A Science Behind Poker Being a Game of Skill: Some Freakonomics

Written by:
Ace King
Published on:
Poker Game of Skill

Is poker a game of skill or chance? 

“Freakonomics” author Steven D. Levitt looks to answer that question, which could

very well determine whether three of the world’s largest online poker rooms were in violation of US law.  PokerStars, Full Tilt Poker and UB.com were indicted on April 15 for violation of a 2006 Internet gambling prohibition act some say does not apply to poker.

Levitt and Thomas J. Miles contend that with both state and federal law, “the single most important factor in determining the legality of poker is whether poker is a game of skill or a game of luck.”  There have been mixed judgments passed down by various courts in recent years. 

The two released a study on the subject this week that is gaining national media attention. 

They studied the 2010 World Series of Poker and the tournament’s 32,000 entrants.

The pair found that the 720 players rated as highly skilled won an average of more than $1,200 each per event, or received a 30 percent return on their initial investment. All other players averaged a loss of $400 per event, 15 percent of their investment.

The differences are “far larger in magnitude than those observed in financial markets, where fees charged by the money managers viewed as being most talented can run as high as 3 percent of assets under management and 30 percent of annual returns.”

The Poker Players Alliance has begun touting the Levitt/Miles study.

While the science now bears out this fact, the law lags behind – to the detriment of online poker and the millions of Americans who enjoy the game, the PPA said in a statement issued Wednesday morning.

“The PPA urges every member of Congress and everyone else to learn the facts  provided in Levitt’s new working paper: “The Role of Skill Versus Luck in Poker: Evidence From The World Series of Poker.” Levitt has graciously provided a free link for all of our supporters to his paper: http://theppa.org/?p=9883

Whether Levitt and Miles study will have any impact on the case against PokerStars, Full Tilt Poker and UB.com along with a handful of associated defendants remains to be seen as the US Justice Department has also charged the organizations and individuals with money laundering and bank fraud in connection with misrepresenting Internet poker transactions.

- Ace King, Gambling911.com