Vegas is typically a place you’d associate with reckless behavior and lost money – not careful investment planning. In the past few years, however, the once-exclusive practice of poker ‘staking’ has grown incredibly popular amongst a wide range of investors. So what exactly does ‘staking’ involve?
It’s a common misconception that most of the players you’ll see at high-stake poker games are gambling with their own money. In reality, few of those same players could afford to enter frequent poker games if they were relying solely on their own funds. That’s where ‘stakes or ‘backers’ come in.
Much like you’d bet money on the jockey horse you think is fastest, stakers put money on the poker horse, eh – player, they believe has the biggest chance of winning. It allows stakers to make some serious cash from a game in which they might not be particularly skilled, whilst poker players get to enter tournaments they could otherwise never afford. It’s a win-win…providing the poker player doesn’t lose all the money, that is. Sometimes each party enters into an official and long-term backing arrangement that covers an agreed number of tournaments or months. At other times, it’s a casual deal, settled with a mere handshake.
Admittedly, it’s somewhat inaccurate to describe ‘staking’ as a new concept. Investors have been backing promising poker players for decades. The difference, however, is that stakers used to be shady individuals with close connections to illegal backroom games. Poker hasn’t always been so openly commercialized as it is today, after all. Nowadays, with the de-stigmatizing that followed when states relaxed gambling laws and international stars like Ben Affleck and Cristiano Ronaldo took to the card table, the game is about as mainstream as the Kardashians. The image of your average staker has subsequently gone from sleazy, rough-looking cigar-chewers, to that of well-groomed, well-educated Silicon Valley investors.
Contributing further toward the popularity of staking was the early 00s poker boom, where mega igaming brands like PokerStars and 888Poker began backing some of the biggest pros in the industry. Consistently, these poker pros would deliver a significant return on investment. Multi-million dollar brands would identify a promising player, pay their tournament fees, and own the larger portion of their winnings. It wasn’t long until the average Joe realized the money-making potential in a game that was once thought to be all about luck.
That’s not to say luck doesn’t remain a central factor in the outcome of a poker game. Over the past ten years, however, an incredible wealth of information on the strategy, psychology, and odds calculation has been made available online, found everywhere from poker-based forums to news sites like PokerListings. Never before has skill played a bigger part in the game, as players take intensive poker courses and study thick books on gambling methodology. It’s no surprise staking is considered less risky today than it was thirty years ago.
“As statistics get more sophisticated, you may see more and more people coming into the poker backing industry”, says Courtney Brunious, the Executive Director at Southern California’s Sports Business Institute. “I don’t think it’s necessarily something you get into to make a lot of money, just because there are a lot of risks involved, but then you could say the same thing about any investment.”
A recent feature run by the BBC explored some of the reasons stakers choose to back poker players. “I’m more for the entertainment value,” admits one staker. “…but for as little as fifty bucks or a hundred dollars, if I get a piece of the action, I could get two to a thousand times my money back,” he continues. “If [the player] finish first in one of these multi-million dollar pay-out tournaments, then that’s a nice return. It’s a lot better than the stock market.”
Candace Collins is a professional poker player and regularly backed by stakers. “I absolutely have the investors in mind when I play tournaments”, she says. “I want to win money for them.” When Collins cashes, she pays her staker their percentage of the winnings on top of the initial entry fee. To give an example; A staker pays $3,000 of a $12,000 entry fee, which contributes 25% of the total entry cost. Collins will first pay back the $3,000 entry fee, and then pay her staker 25% of the remaining $9,000. Collins is left with $6,750. Though losing out on so much money is a pain, being staked remains an attractive prospect for most poker players, who will work hard to prove they’re worth the investment. Whilst the bigger pros will be able to handle their own fees and reap the benefits of not owing anyone money, poker newbies are typically thankful for how staking allows them to get a foot in the door.
Besides experienced investors, you’ll also find some of those aforementioned poker pros becoming backers themselves. Jason Mercier is a hugely successful poker player and, as such, knows what to look out for when picking his ‘horse’. He carefully selects a few players to back and keeps a close eye on their progression. “Backing is definitely a huge part of the poker industry. I mean, most players have been backed at some point or have backed someone…it’s how a lot of guys can play big buy-in tournaments,” Mercier explains. ”I think that if you’re backing too many players, like more than 20, it’s going to be very difficult to make money. Just because it’s going to be so hard to keep track of whether or not the guys are good or bad, how they’re playing, and what they’re playing. I think it’s much easier to make money if you have one, two, three, or four guys that you know are going to be profitable.”
According to the Wall Street Journal, at least half of the 6,600 players in the 2014 World Series of Poker were receiving some form of financial backing. Considering that the 2014 event collected $64 million in entry fees, a hefty sum of that money likely came from backers. With staking playing such a prominent role in tournament finances, there’s a high probability of a poker pro facing off against a player he or she has personally backed. Such was the case for Daniel Negreanu, widely regarded as the greatest poker player today, when some of his backed players became his opponents at the WSOP. “I play against them as hard as I play against someone I don’t know”, Negreanu claimed.
The WSOP has no official rules to regulate the possibility of unfair play resulting from hidden interests such as backing but admits it is a potential problem. As fewer people remain ignorant of the hidden world of staking and its pertinence in poker culture, the less easy it will be to avoid the discussion of what regulation should ensue, if any. Will the introduction of regulation curb the growing number of investors, or simply help organize and popularize the practice? Is staking an experimental trend, or the future of sports-based investment? These are questions only time will answer, but it’s safe to say the growing popularity of staking is unlikely to slow down anytime within the next few years.
Leave a Reply