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Tuesday, July 19, 2011

Barton Bill has Serious Drawbacks for U.S. Online Players

Barton Bill Has Serious Drawbacks for U.S. Online Players

                             By  K. Preston Oade, J.D.   

The purpose of the Barton Bill is to “strengthen” the UIGEA and make internet poker illegal under U.S. law except for U.S. licensed websites. This is clear from the title, the ‘‘Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011.”  (Emphasis added). 

The Bill would give the government the law it needs to completely shut down all offshore internet poker sites still accepting U.S. players, a legal power it currently lacks under the UIGEA. See “Black Friday; the DOJ’s Campaign of Fear,” by Oade & Reber, Poker Player Newspaper, (front page, July 18, 2011).     

The Barton Bill defines “internet poker” as a form of “internet gambling” and would make internet poker illegal without a license. It also creates an ongoing list of offshore gambling websites – including poker sites –  targeted for shut down. The intent is to limit U.S. online players to only U.S. licensed websites.  

The Barton Bill would authorize any state or Indian tribe to issue online gambling licenses. The licensed operators, however, may accept bets only from players in the licensing state or “located” in other states that have not given notice of “opting-out” of the Barton Bill. 

If your state opts-out of the Barton Bill, you cannot play on licensed websites, which are required by law to block all bets from opt-out states. All it takes for a state to opt-out is a letter from the governor saying that state residents are not allowed to place bets on U.S. licensed gambling websites. Nobody knows how many states will opt-out. 

Significantly, international players would not be allowed to play on U.S. licensed poker sites. The Barton Bill only authorizes licensed operators to accept bets from players “located in the United States.”  Section 104(a)(1). This is consistent with the provision limiting players on U.S. licensed sites to the licensing state and non-opt-out states. The combination of these two related provisions would have significant consequences for U.S. online players.  

By limiting U.S. licensed sites to only U.S. players in non-opt-out states, the Barton Bill seriously fragments the online market and would isolate U.S. players from international play. We will be playing online with only other U.S. players located in the limited number of states that have not opted-out. This is a relatively small market. 

The market would be further limited by the exclusion of players under age 21, whose bets will be blocked.  Eighteen year olds are old enough to fight and die for their country, but apparently not old enough to play online poker. 

While offshore sites like PokerStars would be eligible for a U.S. license, the Barton Bill does not allow them to accept bets from any non-U.S. players. Thus each offshore site would presumably have to establish entirely separate games just for the U.S. market. This separation of U.S. players from the players of other nations amounts to an Iron Curtain of online poker.   

PokerStars only lost 28% of its total worldwide market as a result of Black Friday. Thus the entire U.S. online poker market is much smaller than the rest of the World. This means fewer games, fewer players, less diversity and less variety of games. And the U.S. online market will be even smaller under the Barton Bill, since many states are likely to opt-out. 

Unfortunately, if you live in an opt-out state, you may have to move to another state that has not opted out if you want to play poker online. You would no longer have the option of playing on offshore sites, which will be shut down completely if the new law works as intended. 

We can do better than the Barton Bill. Even the current situation might be better; and can only improve as online sites still accepting U.S. players expand and others enter the U.S. market to fill the void left by Black Friday. It will happen if we all continue playing online. 

  Preston Oade plays online poker and is a partner in the Denver law firm of Holme Roberts and Owen, www.hro.com.
Comments and questions  to preston.oade@comcast.net

2011 Copyright by K. Preston Oade.  All rights reserved. 

The Role of Skill and Chance in Poker

Skill Or Chance In Poker: Legal Perspectives

By Ingo Fielder Phd. and K. Preston Oade J.D. 

Most gambling opportunities are driven by chance. Poker is not. Skill affects results, but how large are these effects? And does this make any difference for the legislator or the juror?

One way to identify games to be regulated is the so-called “predominance test”: If a game’s skill elements predominate over the chance elements, it is considered a “game of skill” and – in many jurisdictions - usually not subject to any restrictions.

Many jurisdictions outside the U.S. use some form of the “predominance test” with various results. In the U.S., however, the legal issue of whether poker is “gambling” depends on state law, and many states do not use the predominance test, making the skill/chance debate legally irrelevant[1]. Most of those approaches are neither coherent nor sophisticated but instead lump too many things together. The result are laws which are constantly under debate.

