Naive Question: House Rake

Here in Michigan, many charities sponsor Poker Tournaments for fundraising. In recent years, many of these charities have teamed up with poker rooms for their events. In short, the charity obtains the license and the poker room (banquet hall, restaurant and/or standalone facility) provides the room, equipment, chips dealers etc., and splits the take with the charity. It has become a multimillion dollar industry as it allows a charity to raise money with zero risk and no outlay other than the license fee. Pretty slick deal, IMHO.

In recent months, the state of Michigan has closed dozens of the poker rooms for various violations. Mostly, these violation have to do with bogus record keeping where the maximum $15,000 per-day wager limit is exceed. As a result of all this, the state is now proposing regulations that will not prohibit charities from sponsoring poker events for fundraising but will definitely make it impossible for poker rooms to exist by limiting the number of charities they can host per-day (from unlimited to 1) and the number of events they can host per-year (from unlimited to 220), as well as limiting how much money they can charge a charity for what they provide (was 1/2 the take, now max $250). There is no way a poker room can provide that level of service and make money. And., as a final act, the state has lifted the moratorium on new poker rooms that has been in place for a few years. This will now eliminate the virtual monopoly the current poker rooms enjoyed, which resulted in charities lined up by the hundreds to get their organization's event in to a room.

In my opinion, the state may or may not be right in what they are doing to the poker rooms. That is for others to determine. However, what it fails to address is that through their efforts to shout down the evil poker rooms, the state has failed to appreciated the the financial impact all this will have on the charities. Now, if a charity wants to sponsor a poker event, all the costs surrounding the execution of the event, formally provided by the poker room, must be borne by the charity. That's because there will no longer be any poker rooms in Michigan--as in extinct!

Many charities will not have the money, desire and/or manpower to operate in this venue so this form of fundraising will go away for them and so will the money that these charities funnel to their respective cause. I just don't think the state thought through this entire process in their zeal to kill the poker rooms.

Remaining unchanged through this entire scenario is the $15,000 daily wager. I think it is a paltry sum considering all that goes in to conducting an event. The poker rooms thrived because many of them operated under the same $15,000 however, some of them hosted dozens of events per-night under the same roof--each a different charity. Now, it's just one charity, one room, under the same wager limit.

Here's where I am somewhat naive....Let's say the wager limit was increased to say $50,000 per-day. In what manner could having a $50,000 per-day wager limit help a charity sponsoring a poker event? Bigger pots, attract more people? Bigger pots, bigger rakes for the house? Other?

Personally, I would love to see the wager limit increase as I volunteer for a charity that offers traditional games like craps, roulette blackjack, etc. Making a percentage off of $50,000 is a lot better than making a percentage off of $15,000. There are a lot of events where we max out early and can't sell any more chips to players. Anyway, my questions relate to poker so, any thoughts and suggestions that you may have with respect solely to the wager limit and poker will be greatly appreciated.

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I'm relatively novice to these situations. Does the rule mean you can only:

1) sell $x of chips,
2) make $x of of money from losses of players
3) book $x of bets
4) something else

?

Edit: the answer to my query just appeared as I was asking. Thanks Ibeatyouraces.

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Quote: endermike

I'm relatively novice to these situations. Does the rule mean you can only:

1) sell $x of chips,
2) make $x of of money from losses of players
3) book $x of bets
4) something else

?

Edit: the answer to my query just appeared as I was asking. Thanks Ibeatyouraces.

Poker is relatively new with regard to charitable gaming in Michigan. Prior to that, it was only for games like craps, roulette, blackjack and bingo. So, at this type of an event, when you sold $15,000 in chips, you were done for the night. You could not sell any more chips to players no matter what. So if you had a good night and made 20% on your games, the house profit for the night would be $3,000. When they approved poker, they simply said keep the same limit because it all falls under the same charitable gaming law.

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Riva, clearly if you are selling out raising that limit would increase your expected gross hold.

