Why Online Poker Should Be Legal (Ep. 93)
In our latest Freakonomics Radio podcast, Steve Levitt visits with Marketplace‘s Kai Ryssdal to discuss his poker research and his personal poker history. The episode is called “Why Online Poker Should Be Legal.” You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript here.
In case you haven’t been following the long-running legal story, here’s the gist. Online poker was growing fast in the U.S. until Congress passed the Unlawful Internet Gambling Enforcement Act of 2006, which pretty much shut things down. The ruling was based in large part on the government’s reasoning that poker is predominantly a game of chance as opposed to a game of skill. But is this classification correct?
Levitt — an avowed poker devotee — says the data show otherwise. In the podcast, he touches on two recent papers he has written, with Thomas J. Miles as a co-author on both and Andrew M. Rosenfield as a third author on one paper. The first paper, “The Role of Skill Versus Luck in Poker: Evidence from the World Series of Poker,” has been published in the Journal of Sports Economics. The second, “Is Texas Hold-‘Em a Game of Chance? A Legal and Economic Analysis,” is forthcoming in the Georgetown Law Journal. An excerpt:
We develop four alternative tests to distinguish the impact of skill and luck, and we test these predictions against a unique data set of thousands of hands of Texas Hold ‘Em poker played for sizable stakes online before the passage of the UIGEA. The results of each test indicate that skill is an important influence in determining outcomes in poker.
While academic research of this sort is often ignored by the courts, that hasn’t been the case here. In a recent Federal ruling, the venerable judge Jack B. Weinstein declared that poker is indeed a game of skill, citing the Levitt/Miles paper in his decision. For more, see poker writer James McManus‘s Times op-ed “No More Bluffing.”
During his conversation with Ryssdal, Levitt reveals how he came to think well of poker:
“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 and if he won, he would leave a $5 bill in the keyhole of my door. And if he lost, he wouldn’t leave anything. And so I very early on developed positive associations with gambling.”