Criteria are needed to distinguish between different games. Arthur Reber, a psychology professor, made a good step in the right direction by pointing out that every game has two dimensions: expectation and flexibility. Expectation is a game’s expected value; flexibility is the possibility to modify the payoffs. While most gambling has negative expectation and no flexibility, poker can either be played with positive or negative expectation and flexibility exists. But is the flexibility in poker sufficient to make it a game of skill?

Until now nearly all efforts to answer this question were qualitative. Courts and legal scholars listed various reasons for poker being a game of chance or skill, but did not quantify the relative amounts of skill and chance. However, Ingo Fiedler and Jan-Philipp Rock of the University of Hamburg, recently published the first quantitative analysis in Gaming Law Review and Economics.

They compared the relative skill, represented by players’ net expected value with the chance elements, represented by the standard deviation of the outcomes. Their approach makes clear that there is a third dimension involved in games: repetitions. While the expected value increases in proportion to the repetitions (n), the standard error of the mean increases only in the square root of n: skill adds up, chance cancels out.

If only one hand of poker is played, chance dominates skill; if poker is repeated infinitively, skill dominates chance. In between, there is a threshold where the outcomes (gains or losses) of a poker player are 50% due to skill and 50% due to chance. It’s called Critical Repetition Frequency (CRF) and is different for every player. The higher his expected value (positive or negative), the faster he reaches CRF.

The answer to the question of predominance therefore depends on 1) the relative skill of the players, 2) the chance elements of the game, and 3) repetitions. Legislators should consider all three dimensions. The best way is to target the average player and determine if he reaches his CRF or not.

Based on a 51,761 player sample Fiedler and Rock showed that the CRF for the median no limit midstakes online cash game player is about 1,000 hands. When he plays more than one thousand hands, the outcome is dominated by skill and not by chance.

This number is surprisingly low because the median player is a big loser. In 100 hands he loses 32 big blinds! This lack of skill quickly dominates chance.  For a player winning 10BB/100h it takes much longer, about 30,000 hands. But legally,the average player should matter. The crucial question is whether the average poker player plays 1,000 hands. If yes, that limit holdem cash game is a game of skill under the predominance test.  

In tournament poker the CRF is not as easy to calculate. The effect of skill varies depending on the amount of starting chips, blind structure and length of the rounds. The skill component rises monotonically in the proportion of stack sizes to the blinds. A tournament with 5-10 big blinds is basically push or fold and therefore involves only one betting decision, which leaves little room for skill.  A tournament with an effective stack of 250 big blinds requires much more skill.

The degree of skill relative to chance also varies between cash games and tournaments. In every tournament, the proportion of stack sizes to blinds decreases constantly and eventually reaches a very low level.  In this final stage of the tournament – which is most important for the overall result – the outcome of the game often depends mostly on chance. 

The impact of skill therefore varies highly according to the tournament structure and there is no general answer for tournaments. But as a guideline, most online tournaments are played with small stakes and therefore involve less skill than cash games. But tournaments with very large stacks relative to the blinds usually involve considerable skill.     

Poker’s situational nature therefore seems to preclude any sweeping generalizations about whether it is primarily a game of skill or chance. It depends on the nature of the particular game, the players’ skill, and the number of hands actually played. 

This seems to be confirmed by jury verdicts which have applied the predominance test.  These verdicts – which set no legal precedent precisely because each case is based on its own unique facts – vary from case to case.  In a 2006 U.K case, London’s Gutshot Club was  found quilty by a jury of violating a law against operating a poker club taking a rake without a license. The law contained an exception, however, for any games that are “predominately based on skill.  The jury, however, was not persuaded.[2]

The predominance test does not legalize poker. It just provides a defense to a charge of gambling if you can prove that the particular game favored skill over chance. This fact must be proved like any other disputed fact. The answer depends on the factors discussed here and how particular judges and juries interpret them.. 

Defining and prohibiting “gambling” by reference to the role played by chance is largely a moral and social judgment made by each state legislator. Juries often make the same judgment when presented with the issue of whether the outcome of a particular game is determined mainly by chance or skill. When deciding this issue, the moral and social values of each jury member can easily prevail over math or statistical models presented by expert witnesses. 

Whether poker is defined as “gambling” under the various laws of the 50 U.S. States has historically depended on religion, morals or politics – not math or logic. And it remains to be seen if it ever will. It is a mathematical fact, however, that skill will eventually dominate the chance elements in poker. The only question is how many repetitions are required. The answer depends on the different players and the structure of each individual game.

Copyright by Ingo Fielder and Preston Oade, 2010.  All rights reserved.  

