Joe Cada made enough money playing online poker to pay his first house in cash.
But before his first World Series of Poker in 2009, the 21-year-old didn’t want to risk a significant portion of his bankroll in Las Vegas.
“I gave money to my mom, and I still had a couple hundred thousand in the bank, but if you go to the World Series, you’re going to spend – if you want to play a full program – 50 to 100,000, “said Cada.
“At that point, I was like, hey, maybe it would be a better idea to have some support.”
Cada had full financial backing for all 16 events he attended that summer and won the $ 10,000 buy-in No-Limit Texas Hold’em World Championship, commonly known as the Main Event.
The prize for first place that year was over $ 8.5 million. Cada’s cut was half.
Cada is a high-profile example of support for the World Series of Poker, which runs through July 22 at the Rio Convention Center. This is an often-secret economic system that many professional players believe is essential to offset the expense and unpredictability that comes with playing poker tournaments.
In recent years, the medium has evolved into a sophisticated market where top players sell and / or trade percentages of their stock with each other.
“Almost no one in a tournament has 100 percent of themselves,” said professional poker player Tom Kearney.
“The standard agreement”
Traditionally, support has been used to help poker players who were unlucky, like legendary player Billy Baxter who bet eventual champion Stu Ungar in the 1997 Main Event.
But that changed during the poker boom of the 2000s, as New York business partners Eric Haber and Cliff Josephy began to financially support many of the best young players online. (Josephy and Haber supported Cada at the 2009 WSOP.)
Likewise, Shane Sigsbee founded Imawhale Staking Group in 2009 and currently has 60 players under contract with his company.
“The misconceptions that I often hear are high priced loans, used car salesmen, high interest loans, none of those things that we don’t do,” said Sigsbee, a Las Vegas resident. “In fact, we really invest in guys, just like you would invest in a stock, gold, cryptocurrency or whatever. It’s a different medium. We invest in poker players.
A standard backing deal, according to Sigsbee, is 50-50 with “makeup,” meaning the funder pays the buy-ins and shares the winnings equally with the player.
If a player loses money, he must “catch up” on his debt before receiving a profit.
“You’re trying to maximize your return, but at the same time you’re trying to smooth out your risk a bit,” Haber said. “That’s what I tried to explain to real players when I spoke to them about being supported. Some players think of it as “Well I don’t want to give away any of my profit”. But you’re just looking at it the wrong way.
“Would you rather give up 50% of your profits without any financial risk to yourself, or keep all your supposed profits while subjecting yourself to all the variance and ruin of the player that exists?”
The modern system
While full support deals still occur, they have largely been replaced by an alternative model in which players sell percentages of their tournament action with a markup to multiple investors.
In other words, if Player A wants to participate in a $ 10,000 buy-in event and sells at a mark-up of $ 1.10 per dollar, an investor would pay $ 1,100 for 10% of the stock’s share. player.
This is especially common in high-roller tournaments, where only a handful of professional players and wealthy businessmen are funded for all of the six-figure buy-ins.
“The younger generation is really looking at it like you’re looking at a market,” said professional poker player Daniel Negreanu. “They are emotionless and ruthless when it comes to this stuff. There is very little, ‘I want to help this guy.’ They just look at the numbers. “Is this a positive EV (expected value) situation for me?” And if it does, they do. And if not, they don’t.
Kearney, a Las Vegas resident who finished 15th in the 2015 Main Event for $ 411,453, said he sold chunks of his stock to investors that summer.
As he deepened the tournament, Kearney also made deals with other competitors to trade a percentage of their winnings, another common financial strategy that poker pros use to maximize their profits.
The system of selling and trading percentages can create awkward dynamics at the poker table.
Haber noted that the year Cada won the Main Event, two other players that he and Josephy supported also ran deep and came close to facing their stable mate.
“I had exchanges that became deep, but it’s never a problem. You just played, ”Kearney said. “Everyone somehow knows who everyone is friends with, so if people started doing weird things it would quickly become speculative. “
Beyond the possibility of collusion, however, there are legal issues to consider.
“If you have a player who sells coins to a friend in Hawaii where gambling is strictly illegal,” said Dutch Boyd, three-time WSOP bracelet winner, “is there really a difference between giving your friend five dollars to play the Razz event or give your buddy five dollars to play roulette or bet on the Raiders? “
Seth Palansky, vice president of corporate communications for the World Series of Poker, said players are not prohibited from selling or trading percentages of their stock in WSOP tournaments.
“We follow Nevada gaming regulations, as well as local and federal laws, regarding financial transactions at our events. We ban third party filers and require every individual to pay and register in person, ”Palansky said. “In addition, only the person who cashes in our event can claim their winnings. This winner is responsible for all related tax and legal ramifications.
Out of the shadows
As support for poker begins to spread, private investors like Sigsbee are not the only ones who can get in on the action.
Many of the top live and online players are now selling percentages of themselves with markup to the public through their social media accounts and online staking sites like StakeKings, TastyStakes, and YouStake.
“What we’ve been doing looks like dinosaurs compared to what’s going on right now,” Haber said. “From a player’s point of view, it’s a gold mine. It’s perfect, because people want to sweat, people want action, and players ostensibly go to each of the sites and put up what they want to sell and someone is going to buy it.
Cada said he hasn’t been backed since winning the Main Event – “It’s the best thing to be lucky in the first big event I’ve played” – and that he currently has agreements to bet two players.
Cada, who remains the youngest Main Event winner in history, won his second career WSOP bracelet in 2014. But the Michigan native hasn’t cashed in the Main Event since winning eight years ago.
“Everyone is probably always wondering, ‘Why would you be supported if you are doing well at poker?’ ”Cada said. “There are so many great players who don’t have bracelets because of the variance in poker. It’s hard. I never regret my decision to be supported. I always thought it was a smart idea.