Getting It Straight

Every now and then I share results with somebody in a drawing or tournament. Sometimes, other people do it to lower the fluctuations in their bankroll. That is, they would much prefer to get half the amount twice as often. Assuming they are playing with an edge, this smooths out the swings. One can think of it as getting to the long run more quickly.

That’s not the primary reason I share results. I share results for social reasons. Simply put, it’s more fun to do things with your friends.  Sometimes the decreased bankroll variance is important to the friend with whom I would share. Sometimes not.

Once you’ve agreed to share, only half the work is done. You need to carefully lay out what is and is not included in the agreement. For example, is this agreement for one drawing only? Is it always in effect unless otherwise specified? Is it never in effect unless explicitly specified?

If the award is in free play, do you share in cash? (That is: Let’s say one of the players earns $1,000 in free play. When it plays it through, he runs salty and only collects $900. Does he owe his partner $500, $450, or some other number?)

If the prize is in cash, are 1099s to be issued? If the prizes are $1,000 or less, the tax implications are fairly minor. If there is a rare $50,000 prize, the tax implications are not minor at all. Issuing a 1099 for $25,000 is the cleanest way to handle it, but if this isn’t agreed upon up front, hard feelings will abound.

Several years ago, Jamie Gold won the World Series of Poker main event for $12 million. He had a partner putting up some fraction of his entry fee, and possibly the partnership wasn’t thought through clearly enough. There was a major disagreement as to how the tax liability would be handled. The poker community generally appeared to be against Gold. Eventually it got settled and Jamie resumed his career — probably because he was wealthy and willing to play in games with significantly stronger players. But there were hard words and angry feelings until it got resolved. I’m not involved in any sharing opportunities where a jackpot anywhere near that large is possible, but that incident offers a lesson nonetheless.

At a recent Big Draw lottery at the M resort, most people earned zero, but you could earn $50, $200, $1,000, $10,000, or (with a less than 1-in-50 million chance) $250,000. The lower amounts were in free play and the largest one was in cash. The deal I had with another player was all prizes would be settled for the full 50% amount in cash, and if lightning struck and one of us got $250,000, a 1099 would be issued for half that amount.

Was that the best way to do it? I don’t know. But it was agreed upon up front and both of us thought it was fair. So that means it was fair.

Sharing isn’t always symmetrical. In a slot tournament where it’s just “hit the button as fast as you can,” everybody has more-or-less an equal chance and you can share with anybody who’s not completely senile.

In a video poker tournament, it’s a different situation. Some players are simply much faster than others, some can make better decisions than others in a split second, and some can correctly adjust their strategy in the middle of a round when it’s appropriate to go for a “royal-or-bust” strategy. You need to be very careful with whom you partner.

I recently shared in a video poker tournament with someone who I later discovered was a slightly faster player than I was. However, I probably made better decisions than he did because I’ve been doing this a couple of decades longer than he has. Neither of us know this for sure. It was close enough to being fair that neither of us were worrying about it.

Sometimes there are drawings where once you’re selected as one of the winners, you have an equal chance at each of the prizes. In these circumstances, if you’re one of the winners and want to make a deal with another of the winners, it’s fair. However many tickets you had going into the drawing no longer matters. At this point, you’re both in there and have equal chances.

If you have unequal numbers of tickets in the drum, it isn’t easy to come up with a fair system for sharing — simply because you usually cannot win more than one prize. For that reason, if I have 1,000 tickets and you have 500, giving me 2/3 of the prize money would be unfair to you unless there is only one prize. I have twice the chances as you to be called first, but then the rest of my tickets are dead while yours are still alive.

Still, if there’s enough goodwill between the players, usually players would go with a 2/3 and 1/3 split in this example. It’s “close enough,” and you’re friends. If there wasn’t sufficient goodwill, normally no split is done.

Finally, some people can be trusted with money and some can’t. Whenever I’ve felt I’ve been intentionally shortchanged by a player, I let others know — sometimes by an article in this blog. Once somebody shows he will steal from or shortchange me, I never will give him a second chance.