Staking and Backing in Poker Tournaments

This week we take a closer look at the two most common ways poker players get financial backing to play in tournaments above their bankrolls. Too tired to read? Check out the video at the bottom of this post.

Perhaps the World's Most Famous Backing Arrangement:

Half of Joe Cada's $8.5 Million 1st Place Prize at the 2009 WSOP Main Event had to be paid to his backers: online poker legends Cliff Josephy and Eric Haber.

Variance around your expected value as a poker player means you may earn more or less than what you deserve at the tables given the quality of your play. This volatility of profit and loss can be devastating to a pro who depends on his bankroll to stay in games and earn a living. To reduce variance, good players sometimes shift some of the risk (and reward) to investors. In poker, investors are either called stakers or backers depending on the structure of the deal.

Young Russian Max Katz made waves in 2011 after aggressively staking online poker players from across the globe for the World Series of Poker that year. Some estimates of his fund's total outlay for the summer reached into the millions.

Stakers are like shareholders in a company. If I stake you for 50% of the World Series of Poker Main Event, I pay 50% of your $10,000 entry fee and I'm entitled to 50% of any prize money you win. Very good players can command a markup on each 'share' they sell for a poker tournament. So stakers may end up paying $1.01 to $1.50 and up for a $1.00 share. This premium, or 'mark up', offsets the stakee's skill level, expenses, and time at the table.

Backers take on a much larger commitment to a player than stakers. Backing deals are generally reserved for excellent players with strong historical results who cannot afford to contribute any money to the deal. That's a rare mix of conditions and as such backing deals are pretty rare. A typical backing deal provides 100% of the entry fee to a player in exchange for 50% of the revenue. The catch is the player must repay all lost entry fees from any future winnings while in the backing arrangement. This rolling debt to the backer is called 'make up'. Since makeup can generate stress and sub-optimal play, most players actually prefer staking.

Questions for You:

1) Have you ever been staked/backed or staked/backed another player? Tell us about it in the comments below.

2) If you were a pro, would you prefer to be staked at 80% with a 25% markup or backed? Note that you pay 0% of your entry fees in both cases, but receive 50% of the winnings when backed as opposed to 20% when staked. Of course when backed you face make up. Let us know in the comments.

Prisoner's Dilemma

Here's a brilliant, televised example of the Prisoner's Dilemma that we thought you Beanstalkers might enjoy! In short, the Prisoner's Dilemma is a classic Game Theory mechanic wherein two players are forced to choose between 1) Sharing and 2) Greed. If both players pick 'greed', niether benefits. If both players pick 'sharing', they both benefit marginally. If both players pick differently, the player picking greed gets 100% of the benefit. Remind you a bit of leveling and mind/meta games at the poker tables?

Watch this complete video for a Tom Dwan-esque maneuver by one of the players. You won't be dissapointed. Let us know what your Poker Playing self would have done in the Comments!

Reminds us a little of word-of-mouth chip chop deals made at high stakes tournament final tables. Here are some fine words on deal making at final tables. We'll be releasing a video on Final Table Deal Making this summer in time for your trip to the World Series of Poker.

For the complete story read this at the Business Insider.