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What Is Staking?
Staking, also known as backing, refers to an arrangement between an investor (commonly known as a staker or backer) and a poker player (commonly known as a stakee or horse) wherein the investor puts up funds on behalf of the player in exchange for a percentage of their profits.
Such arrangements can benefit both parties, by creating a profitable investment for the backer and diminishing the financial risk, amongst other advantages, for the player.
Relevant Terminology
- See above for staking, backer, and horse.
- Profit – money made (on stake).
- Shares – a percentage of the potential profits that is owned by an investor. Otherwise known as action, or selling/buying a piece.
- Makeup - the amount that a player owes their backer after losing on stake. To take an example, consider a newly staked player that loses $1,000 in their first week. While the backer reloads the funds, the player is now said to be $1,000 in makeup, meaning that they must subsequently repay their losses before any profit is split. If the player goes on to win $2,000 in their second week on stake, they are first obligated to repay the $1,000 makeup before splitting the remaining profits ($1,000/2 = $500 profit each).
- Markup - an additional fee associated with buying shares from a player. The player decides what markup they feel is appropriate based on their skill and experience. To take an example, consider a strong player that is selling 10% of their action in a $1,000 tournament. The player has sustained a 10% ROI (return on investment) over a significant sample in similar tournaments; the player is, therefore, a better investment than the average player, and can charge a premium (markup) for investments. Where the face value of a 10% piece is $100 (10% of $1,000 = $100), the player charges $110 for the same share, since this price better reflects his EV (expected value).
- Stable – a group of players that are staked and often coached by a specific investor. Coaching for profits (CFP) is a common type of stable, wherein a backer or backers stake and coach a group of players over a period of time in return for a cut of their profits.
How Does Staking Work?
Both the staker and stakee must negotiate and agree upon several important terms and conditions of their arrangement. These terms and conditions should clarify all of the necessary details to each party, such as what the stakee can play, volume requirements, coaching requirements (if applicable), what percentage of profits each party is entitled to, etc.
Long-Term vs Short-Term Staking
Staking can come in many different shapes and sizes, but agreements will tend to fall into one of two categories, namely short and long-term staking. Find both outlined below.
- Short-term staking: this is where the player seeks out one or several backers to buy a piece of their action, perhaps in a big tournament or cash game. Markup is more common in short-term staking deals.
- Long-term staking: typically, this is where the backer entirely funds the player in exchange for a cut of the profits over several months or years. Makeup is more common in long-term staking deals. Long-term staking is also more likely to involve some element of coaching, such as from a CFP stable.
Ultimately, both short and long-term staking can mean many different things based on the unique terms and conditions of the agreement.
Should You Consider Staking?
Below I’ve outlined the various pros and cons of staking.
Pros
- Diminished financial risk. Variance in poker can be severe; by getting staked and not risking your own money, you can alleviate some of the associated financial pressure.
- Coaching and support. Coaching and support are some of the valuable benefits that you can expect from various staking agreements.
- Opportunities to play in bigger games. Staking is commonplace when it comes to playing high-stakes tournaments and cash games. By getting backed you give yourself a better chance to play in bigger games.
- Networking and community. Mostly associated with poker stables, networking and a sense of community can be invaluable in a game as independent and often isolating as poker.
Cons
- Reduced profit share. The main downside to staking is, inevitably, that you’re no longer entitled to your profits in their entirety.
- Contractual obligations. From volume requirements to game and format selection, contractual obligations mean you’ll have someone (your backer) to answer to.
- Makeup. While your financial exposure is significantly diminished, the idea of makeup (being indebted to your backer) can be daunting so some.
Staking can provide a much-needed financial safety net, along with a myriad of other benefits such as regular coaching and a sense of community. That said, it’s also important to consider the potential downsides of staking, like a reduced profit share and various contractual obligations. Ultimately, it’s up to you to decide whether staking makes sense as part of your unique poker journey.
Hopefully, this article has helped you to better understand staking in poker!
