Why Poker Is Not Gambling

May 25, 2014 Posted in Gambling Law, Poker by No Comments
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This topic has been beaten to death since the passage of the UIGEA in 2006. Actually, the debate goes back further than that, but the debate really heated up on the internet around that time. Nevertheless, I want to chime in with an honest look at whether or not poker actually is gambling.

The topic is worth addressing because it’s not just a philosophical debate. Federal and state laws depend on the definition of poker. Professional players’ livelihoods are on the line. Online poker itself is on the line. If you care about poker at all, it’s important to understand where people stand on the issue.

If you want to protect your right to play poker when you want and how you want, it is vital that you educate yourself on the issue. You can make a difference in the national debate if you simply know how to defend poker as a game of skill. Even if you convince just one person that poker is a game of skill, you have done something positive.

There are three camps in the “is it gambling or not” debate:

  1. Poker is definitely a form of gambling
  2. Poker is a game of skill
  3. Poker is a little bit of both

My argument today comes from the second camp. Poker is 100% a game of skill and it’s not even a question. Poker is just as much a game of skill as baseball, golf, bridge, backgammon, stock trading and just about every other form of competition.

If you’re going to call poker gambling, then you would have to call just about every other human competition gambling as well. Everything we do involves some degree of risk, and in many cases there is money on the line. But it’s not enough to use this type of broad logic to make the argument. If we want to convince our friends and the courts, we need to take a more nuanced view.

This post will address the debate from two different points of view. First, I’d like to convince you, the skeptical reader, that poker is not gambling. Then, we’ll take a look at the issue from the legal point of view.

The Everyman’s Explanation of Why Poker is Not Gambling

This section is designed more for debating with the average person – your friend, your next door neighbor and so on. Some of these arguments would probably be useful in court, but this is mostly about talking to normal, everyday people about poker, skill and gambling.

1. There are Long Term Winners

Poker is not gambling because what separates the winners from the losers is skill. Poor poker players lose over the long run while skilled poker players win over the long run. You can look at the greatest cash game and tournament players in the world and see how they make money year after year.

Big name players such as Phil Ivey, Daniel Negreanu and Patrik Antonius have made millions of dollars over the courses of their careers. They show up time and time again at the final table of major events. They don’t even have regular jobs because they constantly make money with poker.

These professionals are not successful because they are just luckier than the average person. They are professionals because they are extremely skilled at poker. They have a deep understanding of poker strategy and can adjust their tactics to the players they find themselves against.

If poker was a gambling game like roulette or craps, there would be no long term winners just as there are no long term winners in those games. The longer a skilled player plays poker, the more money he makes. The longer a craps player plays craps, the more he loses. The element of skill makes all the difference.

2. You Can Win with a Bad Hand

Poker is unique from other gambling games in that your starting cards do not seal your fate. You can be dealt the worst starting hand at the table and still win the pot through skillful play and deception. This is another big point for poker being a game of skill.

In no other gambling game is it possible to manipulate the game in this manner. If the wrong cards are dealt, or the dice roll the wrong way in any other game, you lose. Period.

Case in point: Professor Robert Hannum of the University of Denver published a paper in 2012 in which he analyzed one billion hands of online poker and found that 85.2% of hands were decided without a showdown. In other words, the players’ betting decisions determine the vast majority of the outcomes in poker.

But what about bad beats?

Bad beats are a part of poker, no doubt. You can get it all in preflop with Aces and lose to someone’s crumby Ten-Jack just because the wrong cards come out on the flop, turn and river. However, that doesn’t make poker a gambling game. It just means there are elements of chance in poker just like in any other activity.

If the mere presence of “chance” was all that was needed to define something as gambling, we could call almost every human activity gambling. Investing, day trading and all sports include some element of chance. Professionals in every profession understand the risks and take the proper precautions to mitigate those risks. Over the long term, professionals come out on top.

For example, a decent poker player knows that his pocket Aces should hold up roughly 80% of the time against any random hand. He’s happy to get as much money in the middle as he can before the flop because he’s a big favorite. Yes, he will lose 20% of the time due to “luck” but if he consistently gets his money in the middle against inferior hands, it is a mathematical certainty that he will win money over the long term.

3. Poker Is Played Against other People and not the House

Poker is unique from all other gambling games in that it is played against other players and not against the house. The casino has no stake in who wins or loses – it earns its money by taking a little money out of every pot.

This point wouldn’t be enough on its own to classify poker as a game of skill. After all, you could easily get 5 people together and host a $10 winner-takes-all coin-flipping contest. I think we can all agree there would be no skill in that type of contest.

But still, this point does have its place. Every other gambling game in the casino is played against the house according to a strict set of rules that ensure the house always wins. The games are “rigged” against the player.

This is not the case in poker. Every person plays under the same rules. Therefore, the only way to win money consistently in poker is to play better poker than your opponents.

4. Risk and Uncertainty Does not Make Poker Gambling

Let’s say you pick up two-pair in a game of Texas Holdem and convince one of your opponents to commit to an all-in pot on the flop. You turn over your two-pair and your opponent shows a flush draw. The turn brings a brick, the river brings the final flush card on your opponent wins even though he was the underdog.

The average person watching this hand might claim this is a perfect example of why poker is a game of luck. The player with the worst hand got lucky and won the pot! This game is all luck!

