In early July, Brian Rast beat out 90 contestants at the World Series of Poker to win one of its most prestigious tournaments, collecting over $1.2 million in prize money. But the cash wasn't all his.
Some of it belonged to strangers he met on the internet.
Like many poker players, Rast didn't have the cash on hand to cover the tournament's $50,000 buy-in fee. Instead, he sold off various percentages of his potential profit to a network of backers—and their gamble paid off.
"That was my biggest score of the summer," said Nate Meyvis, a software developer and former semi-pro poker player in Boston who made $1,200 off the $60 he put toward Rast's entrance fee.
Meyvis didn't know Rast, and no real money changed hands between them. Instead, their financial arrangement was facilitated and processed by StakeKings, a new crowdfunding site that seeks to bring together buyers and sellers of poker action in a simple and transparent marketplace.
For decades, this practice of staking—in which investors fund a gambler's play in exchange for a portion of the winnings—has been a widespread yet underground element of the professional poker world, occurring within an insular network of dedicated gamblers and their associates. Now, platforms like StakeKings and its chief competitor, YouStake, are trying to make it mainstream.
"It's amazing to me how vast sums of money are agreed upon with a simple text message."
Though it generally goes unnoticed by the casual observer, staking plays a significant—if somewhat controversial role—in the poker ecosystem. For players, it's a good way to stay solvent. For investors, it's an opportunity to make money from the sidelines.
"The World Series of Poker is a great time to make investments in the same way that a day trader is going to be buying stocks or options," said Andrew Barber, a former engineer who turned to poker after he lost his job during the financial crisis. "It's amazing to me how vast sums of money are agreed upon with a simple text message."
But staking isn't always about the money. For many players, it's also an extension of a genuine friendship. Last summer, after Barber won a tournament for half a million dollars, one of his first instincts was to celebrate the victory with his friend and longtime backer, who had put up a 25 percent of the buy-in.
"I ended up handing him two $50,000 bricks of cash," he told me. "It was a really touching moment. We had a heart to heart and I thanked him for sticking with me through all the years. By my estimates I probably lost him maybe $30,000 to $35,000 in the two or three years prior to that."
Unfortunately, things are not usually so rosy. Staking terms are frequently disputed, tax issues become muddled, deadlines for cash transfers are forgotten or ignored. The traditional staking world is full of bitter disputes that drag on for years with little hope for resolution. Sometimes the money just disappears entirely.
In perhaps the most notorious case, a player allegedly raised $111,000 from investors for a mega-high-stakes tournament (first place paid close to $5 million dollars) and then squandered every cent of it in a casino gambling pit before the event even started.
When these things happen, backers have few options for restitution. YouStake and StakeKings are attempting to tame this Wild West by adding more safeguards and greater transparency. The sites serve as middlemen for transactions; they also encourage players and investors to interact on social media. If players don't meet their fundraising goal, or don't fulfill all their obligations, pledged money is returned.
Meyvis, the software developer, has also used StakeKings a few times as a player, and he appreciates the ease and speed with which he can solicit funds for high buy-in events. When he was raising money for a $3,000 tournament, he said it took just minutes to get the project live by listing the price of the available shares up for sell, the time frame that the project had to get funded, and the various ways investors could track his progress.
"There are different things that buyers of different packages will want," he said. For more high profile events, his strategy is to emphasize the social aspect and the updates he will deliver as he gets closer to the money. He added, "I got a tweet from somebody who said that he had so much fun following the Twitter feed that he forgot he was at his in-laws for the day." With more obscure tournaments, he senses that backers tend to have a greater concern for their return on investment, and so he tends to emphasize his poker credentials.
Still, troubling inefficiencies in the marketplace persist. Although poker is a game of skill, and elite players will profit in the long run, even the very best of them can experience excruciatingly long losing stretches in the short term. All of the poker pros I spoke to estimated that most people who had ever backed a player lost money as a result.
"It's feast or famine with poker investing," Barber said. "It's not like you're going to have a bunch of small wins over time. You're going to have a bunch of losses punctuated by massive wins."
All of the poker pros I spoke to estimated that most people who had ever backed a player lost money as a result
A pro known as Limon, who is a fixture in big cash games in L.A.'s Commerce Casino, believes that the glamor of the gambling world seduces many naive—and many not so naive—investors into making bad bets.
"Poker is an extremely social game," he told me. "So people who are attracted to the game of poker want to be a part of a community and want to have a social experience." He added, "They have these dreams of this social experience, but they're not actually dreams of making good monetary decisions. And scumbags—basically scam artists—prey on these people constantly."
On sites like YouStake and StakeKings, "the opportunity for abuse is there," said Meyvis. But, he added, "the opportunity for very legitimate, well-informed transactions is also there."
Both YouStake and StakeKings emphasize that their primary customer bases are not intensely concerned with making mountains of money. For the most part, they are spending relatively small amounts in order to engage with likeminded poker enthusiasts and gain access to a world that would otherwise be curtained off to them.
Many backers "really don't care about a return on investment," Frank DeGeorge, YouStake's CEO, told me. "They really are looking more for interaction, and the ability to sweat"—a poker term used to describe the adrenaline rush you can get while watching others play.
Jeff Steinke, a tech worker in Atlanta and an avid poker fan, echoed this view. "I'm constantly looking for ways to keep poker as a part of my life," he told me. Georgia has some of the strictest gambling laws in the country, and so Steinke views online staking as one of the few options he has to get his poker fix, even if it is a mostly vicarious pursuit.
Years before he hopped on YouStake, Steinke had lost out on a couple of opportunities to make some big money through staking. One, which came through Twitter, he ultimately couldn't pull the trigger on. The other fell through because a text message was relayed too late. He said, "I told myself, if I get chances like these again, don't miss out."