[1] See Recreational Gambling Laws State by State; Pennsylvania to Wyoming, Hartley Henderson, http://majorwager.com/index.cfm?page=27&show_column=578
[2] See Hartley Henderson, Major Wager.com, 02-17-2008. Recent verdicts in some U.S. states have gone the other way. 

Overcoming Bad Beats with Positive Thoughts

Good and bad feelings come from within you, not from external events. Your feelings are created by your thoughts about events, not by the events themselves.

An example in Zen and the Art of Happiness (Chris Prentiss, Power Press 2006),  illustrates the power of  thoughts to change negative emotions to positive ones.  Suppose there is a very large new house being built right next to your existing smaller home.  It blocks your view and the construction noise, dust and debris is an ongoing irritation. You become more and unhappy as the days go by and the new house rises to overshadow your house. 

As your patience wears thin, however, the contractor in charge of building the house tells you that a rich relative ordered the house built as a gift to you. 

The same house, the same dust and debris, and the same everyday noise, now evokes a much different emotional response after you receive this new information. What before seemed oppressive, is only a temporary inconvenience now that you know the new house is yours. Nothing has changed, however, but your state of mind. It the same house and the same construction noise, dust and debris. But your feelings towards it have changed simply because your thoughts about it have changed. 

In poker, the same bad beat has can have negative and positive consequences depending on how it is perceived.  If you suck out on a bad beat to win a huge pot, you probably feel relief and happiness. The loser of the pot, however, might feel really bad about it.   He might feel so bad it affects his judgment and decisions on future hands. The loser of the pot, however, has a choice on how to react to a bad beat.  He can change his feelings just by changing his thoughts.

Let us take two different bad beat reactions. In the first, the loser reacts emotionally, curses his bad luck, blames the dealer or the poker gods, and goes into an emotional  funk. These negative emotions perpetuate themselves by effecting the loser’s body chemistry in very specific and very negative ways.  See Candice B. Pert, The Molecules of Emotion: The Science Behind Mind-Body Medicine (New York: Touchstone, 1997).  

According to Dr Pert, a type of  “information molecule” called a peptide is produced in the hypothalamus in the brain. The type of peptide produced is determined by what you are thinking or feeling at any given moment and duplicates every emotion you experience, from fear, anger, and frustration, to joy and happiness.  Some peptides make you feel good, and others make you feel bad.  

In our first bad beat victim, the peptides produced by his negative emotions cascade throughout the player's loodstream, entering the cells of the body through receptor sites on each cell.  They are produced in the millions and make the player feel bad by blocking cell receptor sites which could otherwise  accommodate positive feeling peptides. This chemistry often has disastrous consequences at the poker table.     

Our second bad beat victim, however, has a totally different experience. He maintains a healthy internal body chemistry because he doesn’t respond to it with negative thoughts.      
He avoids becoming a victim of  negative body chemistry by looking at it as just a part of the game. If not for bad beats, all the unskilled players would go broke and go home.  Since he is a skilled player, he knows that most significant loses should come from bad beats simply because he is usually getting his chips into the pot with the best hand.  He knows that’s  exactly how he should lose, not by my making mistakes or losing control of his emotions.

So when you take a bad beat, don’t let it bother you. If you perceive the bad beat in positive or netural ways, you will stay calm, cool and collected, and won’t create and perpetuate negative feelings from millions of peptides spreading negative emotions throughout your body.

When you take a bad beat, know and feel that you have the skills to recover from it.  Know and feel that bad beats are part of the game. Remember that all good players experience and overcome bad beats all the time. Think positive thoughts, which create emotionally healthy body chemistry and allow you to maintain concentration and focus.   

“We are what we think. All that we are arises with our thoughts. With our thoughts
we make the world.”  Buddha.  

Copyright 2010 by Preston Oade,  All rights reserved.  

Wednesday, July 13, 2011

Short Stack Tournament Play - A Critical Skill

Playing a short stack is a critical tournament skill. To win tournaments, you must be able to overcome adversity and a short stack is a very common form of adversity.   

Here are the key strategic principles: 

1. Never give up. You can win virtually any tournament with a short stack.
2. Be patient and wait for the right situation. Not just the right hand, but the right situation. If, for example, everyone folds to you in the small blind preflop, the blinds and antes are significant, you have a short stack but still have fold equity, you should consider pushing all in with any two cards. More important than your cards is the fact that only one potential opponent remains and that opponent needs a good hand to call. This is therefore a high-percentage move against all but the weakest opponents, who don't know any better than to call.    

