93. Why Online Poker Should Be Legal

The data show that poker is indeed a game of skill, not chance, and a Federal judge agrees. So why are players still being treated like criminals?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:48Stephen J. Dubner?

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• 1:19Stephen J. Dubner?

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• 2:09Speaker 01

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• 2:46Speaker 02

  From APM, American Public Media and WNYC,

• 2:52Speaker 02

  this is Freakonomics Radio on Marketplace. Here's the host of Marketplace, Kai Rizdal.

• 3:01Speaker 01

  Time once again for a little Freakonomics Radio, that moment every couple of weeks where we talk to, this time, Stephen Levitt, the co-author of the books and the blog of the same name. It is The Hidden Side of Everything. Dubner is, I guess, out of town. Levin, how are you?

• 3:14Speaker 03

  I'm doing great.

• 3:15Speaker 01

  So, listen, I have a little piece of paper in front of me. It says we're going to talk about poker today, and I am shocked to find out there's gambling going on at Freakonomics World Headquarters.

• 3:23Speaker 03

  Oh, well, poker's one of my all-time favorite things.

• 3:26Speaker 01

  Seriously?

• 3:26Speaker 03

  All gambling. Yeah. Yeah, well, my father introduced me to it early on. When I was no more than five or six, he would go out and play poker with his friends.

• 3:35Speaker 01

  Yeah.

• 3:35Speaker 03

  And if he won, he would leave a $5 bill in the keyhole of my door.

• 3:39Speaker 01

  No way.

• 3:39Speaker 03

  And if he lost, he wouldn't leave anything. And so I very early on developed positive associations with gambling, that you only won and you never lost.

• 3:46Speaker 01

  But here's the thing, and I'm a little shocked to discover that you are a poker player, because really, it's like a game of luck, right? I mean, you deal some cards and boom, you're done.

• 3:56Speaker 03

  Yeah, if poker were a game of luck, I definitely would not be a fan. You wouldn't get me and catch me anywhere near a craps table or a roulette table. But poker is so obviously a game of skill.

• 4:07Speaker 01

  That's like a declarative statement. Prove it, right? I mean, how do you know?

• 4:10Speaker 03

  You kind of know if you've ever played poker that some guys are good at and some guys are bad at it.

• 4:15Speaker 01

  I have to say here, I have to say here, I'm a horrible poker player. I'm just a really bad gambler.

• 4:18Speaker 03

  Really? Well, that's good to know, because I think you and I are going to have to sit down at the table the next time we're together then. But beyond just experiencing poker, we've actually written a couple of papers. One was a simple paper that just looked at outcomes in the World Series of Poker. So every summer, the best poker players in the world convene. And the great thing about poker tournaments is if you pay your entry fee, you get to play. It's not, you don't have to qualify, you don't have to be any good. And a lot of bad players play along with the good players. And so, not surprisingly, really, to someone who plays poker, that the good players did very well and earned positive returns. And the bad players, the guys like me who show up and think it would be fun to play with the good players, end up losing a lot of money.

• 4:58Speaker 01

  Now, all right, so if that was the simple paper you just described, what's the complicated paper, in layman's terms?

• 5:02Speaker 03

  So this is a special dataset with 12 million hands of online poker. And what makes it special is that we actually get to see the whole cards, the hidden cards that the players have, because it was given to us by the online poker site. And so, we can analyze the skill of the play in a way that others never have been able to. And indeed, we show on every single test that we can think of doing, that skill really predominates over luck when it comes to no-limit hold'em poker.

• 5:31Speaker 01

  So what are we supposed to take away from this? That it's okay to do this if you know what you're doing, but it's not if you're not?

• 5:35Speaker 03

  Well, it's a crazy politicized issue now, which is hard to understand, which that Congress has made it more or less illegal to play games of luck over the internet for real money. And so, there's been a lot of litigation going on, and the biggest poker sites got shut down, what was called Black Friday.

• 5:54Speaker 01

  For those of you in the game.

• 5:56Speaker 03

  Exactly. And so, there's an interesting decision handed down in a recent case by a legendary judge named Jack Weinstein, who has really turned over a lot of the existing legal thinking by judging that poker is a game of skill, and looking at it in much the way an economist would look at it. And so, we've been thrust into this new world where no one really knows what's going to happen next with online poker.

• 6:23Speaker 01

  Well, what should happen next? I mean, should it just be legalized? Because there are people who have problems with this stuff, right? I mean, there are gambling addicts and all that.

• 6:29Speaker 03

  Well, what's funny is that government has taken a hard line against online poker. Gambling, and yet at the same time, there are state-run lotteries and there are state-approved casinos. So it doesn't seem really that the government is morally against gambling. It seems more like the government is morally against gambling that doesn't lead to direct revenues for the government. So it seems to me, if the government wants to be in the business of controlling and monopolizing gambling, then the government should do a better job of putting together some good internet poker sites so that the people who want to play poker have the play.

• 7:00Speaker 01

  You know what I think?

• 7:01Speaker 03

  What do you think?

• 7:02Speaker 01

  I think you actually just did this research so you can play more poker. That's what I think.

• 7:06Speaker 03

  [laughing]

• 7:07Speaker 01

  Stephen Levitt, Freakonomics.com is the website. He's back. Probably not him, actually. Dubner's probably back in a couple of weeks. Stephen, thanks a lot.

• 7:14Speaker 03

  Thanks, Guy. It's been great.

• 7:28Stephen J. Dubner?

  In our next Freakonomics Radio podcast, you'll hear Steve Levitt talk about the time he grew cherry tomatoes at home at a cost of about 15 bucks a pop. Why do so many of us love to do so much low-paid manual labor at home that we'd never do for somebody else?

• 7:46Speaker 03

  That's a question I think that really an economist can answer. That's a question for a psychoanalyst, I think.

• 7:52Stephen J. Dubner?

  That's coming up on the next Freakonomics Radio podcast.

• 8:11Stephen J. Dubner?

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• 8:44Stephen J. Dubner?

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• 9:28Stephen J. Dubner?

  So they are looking ahead and investing $80 billion in infrastructure upgrades and are committed to fueling growth in ways that benefit all customers so that reliable and affordable energy is accessible for generations to come. Go to southerncompany.com to learn more. Southern Company, building the future of energy.

• 9:52Speaker 04

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