The real disappointing thing is that you are not allowed put chips back in play after someone cashes them out. That seems like a rule which really can hurt poker because if someone buys in deep (>$100, >$500) and then wins they probably will keep a lot of chips out of circulation and box out other players from playing. Dumb as it sounds, you might want to consider caps on buy-ins, but allow speedy re-buys whenever someone is below the original cap.

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Quote: endermike

Riva, clearly if you are selling out raising that limit would increase your expected gross hold.

The real disappointing thing is that you are not allowed put chips back in play after someone cashes them out. That seems like a rule which really can hurt poker because if someone buys in deep (>$100, >$500) and then wins they probably will keep a lot of chips out of circulation and box out other players from playing. Dumb as it sounds, you might want to consider caps on buy-ins, but allow speedy re-buys whenever someone is below the original cap.

endermike...I truly do not know enough about poker tournaments to respond to your comments. Again, my involvement in charity gaming is in traditional games. From a that perspective, I would like to see the wager limit increase because we frequently max out and can not sell any chips more than $15,000. On some busy nights, i can easily sell 2x or 3x that amount. So, to use a silly example, let's say 1 person came in and purchased all 15k at one time, we would have to turn every other player away, even if that one person lost all 15K on the tables.

I am simply trying to find a solution for those charities that are going to lose this income source because of the new regulation changes. And, my thinking is that, if you raise the wager limit, a charity offering poker can somehow increase revenue and profits. I simply don't know hot to connect those dots for poker.

Seems like the advantage play here is to buy up all the chips and sell them to other players at a markup.

So, are you guys doing Orr tournaments or cash games?

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Riva:

You have to find out who is proposing the changes to these laws, and who is funding them.

It could be the larger Detroit Casinos.
It could be Indian Casino's elsewhere in MI if any.
It could be anti-gambling groups.
It could be "other" non-profits that are not getting in on the action.
It could be Non-profits that are disappointed that the "Poker Room" operators took home more cash then they did when its all over, and feel ripped off.

After you do that research, you know who your real opponent is, and you can lobby for what makes sense.

In my county, a charity is allowed to run 2 events a year with gambling and or wagering. Where real money changes hands. You can have a "Casino night" where you buy your chips, but you cannot redeem them for cash at the end. That way, your "buy-in" is the contribution.

SFB

Quote: SFB

Riva:

You have to find out who is proposing the changes to these laws, and who is funding them.

It could be the larger Detroit Casinos.
It could be Indian Casino's elsewhere in MI if any.
It could be anti-gambling groups.
It could be "other" non-profits that are not getting in on the action.
It could be Non-profits that are disappointed that the "Poker Room" operators took home more cash then they did when its all over, and feel ripped off.

After you do that research, you know who your real opponent is, and you can lobby for what makes sense.

In my county, a charity is allowed to run 2 events a year with gambling and or wagering. Where real money changes hands. You can have a "Casino night" where you buy your chips, but you cannot redeem them for cash at the end. That way, your "buy-in" is the contribution.

SFB

It's quite possible that the Detroit Casinos are annoyed by this competition. Closer to the truth is that the city of Detroit earns a HUGE take from all the gambling action at the 3 Detroit Casinos. Without that take, the city of Detroit would not only be in bankruptcy (which it already is), it would be without its biggest source of income. So, it stands to reason that the State wants to keep Detroit afloat so it (Lansing) will not have to!

Indian Casinos? Nope. Small potatoes and, all the money stays in house (no State skim)

Anti gambling groups? Nope. They are too busy fighting abortion and right-to-work laws.

Other non-profit groups that are not getting in to the action? Perhaps a possibility. As mentioned, many charities can not get in to one of the 40 "approved" poker rooms in MI. However, to burn down those houses, they would be burning down their own at the same time. Not likely.

Other non-profits not making as much as the other guy? Charities are frugal, sometimes greedy but, none of them think that big.