The skilled player would know this single hand doesn’t tell the whole story. He knows that if he consistently gets his money in when the odds favor him, it is mathematically certain that he will win money over the long run. That’s not blind gambling; that’s how you play the odds.

Let’s use a coin flip example. You and a friend decide to flip a coin and bet on the outcome. If you both bet $1 on every flip of the coin, you would be gambling. But what if your opponent had to risk $5 every time while you only had to risk $1? Would you still be gambling?

This gets into the fuzzy definition of gambling. In this example, random chance determines the outcome of any single flip of the coin. However, you are guaranteed to win all of your friend’s money if you play this game long enough. You have the best of this game because the odds are in your favor.

Day traders should be familiar with the concept of expected value. Even though there is some uncertainty in the outcome, you know that you WILL win money if you consistently get your money in when the expected value is positive. If you’re going to classify poker as gambling, then you also have to classify investing as gambling.

The mere existence of uncertainty doesn’t make an activity gambling. Investing deals with uncertainty. Professional sports deal with uncertainty. There are very few human endeavors (especially those that deal with money) that don’t include some amount of uncertainty and risk.

5. You Can Intentionally Lose in Poker

Unlike true gambling games, you can purposely lose in poker. In games such as roulette and keno, you cannot intentionally lose. The decisions you make in those games have no effect on the outcome. There is zero room for skill in those games because it’s all based on luck. There are no “good” or “bad” decisions in those games.

When you play poker against other people under an equal set of rules, the money you win comes from other people. Skill is the only thing that separates the winners from the losers. The people who make the best decisions win money from the people who don’t make the best decisions.

Even though some people may approach poker with a gambling mindset, that does not mean poker itself is based on luck. The skill aspect exists whether or not any particular player chooses to acknowledge it. This is just like investing in the stock market. Those who invest at random are basically gambling with their money. Just because those people gamble (and sometimes get lucky), it doesn’t mean investing is a gambling game.

The Legal Debate

It’s one thing to convince your friends and coworkers that poker isn’t gambling, but it’s a whole different beast when dealing with the court. Previous court cases have ruled in both directions. There have been cases in which the court decided poker was a game of skill and others in which poker was classified as a gambling game.

Let’s start with the official dictionary definition of gambling. Dictionary.com defines gambling as follows:

“The activity or practice of playing a game of chance for money or other stakes.”

This is a good start but it doesn’t take us very far in the court of law. There’s a big difference between the Dictionary.com definition and how the legal system defines gambling.

In the legal system, an activity must have three elements to be considered gambling:

  1. Consideration
  2. Prize
  3. Chance

Consideration is interpreted by courts to mean that you must pay something of value to participate in the activity. In a casino setting, the “consideration” would be the money you wager at the beginning of a hand of blackjack.

Being asked to buy something could also be considered a “consideration.” That’s why all those TV advertisements you see from companies holding drawings always tell you “no purchase necessary.” They aren’t authorized to host gambling contests so they let you participate for free.

Prize is what you win. In most cases, this is money. It could also be a trip, a new car or anything else of value.

Chance means you cannot win the contest using skill. Slot machines and random drawings both show that element of chance because there is nothing you can do as a participant to ensure that you win.

Consideration and prize are both fairly easy to define. The element of chance is where things get fuzzy. Many of the arguments in courts revolve around whether or not an activity involves chance. Almost every activity involves some degree of chance. So where do you draw the line?

This definition of “chance” is what many a courtroom battle has revolved. There’s no easy or ironclad defense you can mount for the case of poker when we look at the skill-vs-chance debate using this legal definition of gambling. Sometimes, it would seem that the judge’s mood on that particular day is the deciding factor.

I’ll have to add more thoughts on this at some point but for now, I’ll leave it at this. This post is already absurdly long. I think that the best thing that we (average people who aren’t arguing before judges) can do is defend poker as a game of skill to our friends and neighbors. The more people we can bring to our side, the better it is for poker as a whole.

Please leave a comment if you have anything to add. Even if you disagree, your thoughts are welcome. Open, honest debate only leads to good things.

More Resources

Below are links to more resources that address the skill-vs-luck debate in poker.

The Role of Skill Versus Luck in Poker: Evidence from the WSOP

This is an interesting study that was done in 2011 by Thomas Miles and Steven Levitt from the University of Chicago. They found that skilled poker players earned an average return of more than 30% in high stakes poker tournaments.

They also found that the win-rate of skilled poker players was almost identical to the win-rate of baseball teams that had made the playoffs last season when playing against teams that did not make the postseason.

Finally, the study concluded that money managers of mutual funds are often viewed as highly skilled. People pay billions of dollars per year for money managers to manage these funds. However, mutual fund returns are worse than the returns earned by skilled poker players.

http://pricetheory.uchicago.edu/levitt/Papers/WSOP2011.pdf

Quantitative Poker: 20 Thoughts on Skill vs. Chance in Poker

This is a massive article that goes way beyond anything I could have hoped to written on the debate of skill vs. chance in poker. The author is realistic, unbiased and clinical in his approach to the debate. Several of his points effectively debunk some of the points I made in this post as too simplistic, but I’m fine with that. This guy has some great thoughts on how skill figures into poker.

One of his points, which I really like, is that “skill” and “chance” are not opposites. He looks at how people like to call poker 90% skill and 10% chance and explains why that approach is inherently flawed. This is a long, hard read but it’s a good one.

http://www.quantitativepoker.com/2012/09/20-thoughts-on-skill-vs-chance-full.html

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