A new study has reignited the debate over whether poker winnings should be taxed by suggesting that the game becomes one of skill after around 1,500 hands.  Researchers analysed hundreds of millions of online plays to arrive at the finding, which could have major repercussions for card-sharps around the world.

Poker is among the most popular internet games in the UK, with leading bookmakers and other big-name operators running sites attracting millions of users. But the question of taxing winnings has long been clouded by controversy over whether success is determined primarily by ability or largely by blind luck. In many countries and most US states, where what are perceived to be games of chance are subject to much tougher legislation, online poker is essentially illegal. 

NIBS co-author Dr Dennie van Dolder, said: “Our findings could have significant legal implications. The key question isn’t whether skill is a factor but rather whether it dominates chance. If it does then poker must be considered a game of skill.”

Together with fellow researchers from Erasmus University Rotterdam and VU University Amsterdam, Dr van Dolder first investigated the persistence of players’ performance.  Drawing on a database of 456 million player-hand observations from a year’s worth of online games, they  discovered “substantial evidence” of skill’s role in successful play. For example, players who ranked in the top-performing 10% in the first six months were more than twice as likely as others to do similarly well in the next six months. In addition, players who finished in the top-performing 1% in the first half of the year were 12 times more likely than others to repeat the feat in the second half.

Dr van Dolder said: “If performance is predictable, as we found, then it follows that poker involves an element of skill and can’t be merely a game of pure chance. But that still leaves the crucial question of whether skill dominates chance, which we set out to address by comparing the performance of skilled and unskilled players. According to our simulations, skilled players can expect to do better than relatively unskilled players at least three quarters of the time after 1,471 hands have been played. To put this into perspective, most online players are likely to play 1,500 hands in 19 to 25 hours – and less than that if they play multiple tables simultaneously.”

H2 Gambling Capital, a leading consultancy in the gaming industry, has calculated that in 2013 alone online poker rooms generated more than £2bn in winnings. More people are also taking part in tournaments, with almost 7,000 entrants paying $10,000 each to play in last year’s World Series of Poker Main Event in Las Vegas. Writer and TV presenter Victoria Coren Mitchell, one of Britain’s top professional players, has won more than £1.5m - including £500,000 at a single event.

Dr van Dolder, an expert in behavioural and experimental economics, said: “The outcome of one hand of poker is largely chance. However, skilled players will consistently outperform less skilled players if enough hands – around 1,500, according to our research – are played. It’s up to legislators to decide whether the role of chance diminishes fast enough for poker to be considered a game of skill. If so then our findings represent both good and bad news for players. The good news is they’ll have the satisfaction of knowing the game they love is recognised as requiring real skill. Also, players in countries with a less permissive stands towards games of chance will benefit if poker is no longer affected by restrictive policies. The bad news is that one day they might have to start handing some of their winnings to the taxman if the policymaking community takes notice of findings like ours.”

The study referenced here is Beyond Chance? The Persistence of Performance in Online Poker, co-authored with Rogier Potter van Loon, of Erasmus University Rotterdam, and Martijn van den Assem, of VU University Amsterdam, and published online by PLoS ONE. It can be downloaded here.