The dominance of skill in online poker

Abstract

Does skill dominate luck in online poker? In many countries around the world, the legality of the online poker industry rests on courts’ evaluation of the “skill dominance” criterion. Because it is not precisely defined, however, the skill dominance criterion may be misleading when it comes to the legal qualification of online gambling activities. We argue that this concept might be better framed as “do skilled players dominate the game” than as “does skill dominate game outcomes”. We introduce a novel, comprehensive dataset on online poker play – where we follow 91,439 players over 40 consecutive months (representing over 85 million hands played) – and develop simple tests to show that (i) skill in the game drives individual results, and (ii) players improve their skills with experience and quit playing the game as a function of starting ability. A lower bound estimate suggests that it takes at least 7 months of full-time training for a novice to acquire the basic skills exhibited by the most experienced players in our data. We conclude that the scholarly debate around this industry may move beyond that of its legality to focus instead on issues of regulation. Beyond the case of online poker, the procedures and tools we develop can be readily transferred to evaluate the skill dominance criterion in other purported games of skill, such as sports betting or stock trading.