Poker's Great White Shark

(CBS)  This report by Ken Adams is part of a series for CBSNews.com offering commentary on the world of poker.

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Remember when the great white shark ate its first victim, how the Mayor of Amityville hushed it up for fear of hurting the tourism business on which the town's economic prosperity depended?

Well, that is what the leadership of the tournament poker community is doing with regard to the risk of scandal posed by undisclosed partnerships among competing players. The future health of tournament poker will be a lot better off if the risk of collusion is addressed openly and sensibly before a scandal erupts.

What is the problem, you may ask? It comes up in different forms. Here are a few examples. Remember that in most poker tournaments today, including the World Series, all the prize money comes from the entry fees (called "buy-ins") paid by the players. It is not like golf or tennis, where corporate sponsors put up the money that the players compete to win.

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Suppose you and I are among 100 players who pay $1,000 each to enter a poker tournament. The total prize money is $100,000, with the first place winner getting $40,000, the second place finisher getting $20,000, the third place finisher getting $10,000, and the rest being divided up among 4th through 9th place. We both realize that short term luck can play a decisive role in how we each fare. So we agree to hedge our risk by swapping 10 percent interests in each other. In other words, I get 10 percent of any prize money you win and you get 10 percent of whatever I win.

Now suppose the field eventually gets narrowed down to three surviving players – you, me and Clueless Clyde. If Clyde wins, one of us finishes second and gets $19,000 (90 percent of the second place prize plus 10 percent of third), and the other finishes third and gets $11,000. But if one of us finishes first and the other finishes third, we get $37,000 and $13,000 respectively. Better yet, if we can knock Clyde out in third place, we get $38,000 and $22,000 respectively.

In that situation, the risk of conscious or unconscious collusion against Clyde is obvious. An explicit understanding could lead one of us to deliberately lose all our chips to the other, significantly increasing the chances that one of us (rather than Clyde) will finish first. Even if there is no explicit understanding to gang up on Clyde, it should be obvious to each of us that it is in our interest to eliminate him first. The result is that we will avoid playing any big pots against each other, and both look for opportunities to knock out Clyde. Clyde is playing against an explicit or implicit partnership, in which we are ganging up on him.

Should it be against the rules for players to "invest" in each other by swapping percentages? How would such a rule be enforced? Most players would agree that as long as the players are putting up all the prize money and are taking all the financial risk, they should be allowed to hedge their risk by taking pieces of one another. But the rules could and should require disclosure, when two or more players with pieces of each other end up at the same table. The other players at the table are entitled to know what they are up against, so they can adjust their own play accordingly.

A more dangerous example occurs when a player is "backed" by other players, meaning that they put up his or her entry fees in return for a percentage of a player's winnings. Again, it is understandable why players enter into such arrangements. It is not uncommon for a tournament professional to spend more than $100,000 in entry fees and living expenses during the six-week World Series of Poker. If you have been running bad and do not have the bankroll to afford that, but are a top player, you may have to sell pieces of yourself in order to compete.

There have been rumors of situations in which top players have sold more than 100 percent of themselves in a particular tournament, and cannot afford to win. They are better off helping another player win, with whom they have swapped 10 percent. With prize money in the tens of millions of dollars, a 10 percent interest can be a significant payday. The temptation to dump off chips (by deliberately losing a big pot) to a confederate could lead to behavior that everyone would agree is collusive and bad for the game.

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