Our poker historians take a look back in time to look at the origins and evolution of poker Rakeback
Card-rooms, casinos and poker sites earn a commission by taking a ‘rake’ in the ring/cash games or charging an entry fee in tournaments. With “Rakeback”, players get a portion of their rake contributions back in the form of a refund.
The History of Rakeback
It’s difficult to identify when poker players in land based casinos first received rakeback or cashback on their play. Online Poker players, however, experienced the first significant rakeback deals offered through Empire Poker which was founded by Israeli businessmen Noam Lanir and Arnon Katz in 1998. Empire Poker had negotiated a skinned version of Party Poker software (liquidity sharing with a different brand).
Although it was a brilliant strategy to offer rakeback to players, it became a sore spot in their relationship with Party Poker, since many of the high value players could re-portal from Party to Empire in order to receive their rakeback. The bad blood between the two brands only accelerated, with Party Poker shutting off their software to Empire players, and eventually all of this culminated into a $1 billion lawsuit in 2005. Party Poker eventually decided it was easier to purchase Empire for $200 million.
Rakeback only grew along with the poker boom, especially as high volume grinders could be profitable players even if their pre-rakeback play was slightly negative. Sites like RaketheRake, Rakemeback, and RakeBrain became very popular rakeback sites.
Another famous rakeback offering was the Poker Stars VIP program, whereby the highest sixth level was known as Super Nova Elite status. A player at this level could receive up to 75% rakeback if they had contributed at least $9,000 to 10,000 in rake (minimum of 1 million VPPs) in a single calendar year. This was really for the hard core grinders. In November of 2015, under new management Poker Stars (Amaya parent) discontinued many aspects of the Super Nova Elite VIP program, causing respected pro Isaac Haxton to sever his ties with the brand in January 2016. Haxton cited specifically the changes to Super Nova Elite as the reason for leaving and stating the decision to be ‘dishonest and unfair’.
Rakeback or Cashback gained further steam as poker become more and more popular in China and South East Asia, where bettors are accustomed to getting cashback offers. Huge poker networks like GG Poker and IDN Poker emerged as major forces starting in 2014. GG Poker is today the largest poker network in the world. In addition, mobile apps like PP Poker and Poker Master working on the agent model also started to flourish in 2016, and especially in Asia where the centralized poker sites have more challenges reaching players. Receiving rakeback or cashback became more the norm and expectation rather than a nice perk for a few savvy players.
How poker rooms calculate Rake & Attribute it to Players
As above, tournament fees typically have a fee that is directly charged to the player for each buyin, rebuy, or add-on making it a very straight-forward exercise to allocate commission or rake to each player participating in a tournament.
It is cash games where allocating the rake to each player is more of a challenge, since rake is taken from the pot by the cardroom and not taken from the players directly. This indirect rake charge requires a separate formula or approach and it has changed over the years.
Dealt In Hand Rake
When online poker emerged in the 1990s the rake schedules were essentially borrowed from the popular Las Vegas card-rooms of the era (Caesars, Mirage, Binions, etc.). There was a predetermined rake amount that the cardroom would take from the pot as the pot grew. For example, when the pot reached $10, the room could take $0.50, and then when reaching $20 it might take another $0.50, until a predefined upper limit (aka rake cap) is reached. The early online poker rooms, specifically Planet Poker and Paradise Poker borrowed this rake procedure.
The online rooms started to care about the rake contribution per player because of the advent of deposit bonuses. These were bonuses awarded to new players who deposited and extra money would be put into a bonus pending balance. This bonus was released as the player played raked hands of poker. Alas, online poker sites now were required to understand how much rake each player had contributed.
The simplest approach first applied was to simply divide the rake collected in each hand by the number of players who were dealt cards in the hand (regardless if they bet or not). This was known as the dealt in hand rake allocation model.
Method Two: Weighted Pot Contribution
In 2002, Bruce Davidson from Paradise Poker contemplated changing the Dealt in Hand allocation model in order to reward players who were more active in betting. Therefore, if a player generally contributed more betting per hand then it made sense to reward them accordingly. This gave rise to a method known as Weighted Pot Contribution, which looks at the % of each pot which a player contributed, and simply assigns the same split to the total rake taken by the poker room in the hand.
Rake Schedule Change – introducing % based rake
Poker Stars changed the classic rake schedule, mentioned above, where rake values were taken by the cardroom as the pot reached certain levels (ie. $10, $20, etc.) until a cap was reached. The new Poker Stars change was to apply a Rake % to the pot regardless of the size of the pot. This tweak generated more rake, because pots which previously would not have been considered ‘rake-able’ based were now considered so, resulting in profits for the poker site (‘rake’).
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