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How Do Casinos Make Money On Poker?
How Casinos Make Money on Poker
Casinos make money with poker in the form of rake, fixed fees, time collections, dead drops and tournament fees. Every casino uses a different model.
Casinos are in the business of making money whilst keeping their players as entertained as possible. Although it is quite obvious how casinos make money with traditional table games such as blackjack and roulette, casinos make money on poker in a very different way.
That’s because players play against each other rather than playing against the casino.
In this guide, we will explain to you how casinos make money on poker. Casinos use different revenue models for this wonderful card game and we will be discussing each of these models in great detail so that you can understand the ins and outs of it.
Peer-to-Peer Gambling Explained
In order to comprehend how casinos make money on poker, you should first become familiar with the term peer-to-peer gambling.
A peer-to-peer casino game is a game of chance where the players (peers) play against each other instead of playing against a dealer or “the house.” Examples of peer-to-peer games of chance are poker and bingo.
As players face off against each other in these types of games, there is no such thing as a house edge. This of course begs the question: why would casinos even have a cardroom then?
Well, one of the reasons is rake.
What is Poker Rake?
Poker rake is the fee or commission charged by a casino for every hand played at a game of poker. The more hands players play and the higher they bet, the more money the casino earns in poker rake fees.
Casinos use different rake-based fee models such as pot rake, dealt rake and weighted contributed rake.
Pot rake is the most commonly used rake-based fee structure land-based casinos use. It is one of the easiest forms of rake for the dealer to calculate, as they just take a percentage of the pot after each hand.
Every time a player wins a hand that has at least made it to the flop, the dealer will collect between 5% and 10% of the pot before distributing the rest of the chips to the winner(s).
Although most casinos have a no-rake policy in place when hands don’t reach the flop, there are casinos that still charge poker rake fees based on the players’ pre-flop bets.
Most online casinos use a dealt rake fee model instead of a pot rake fee structure. In dealt rake, all players who have been dealt cards are required to pay rake.
If the total rake of a pot is $10 during a 10-handed game, each player contributes $1 to the house’s cut. With this rake scheme, your play style has very minimal effect on the amount of money you will need to pay the casino.
It doesn’t matter whether you have played until the showdown of a hand or folded preflop.
Contributed rake, also called shared contributed or average contributed rake, is a model where only players who put money into the pot have to pay rake.
With this method, it doesn’t really matter how much each player contributes to the pot as the total rake is divided evenly among participating players.
The contributed rake model favors loose players that see many flops as it doesn’t matter whether they stay in the hand until the showdown or end of the hand.
Weighted Contributed Rake
The weighted contributed rake model is considered to be the fairest online poker fee structure.
This model uses the percentage of the pot each player is responsible for. For example, if a player is the big blind for $10 and folds pre-flop while two other players see the flop and play each other heads up — raising the pot to a total of $100 over the course of the round — this means the big blind player is responsible for 10% of the total rake.
If we assume the online poker room charges a weighted contributed rake of 5%, the big blind player pays $0.50 in rake (10% of $5). Note that the $0.50 in rake paid has nothing to do with paying the blind or placing the ante bet.
The weighted contributed rake model takes the amount of risk each player takes into its equation and is therefore seen as the best rake model by professional poker players.
Although rake is a fair way to implement a house edge into a peer-to-peer casino game, it is not that favorable for high rollers. If they have to pay 5% to 10% of every winning hand to the casino, they get better odds playing slots, which have an average return to players of 96%.
To solve this, many brick-and-mortar casinos have introduced fixed fees at their high-limit tables.
At these tables, the dealers collect a fixed amount of money after each hand. This makes it easier for the dealers to calculate the house fees and more favorable for the high-stakes players as they pay less compared to rake-based poker tables.
Timed Fee Collection
We speak of a timed fee collection when a casino doesn’t charge wager-based rakes or fixed fees but a time-based fee instead. With the timed fee collection model, the casino charges every player a fixed amount, based on the amount of time they spend at the poker table.
A casino can charge every poker player $30 an hour for example. All players have to pay these fixed amounts to continue playing, regardless of how many hands they actually participate in. Just like fixed fees, the timed fee collection model is more prevalent at high-stakes poker tables.
