Why is Rake in Poker Illegal?

Why is Rake in Poker Illegal?
Rake in poker refers to the commission fee that casinos, online poker rooms, or unlicensed operators charge to players for participating in a poker game. It is typically a small percentage, ranging from 2.5% to 10%, taken from each pot in cash games, or a fixed entry fee for tournaments. While the concept of rake is commonplace and essential in the gambling industry, there are situations in which it becomes illegal.

 

Understanding why rake in poker might be considered illegal requires an insight into the varying regulations and licensing procedures surrounding the gambling industry. Some countries, including parts of the United States, have strict laws on gambling that necessitate proper gaming licenses and permits. If a casino, online poker room, or any other establishment takes a rake without possessing the appropriate license, it is then operating illegally.

In both live poker games and online platforms, rake collection can sometimes be viewed as predatory or improper, especially when higher percentages are being taken from players' winnings. This issue, combined with unlicensed establishments competing for business, contributes to the question of legality around the rake taken in poker games.

Key Takeaways

  • Rake is a commission fee charged by casinos and poker rooms for participating in their games.
  • The legality of rake depends on licensing regulations and proper permits in each jurisdiction.
  • Both online and live poker games can encounter issues with illegal rake collection, often related to licensing or unfair practices.

Understanding Rake in Poker

Mechanism of Rake

In poker games, a rake is a commission fee taken by the cardroom operator from each pot. This fee is how casinos and online poker platforms generate revenue from poker, as they typically do not directly participate in the games. One of the most common ways to collect rake is by applying a fixed percentage of the pot, on a sliding scale, with a capped maximum amount that can be removed regardless of pot size 1(https://en.wikipedia.org/wiki/Rake_(poker)). Less often, the rake is a predetermined amount, independent of the pot size.

Types of Rake

There are several types of rake in poker, each with its method of collection:

  • Pot Rake: A percentage of the pot is collected as rake. This is the most popular form of rake, particularly in cash games2(https://pokerology.me/rake-in-poker/).
  • No Flop, No Drop: The cardroom does not take a rake if there is no flop in a game, meaning the hand never reaches the second betting round. This rule is prevalent in cash games and encourages more players to see the flop.
  • Dead Drop: In this method, the player in the dealer position pays a fixed fee, which serves as the rake for that specific hand3(https://transatlantictoday.com/why-is-taking-a-rake-illegal-what-exactly-is-it/23999/).
  • Timed Rake: The operator charges a set fee every predetermined time interval (for example, every 30 minutes) regardless of how many hands have been played during that period. This method is more common in high-stakes cash games.

Rakeback and Poker Rewards

Many poker platforms and cardrooms offer a form of rakeback or rewards program to incentivize and retain players. The rakeback concept refers to returning a portion of the paid rake to the player4(https://www.raketherake.com/news/2022/07/why-is-it-illegal-to-take-rake). Rakeback can be distributed following one of three methods:

  • Dealt Method: All players who receive cards in a hand are eligible for the rakeback, regardless of their contribution to the pot.
  • Contributed Method: The rakeback is calculated based on each player’s contribution to the pot.
  • Weighted Contributed Method: This method combines the previous two, taking into account both the players who were dealt into the hand and their contributions to the pot.

These rewards programs aid in offsetting the impact of the rake on players' winnings, allowing them to maximize their profits from the game.

When Rake Becomes Illegal

Issues with the Law

Rake, a term commonly used in poker, refers to the commission taken by the house or poker room from every pot played. In some cases, taking a rake may be considered illegal. One reason is that the operators of some home or private poker games might charge a rake without proper licensing or authorization from the state or local authorities, which leads to a situation where the legality of taking a rake becomes questionable. Some jurisdictions even regulate the maximum rake or percentage that can be collected from poker pots, and exceeding this limit makes taking a rake illegal.