3. "Be the hammer, not the anvil." (Eric Lynch). This means being the first one into the pot with a raise and not calling without a huge hand. Callers are anvils and often get hammered because callers have only one way to win the pot. So use your chips as a hammer and don't be a caller.   

4. Play your position more than your cards. The best positions to move all in preflop are the hijack seat, the cut-off seat, the button and the blinds. But be the first raiser into the pot.     

5. In early position with 9 or more players at the table, any raise is likely to get a least one caller. Thus do not play for all your chips in early position without a premium hand like AK or a painted pair. Pushing with AK is a good risk as you will often get called by weaker aces like AQ.  But if you push preflop with pocket tens and get called, one or more overcards will flop more than fifty percent of the time. If you push with pocket jacks, however, you have a fifty percent chance that no overcards will flop. You are therefore just gambling by pushing all in preflop in early postition at a full table with anything less than AK or a pocket pair of jacks or better.       

6. Realize when you only have one move left. This one move is usually  pushing preflop with all your chips when you get down to about 12-15 big blinds, while you still have decent fold equity. Your fold equity is not as good if you reraise all in as the second raiser in the pot. So be the first one into the pot and use all your chips to maximize their power.            

7. Depending on position, good hands to push with preflop are pairs, suited connectors, AK and AQ.  If you push with AJ and AT, you will usually be behind if called and are likely to be dominated by a bigger ace.  

8.  Avoid playing weak aces, including suited aces. Big aces are the most common calling hand of short stack all-ins and you are dominated as a 3-1 underdog if your opponent's ace has a bigger companion card. Having a suited ace makes very little difference and is basically insignificant.  

9.  Avoid pushing all in preflop with K10, Q10, J10, K9 or KJ unless you have no choice.  Like weak aces, these hands are often dominated if  you are called.  

10.  Any pocket pair is a slight favorite against two overcards and the odds are 16 to 1 in your favor that any one opponent does not have a pocket pair. Thus even small pocket pairs may be a good situation for an all-in push preflop in late position against the blinds. If called by a bigger pair you are a 4 to 1 underdog and just got unluckly, but you still probably made the right move. Most of the time you won't get called. And if called by any two overcards you are a slight favorite to double-up.  

11. Play as tight as the blinds and antes allow. If the right situation is not there, don't push but play another round if you can. 

12.  Five times the big blind is generally the decision point for pushing preflop with any two cards. Waiting any longer is usually a mistake as your fold equity disappears.  

13. The most critical point is to rely on "the math of isolation" (Sklansky) and play heads-up. Avoid multiway pots unless you have a BIG hand. Pocket tens, for example, loses 60% of the time against two opponents holding KJ suited and AQ. When faced with a multiway pot, you are better off folding a big ace or medium pair and pushing on the next hand with any two cards if first into the pot.  

Here are some sample odds heads-up: 

a). AK is nearly a 3 to 1 favorite against weaker aces like AQ and AJ, but is only a 7 to 5 favorite against suited connectors like 65s and 54s. 

b). 98s and 87s is only a 7 to 5 underdog against AK, AQ and AJ. 

c). 98s and 87s is only a 11 to 10 underdog against A6, A5, A4, A3 and A2.   

d). J10 suited is an even matchup against 88 and lower pairs.  

e). Pocket twos wins 53% of the time against AK and is basically an even matchup against KQ suited.  

14. Focus on the most common calling hands in deciding which hands to play for all your chips. Most players will call short stack all-ins with AK, AQ and big and medium pairs. Loose players with lots of chips will often call with any two broadway cards. You want both your cards to be live against these common calling hands. Suited connectors are often live, are unlikely to be dominated, and often give you a fair chance if you are called.   
  Finally, the key strategic point is to play to win the tournament, not just to accumulate chips. Having lots of chips is not the ultimate goal, but just a stepping stone to winning it all. To win any tournament you first need to make the final table, where there are lots of chips to be won on every hand. So play to make the final table, not just to accumulate chips. 

Jerry Yang entered the 2007 WSOP Final Table as the second-shortest stack, but soon won enough chips to dominant the table and win it all.  Joe Hachem won the 2005 WSOP as one of the shortest starting stacks at the final table. He was patient, picked his spots and gradually moved up as others got knocked out. Then he got heads up and won it all. 

Copyright 2011 by K. Preston Oade. All rights reserved.