In poker, dead drops refer to a rake-based model where the small and big blinds (ante bets) are paid to the casino instead of being added to the pot.
As the height of the blinds varies per poker table, so do the dead drops and because the blinds rotate after each hand, every player pays roughly the same to play over the course of time.
Tournament Fees & Buy-Ins
Poker cash games and tournaments are two completely different things. At poker cash games, players can bring any amount of money to the table and bet according to their liking (No Limit Hold’em) or are limited to betting the current size of the pot (Pot Limit Hold’em).
At the start of a poker tournament, every poker player receives the same amount of chips for a predetermined amount of money. This entry fee is called the buy-in and often consists of a part that goes to the total prize pool of the tournament and a part that goes to the casino for hosting the tournament.
Usually, poker tournament fees are about 10% of the buy-in. Note that both online and land-based poker rooms are required by law to publish their tournament fees in the United States.
Differences Between Land-Based and Online Poker Rake
The differences between land-based and online poker rake are that online poker rooms often use complex models like dealt and weighted contributed rake while land-based casinos and poker rooms tend to charge their players fixed fees, dead drops or collect timed fees.
Online poker rooms often have lower rakes compared to brick-and-mortar casinos because they are cheaper to operate.
Rake-free Online Poker Sites
Nowadays there are hundreds, if not thousands, of online poker sites competing with each other for a market share of the online poker industry.
For this reason, some online poker rooms have decided to introduce rake-free poker tables, where players can play poker against each other without paying rake.
Note that these casinos and poker rooms often only have a few rake-free tables or charge monthly subscription or deposit fees instead.
Alternative Casino Income Sources
Land-based casinos have a lot of other income sources apart from poker rake. Think about accommodation, entertainment and shows, food and drink, and tips.
First of all, poker players need a place to stay. Usually, casinos have hotel rooms as well. Although the players could stay in a cheap motel a few miles away from the casino, they typically choose to stay in the casino they play at as they are on holiday and want to meet fellow poker players.
Most poker players don’t just play poker, but also other casino games. Sometimes groups of friends go to a casino and not all of them can play poker.
Every other casino game, whether it be slots, blackjack, roulette or craps, has a built-in house edge.
Entertainment & Shows
Every poker player needs a break from the poker tables from time to time. Casinos know this and therefore have all sorts of shows and forms of entertainment available such as magicians, circus performers and comedians.
In most cases, these shows come with an entry fee.
Food & Drink
It is difficult to play poker for hours without ever ordering a drink or having a meal before or after a game. Almost every casino has one or multiple bars or restaurants where players can indulge themselves with luxury meals and fancy cocktails.
Some casinos offer players free drinks while they are playing, but this is slowly becoming a rare phenomenon.
Tips are definitely not the biggest income source for casinos and card rooms, but they do help to pay the staff. Most casinos don’t pay their staff high hourly wages but luckily there are some generous players out there who tip dealers, waitors and other casino staff from time to time.
What does rake in poker mean?
The rake in poker refers to the portion of the winnings of every hand or round that goes to the host of the poker game to offset the costs of organizing the game. This rake can be a fixed amount or percentage-based.
Is poker rake illegal?
As long as casinos or card rooms have a valid gambling license in place, they are allowed to take a rake from a poker table. In the United States, online poker rooms have to disclose their charged rakes at every poker table.
How does poker rake work?
Poker rake works as a commission fee model casinos and card rooms use to generate a revenue stream from poker played between players. Usually between 2.5% and 10% of the pot of each poker hand will be paid to the host of the poker game in the form of rake.
Can I play online poker without rake?
Yes, you can play online poker without rake. Because of the heavy competition, some online poker rooms have decided to offer rake-free tables to their players. Note that some of these poker sites charge a monthly membership or deposit fee instead.
What is the poker rake structure?
The poker rake structure refers to the revenue model a casino or poker room uses to create a house fee for a peer-to-peer poker game. The most common poker rake structures are pot rake, dealt rake and weighted contributed rake. Apart from these rake structures, fixed fees, timed fee collections and dead drops are charged by most land-based casinos and card rooms. The poker rake structure of a casino or card room can be tiered, where the higher stakes or more hands players play, the less percentual rake they pay.