Think of bad-beat dollar as a poker insurance policy

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By Elliott Schecter

In Pixar’s animated film Ratatouille, restaurant critic and misanthrope Anton Ego quite deliciously and viciously ordered “perspective” in the movie’s climactic scene. Most people on the planet, and in the poker community specifically, usually have no perspective beyond their fingertips. This goes for players and room operators.

I’ve found most above-average players who are good enough to eke out a profit at the lower limits feel the cost of enticing recreational players to rooms is unfairly deducted out of their profits. They are, of course, not far off of the mark. I have also found room operators rarely try to understand and account for how the taking of fees and accepting of tokes affects the players and the games. Having experience, like most of my colleagues, as a player and a room operator, I feel my views on this subject are at least a little relevant.

Most jurisdictions that have legal poker, with the glaring exception of California, allow for a percentage of the pot to be dragged as rake (revenue). In almost all of these areas, the rake can be no more than 10 percent of the pot with the maximum dollar amount on the rake left to the discretion of the poker room.

Most of these areas also allow player-funded promotions via jackpot donations from the same pots. What this really means is, if a poker room is willing to designate some of the rake for jackpots and promotions and return most or all of these designated funds back to the players in some form or another, then that poker room is granted the privilege of circumventing the 10 percent maximum on the rake.

Also, the jackpot donations are not taxed, while the rake is generally taxed at a fairly substantial rate. At least most rooms collect the jackpot donations separately and don’t commingle them with the rake, making it easier for most players to keep a rough count of how much is being collected.

These jackpot donations lead to the feeling among above-average players that the house is taking “their money” to promote the poker room and its games. This is untrue. Every bit of revenue dragged from the pot belongs to the house.

If I operated a poker room that was not allowed to take jackpot fees from the pots, I would just use an alternate way of collecting the rake. For instance, instead of setting the fees at $5 rake and $1 jackpot, the rake would be $6 rake with 10-15 percent of all rake collected going to a bad-beat jackpot and other promotions. Any business that sells a good or service passes all of its costs on to its consumers. This is how the free-enterprise system operates.

All-you-can-eat buffets charge the same amount to the svelte and to the obese. Those buffets that customize their prices to an individual’s weight would logically and comically attract only slim overeaters, an unprofitable situation. To expect a business to not pass its costs on to its customers is unreasonable and unrealistic.

A public cardroom can attract many distinct groups of players, the largest and most important being low-limit recreational players, which is the group that stereotypically chases bad-beat jackpots and other player-funded promotions. These are the players that usually possess the least amount of skill but play at limits low enough to prevent them from going broke because of that lack of skill. As 80 percent or more of the action at a poker room is made up of low-limit games, it follows that any room in a competitive market that doesn’t cater promotions to these players will find itself filled with empty tables.

These are the players whot are perceived to be making the games worth playing, providing action. Low-limit games, which are usually raked by percentage of the pot, are greatly dependent on the action to produce revenue. To play in games that have only good players and little or no action is cost effective in that a small amount of fees would be taken from the meager pots but still dangerously unprofitable to the point of ridiculousness because of this lack of action.

It’s worth mentioning that the only poker rooms of any consequence in the United States that don’t rake jackpot donations from pots are the poker rooms at the Bellagio, Aria, Venetian and Wynn. All of these hotels are five-diamond resort destinations where poker is not even the eighth-most important offering: slots, table games, sports betting, hotel rooms, restaurants, night clubs, production shows and retail shopping are all more important to their bottom lines.

As a player, I have come to realize player-funded promotions do two positive things: Bad-beat jackpots are big-hand insurance, like home or auto insurance. Maintaining and paying for a home is akin to a skill. Having that home destroyed by a tornado or hurricane is bad luck. Home insurance is the applicable hedge in that situation, and most homeowners have a policy.

Playing poker well is a skill. Losing a pot when holding quads or a straight flush, a situation when virtually every rational person is counting his opponents’ chips as his own, is extremely bad luck. When it comes to bad-beat jackpots, why would you not want to have an insurance policy for those rare occurrences of bad luck? Considering big-hand insurance premiums (the jackpot donations) are paid for by the players losing the pot, that question is begged even further.

The second benefit is what is produced by all of the smaller, frequently paid awards from most promotions, namely good action. High hands, cash for quads, etc., put buy-ins back on the tables so the players keep the games going for longer periods of time. Players realize the positive effect on their sessions and bankrolls and flock to the rooms that keep them in action. Good players realize this because their lesser opponents will expend more chips chasing these quick-hit awards and have more chips to lose when they get paid a promotional award.

As Oliver Wendell Holmes, former Chief Justice of the U.S. Supreme Court and a Republican said, “Taxes are the price we pay to live in a civilized society.” Likewise, jackpot fees and donations are the price we pay for good poker games in which to play. As far as the rake is concerned, poker players are entitled to a fairly and honestly raked game and nothing more.

If a game has good action and you feel you can beat it, you should play in it. If you don’t feel you can beat it, you should not play in it. But a room is under no obligation to provide a livelihood to poker players or tailor a game format so that it becomes profitable for any particular group of players. On the other hand, as a room operator, I’m obligated to show a profit on the balance sheet, but I believe a well-run and enlightened poker room will not rake its players to ruin just to produce a profit. (Full disclosure: The rake in the poker room I operate is 10 percent up to $3 maximum with $1 taken for the jackpot when the pot reaches $30.)

— Elliott Schecter is the poker room manager at Downstream Casino Resort in Oklahoma. Contact him via email at editor@anteupmagazine.com.