Tax Evasion

Another reason why rake could be deemed illegal is related to tax evasion. When a poker room or house takes a rake without declare the income or paying taxes on the rake revenue, the activity becomes illegal. States and governments are keen on ensuring that all gambling revenues are taxed, and failure to comply with these tax laws may lead to serious consequences such as fines, penalties, or even shutting down the poker room.

Fairness and Protection

Lastly, taking a rake may be considered illegal for the purposes of promoting fairness and legal protection among players. In some cases, a high rake might negatively affect the players by cutting into their profit margins, making it difficult for them to achieve long-term success in the game. By regulating and enforcing rules surrounding rake, local jurisdictions aim to ensure that the game remains fair for all participants.

In summary, taking a rake in poker becomes illegal when operators don't adhere to the laws and regulations set by their jurisdiction, evade taxes, or detrimentally affect the players' fairness and protection in the game. By understanding the legal boundaries, poker enthusiasts can play and organize games responsibly and ethically.

Online Poker and Rake

Online Poker Rooms

In the world of online poker, numerous poker rooms exist, providing players with a platform to compete against others from around the globe. Prominent examples of online poker rooms include PokerStars and PartyPoker. To generate revenue, these websites usually charge a fee, known as the rake, which is often a percentage of the pot size in each hand. The rake primarily serves to cover the costs associated with operating the poker room and organizing games.

Online Casino Games

Apart from poker, online casinos offer a wide range of casino games, such as blackjack, roulette, and slots. Similar to poker, these games may also involve a fee or a house edge to provide revenue for the casino. While this fee varies depending on the specific game, casinos operating legally and with proper licensing can usually charge rakes or fees as part of their service.

Online Poker Professionals

For many people, playing poker online is more than just a hobby; it's a profession. Online poker professionals are skilled players who make a living from their poker winnings. However, since they play countless hands, the rakes from various online poker rooms can significantly impact their earnings. As a result, professionals often search for websites that offer the best rake structures and may even take advantage of rakeback programs.

It is crucial to understand that taking a rake in poker is not universally illegal. Rather, it is the circumstances under which the rake is collected that may cause legality issues. Licensed poker rooms and online casinos usually adhere to specific regulations when charging rakes to ensure fair play and transparency for their patrons.

Rake in Live Games and Tournaments

Casino Games

In a live casino setting, the rake is a fee charged by the casino as a commission to operate poker games. This fee is typically a percentage of each pot, ranging from 2.5% to 10%, with a predetermined maximum amount 1. The casino collects the rake from players during the game, and it serves as their profit for hosting the game. The house does not wager against the players in poker, which distinguishes it from casino games like blackjack or roulette.

Poker Tournaments

When playing in poker tournaments, the rake takes a different form. Instead of collecting a portion of the pot, the house charges an entry fee known as the buy-in. This buy-in is typically a combination of the prize pool contribution and the rake. For example, a tournament with a $100 + $10 buy-in means that $100 goes to the prize pool, while the $10 is kept by the casino as their rake.

The buy-in covers the costs of organizing the tournament, including staff, equipment, and other overheads. The rake in poker tournaments is usually slightly higher than in live cash games because the hosting expenses are higher2.

High-Stakes Games

High-stakes poker games often have a different rake structure than regular games. Because the pots are larger in these games, casinos might charge a lower percentage rake. This helps to retain high-stakes players, as excessive rakes might drive these players away.

In some cases, high-stakes games might have a time-based rake instead of a pot-based one. This means that players pay a fee, either per half-hour or per hour, to play at these tables. Time-based rakes can benefit both the casino and the players, as they allow for more hands per hour and create a more consistent earning for the house.

Footnotes

  1. https://en.wikipedia.org/wiki/Rake_(poker) 2

  2. https://pokerology.me/rake-in-poker/ 2

  3. https://transatlantictoday.com/why-is-taking-a-rake-illegal-what-exactly-is-it/23999/

  4. https://www.raketherake.com/news/2022/07/why-is-it-illegal-to-take-rake

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