Is it chance or skill? – only the judge knows

Poker: Is it a game of skill or a game of chance?  To any poker player of merit, it is clearly a game of skill; to those who lose frequently and look for an excuse it is very much a game of luck. Who cares?  Well, lots of people care, the answer may well determine the future of poker online, and even change poker’s status in the bricks and mortar world.

What is the difference, what makes a game gambling and what makes it a game of skill?  Consideration (something of value), chance and a prize; if any game or contest contains these three elements it is considered chance – gambling; but absent one of those and it is not and can be considered a game of skill.  (Consideration) Put up a wager, (chance) take the cards as they are dealt and (prize) the person with the best hand wins the pot – gambling; that is a game of chance.  Put up a wager, play the cards skillfully and the most skillful player wins the pot – not gambling; that is game of skill, a contest, just like a football or baseball game.

A federal court in New York ruled that poker is indeed a game of skill, not chance.  It is therefore legal.  The decision in New York means that a poker room in New York, as a business, is not illegal – the jury, or the judge as the case may be, is out and whether to play poker and wager against an opponent is legal or illegal.

The nature of poker, skill or chance, is not only an American issue. At the same the judge was issuing his opinion in New York a study was being released in Europe – its conclusion matched that of the judge in New York – poker is a game of skill not chance.  But there is another side, in Germany a court has been asked to rule on the same issue.  In that case a professional poker player is trying to avoid paying taxes by claiming poker is a game of chance and therefore his winnings are not subject to taxation as they would be in a game of skill.  A game of skill is taxed, it is an occupation, like playing soccer or tennis; on the other hand lottery and other gambling winnings are not taxable.

The answer will never be simple, nor will the answer in one jurisdiction be found correct in another.  It will be a long while before this issue runs its course; legal analysts are advising caution and not recommending that any one assume that now poker is officially a game of chance and not subject to any of the laws that restrict or control games of chance.  The online poker industry would like very much to be free of gambling laws – but few law enforcement officials are willing to concede their jurisdiction.  That sounds like a game of skill to me, won’t the best, most skillful lawyers win out – care to wager on the outcome?  Oh wait, it will be adjudicate hundreds of times, isn’t that always a game of chance – a gamble?  Some lawyers are better than others, but some judges are also better than others – take the cards you are dealt and play them as best you can – bluffing allowed.

The judge’s reason: poker is more a game of skill than a game of chance, so game operators should not be prosecuted under the federal law the prohibits running an illegal gambling business.  The game was Texas Hold ’Em. About $300 bought a place at the table in the back room of a warehouse on Staten Island, where waitresses floated around with food and drinks and the play lasted until breakfast. The pot went not to the luckiest among them but to the most deft — the player who could guess his opponents’ intentions and disguise his own, make calculated decisions on when to hold and fold, and quickly decide how much to wager. That, anyhow, is how one federal judge saw it from his chambers in the Federal District Court in Brooklyn. In a ruling that goes to the heart of what it means to play poker, Judge Jack B. Weinstein tossed out the conviction and vacated the indictment of the man who ran that gambling business.  Mosi Secret, New York Times, 8-22-12

  “The results provide strong evidence against the hypothesis that poker is a game of pure chance. For a game of pure chance there would be no correlation in the winnings of players across successive time intervals. “This finding can indicate that better players choose to play more and that players learn from playing” Three academics from the Erasmus School of Economics, Erasmus University Rotterdam, Holland have published the first draft of a paper entitled Beyond Chance? The Persistence of Performance in Online Poker. PhD candidates Rogier J.D. Potter van Loon and Dennie van Dolder and Associate Professor of Finance Martijn J. van den Assem have analyzed 415.9 million player-hands, purchased from HHDealer between October 2009 and September 2010 across three different stakes levels in cash games – low, medium and high. They concluded that, “Our results suggest that skill is an important factor in online poker,” according to van den Assem. Brendan Murray, Card Player Magazine, 8-22-12

In a test case, a tax court in Cologne is to decide on whether or not professional poker players are actually carrying out a commercial activity rather than participating in games of chance and should therefore be subject to taxation. In general, profits from gambling games are tax free in Germany. However, the court in Cologne is to examine an appeal submitted by a former poker player contesting the tax authorities’ demands for tax to be paid on winnings totaling over us$ 1 million between 2001 and 2008.  The court is to decide whether or not success in poker relies on luck or on skill. The tax authorities argue that the professional poker player concerned carried out a commercial activity, using skill and a deeper understanding of the game, and did not rely on chance. In contrast, the plaintiff insists that his success relies mainly on luck, highlighting the fact that although a player can indeed influence a game, this does not guarantee a win. Yogonet, 8-28-12


1 Response to “Is it chance or skill? – only the judge knows”

  1. 1 ken adams June 8, 2013 at 7:07 am

    Actually it was very much off my topic and very much passed the range of things I understand

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