a GTO strategy is much harder to develop for the variants of poker where bet sizes are unlimited because of how much computing power it would take to find it. So, researchers from Nevada conducted their own research in which players were grouped according to their skill. After the players were grouped they were observed playing a sample of ten thousand hands. Ultimately, the researchers found that 97% of the time the skilled players won their matchups(Hannum and Cabot). These findings can, again, be cited as evidence of skill in poker.
Despite not being able to come up with a GTO strategy for other variants of poker, loose ones do exist and are very profitable against unskilled players. In fact, this is one of the bigger risks that online players face. Hackers are able to program poker bots that can play a strategy that mimics a GTO strategy and set it loose in unsecured poker sites such as America’s Card Room(Ingram). However, essentially criminalizing online poker leaves unwitting players vulnerable to this kind of exploitation.
If these researchers have consistently found that skill is prevalent in poker, then why has online poker been criminalized? A common answer to that question is that poker, while a game of skill, can still be played to gamble if one wants to. It could be argued that it is not the government’s place to enable those who are problem gamblers by giving them an easier outlet to gamble. However, a counter to this would be that while there are problem gamblers who play poker, poker players are 10.4% less likely to chase their losses compared to the average casino player(Gainsbury et al). That is not to say that some action cannot be taken to help anyone who was suffering from a gambling addiction. In fact, researchers in the Netherlands proposed and developed an algorithm that monitored player’s account activity on a European poker site and was able to find and identify players who may be problem gamblers(Luquiens et al). If implemented in the United States, the algorithm could be used to flag player accounts and freeze them until they seek help for gambling addiction. Or a subtler solution may be to flag their account and start gradually replacing the advertisements they see on the site with advertisements for resources to help with gambling addiction.
There is more harm being done to those who are playing on offshore sites, however. The greatest risk to current players is having their deposits frozen for an extended period. For example, when Full Tilt was shutdown they were discovered to be running a Ponzi scheme and players did not receive their deposits back for almost two years(Harris). Cheating is also another risk that players face. Players on sites like America’s Card Room, a popular offshore site, are also vulnerable to cheating in the form of other players programming bots that can exploit them(Ingram).
Luckily, for those who can play in states where online poker is legal — Nevada, New Jersey, and Delaware — they do not have to worry about being exploited. Reason being, the law in these places state the sites operating there are subject to government oversight and may have their accounts audited at any time. Also, in New Jersey the poker client will not let you run a heads-up-display. A heads-up-display, although not considered cheating by much of the poker community, is a program that runs alongside your poker client and keeps tracks of that other players moves(NJOnlineGambling). For instance, you can set up your HUD so that is tracks how often a player opens the pot, how often they fold to bets, and even more advanced statistics like how often they re-raise when the final card comes. To me, banning HUDs seems extreme but it is certainly a step in the right direction when it comes to player protections. Newer players may not be aware of HUDs yet and playing against someone who is using one certainly puts you at a disadvantage.
In conclusion, online poker’s current state is caused by its miscategorization that ultimately does more harm to poker players than good. However, these outlined problems, cheating and poorly managed poker sites, can be solved by implementing policy that are like the laws already in place in states like New Jersey but on a federal level. These laws would protect current players from the harmful environment created by the underground poker scene. For instance, the laws New Jersey allow the state government to audit the companies running poker sites for any financial and technical errors. Legalizing online poker would spur economic growth online. Poker is a huge business; before the shut down on online poker in America it was a multi-billion dollar industry(Levitt and Miles). Clearly, the demand is there.
Works Cited
Assembly Bill №258 — Committee on Judiciary. Nevada Senate and Assembly. 10 March 2011. https://www.leg.state.nv.us/Session/76th2011/Bills/AB/AB258.pdf
Bowling, Michael, et al. “Heads-up Limit Hold’em Poker Is Solved.” Communications of the ACM, vol. 60, no. 11, 2017, pp. 81–88., ACM DL, doi:10.1145/3131284.
The Delaware Gaming Competitiveness Act of 2012. Delaware House of Representatives, 146th General Assembly. 9 May 2012, https://votesmart.org/static/billtext/40657.pdf.
Gainsbury, Sally M., et al. “Chasing Losses in Online Poker and Casino Games: Characteristics and Game Play of Internet Gamblers at Risk of Disordered Gambling.” Psychiatry Research, vol. 217, no. 3, July 2014, pp. 220–25, ScienceDirect, doi:10.1016/j.psychres.2014.03.033.
Hannum, Robert C. and Anthony N. Cabot. “Toward Legalization of Poker: The Skill Vs. Chance Debate.” UNLV Gaming Research & Review Journal, vol. 13, no. 1, Apr. 2009, pp1–20. EBSCOhost,
Harris, Martin. “Black Friday: Reliving Poker’s Darkest Day Five Years Later.” PokerNews, PokerNews, 11 Apr. 2016, www.pokernews.com/news/2016/04/black-friday-five-years-later-24506.htm.
Ingram, Joe. “Tournament Poker Cheating Exposed on Winning Poker Network YouTube” YouTube, 17 Feb. 2018, www.youtube.com/watch?v=mBo3PhOg8wQ.
Luquiens, Amandine, et al. “Tracking Online Poker Problem Gamblers with Player Account-Based Gambling Data Only.” International Journal of Methods in Psychiatric Research, vol. 25, no. 4, Dec. 2016, pp. 333–42, Wiley Online Library, doi:10.1002/mpr.1510.
Meyer, Gerhard, et al. “Is Poker a Game of Skill or Chance? A Quasi-Experimental Study.” Journal of Gambling Studies, vol. 29, no. 3, Sept. 2013, pp. 535–50, SpringerLink, doi:10.1007/s10899–012–9327–8.
NJOnlineGambling. “NJ Gambling Law — Legality of Online Casinos in New Jersey.” NJ Online Gambling, 2 Mar. 2018, www.njonlinegambling.com/a2578/.
Polk, Doug. “GTO vs Exploitative Play: Which Is the Better Strategy?” Upswing Poker, 27 Jan. 2017, www.upswingpoker.com/gto-vs-exploitative-play-game-theory-optimal-strategy/.
Steven D. Levitt, and Thomas J. Miles. “The Role of Skill Versus Luck in Poker Evidence From the World Series of Poker.” Journal of Sports Economics, vol. 15, no. 1, June 2012, pp. 31–44, NBER, doi:10.1177/1527002512449471.