One of the big stories over the weekend was the Twitter war between Brandon Cantu and other poker pros over old debts. We won’t go into details, but you can read all about it on his Twitter account.
The recent “scandal” is the latest that has arisen between poker pros. Over the years, we’ve seen numerous pros called out for not repaying their debts. The most famous in recent years was back in 2011 when various players came out accusing Chino Rheem of nonpayment on various debts.
Read More: Poker, Be Grateful for Chino Rheem
Poker is in a bit of a unique situation when it comes to lending and it often results in bad debts and players that never settle their accounts. Today we will look at the problems associated with lending in poker, why players go into debt and proper etiquette in repaying those debts.
Note: I am not seeking to call out any specific player in this article as every situation is different and as will be discussed a bit later, circumstances often impact one’s ability to pay their debts.
The Problems Associated With Borrowing
Poker is a bit of a unique scenario when it comes to borrowing. Players often take out loans with other players or backs with no true collateral other than their perceived ability at the poker table.
The word perceived is used because decision to loan money in poker is based on one’s results at the tables. Results are not necessarily indicative of a player’s true ability to make money or even repay their debts.
In standard lending, often a person would need to put up some form of collateral in order to secure a loan. Also, a person’s credit score will impact their ability to borrow or the rate of interest they must pay.
In poker, players don’t put up collateral but rather put forth their poker resume or rely on how lenders perceive their ability. The downside to this is that perceived ability does not guarantee future results in any fashion.
As an example, let’s say a player borrows $50,000 from a backer with the promise to repay in six months time. Even without interest, this loan essentially promises that the player will be able to make enough in the next six months to repay their loan, make their monthly expenses and continue to play poker.
So what happens when that player fails to make enough money to repay their loan? If this were the normal business world, the person would try and negotiate an extension on their loan or the lender would begin collection or default procedures.
In poker, such remedies are not available in most cases and players are left with a couple of choices. They can let the lender know what’s going on and try and get the loan extended or they can try and borrow some additional funds to repay the loan.
Too often, a player will opt for the second option but then they are now on the hook for two loans. In some cases, the player decides to try and spin up the second loan in hopes to make enough money to pay off both lenders. If that plan fails, they find a third lender and try again.
See how this type of thinking can quickly spin out of control? In time, if a player is unable to pay off their debts, their reputation takes a hit and they may be unable to borrow money in the future.
Great Players Can Still Go Into Debt
Poker fans are often surprised when they see great players go into debt over poker. The common perception is that great players should be skillful enough to stay flush in cash. While that sounds logical, fans are looking at poker in a bubble. They aren’t considering other external factors.
Let’s start by looking at a poker player that is able to win an event for $1 million. For some, this is truly “life changing” money and if managed properly, it can be. Notice the phrase “managed properly.” That’s where some fall short.
Keep in mind that a player can expect to lose between 35 and 50% of that score to taxes depending on where they live. (Yes, some lucky players get out of paying these crazy taxes but that is the exception and not the norm).
So let’s say that after taxes a player is left with $600k. Great! That’s a nice chunk of change. How does that player then proceed with their newfound wealth?
Some players will head out and make a couple of big purchases while some may decide to reinvest some of that money for the future. However, what often happens is that a player decides to spin up that money and they do so by moving up in stakes whether it is in cash games or tournaments.
Sometimes a player goes on a run and makes a windfall. Often, this player has minimal success and that $600k gets drained fast. A few $10k events and a healthy WSOP schedule later and they are close to where they started before their big win.
Then you have players that are irresponsible with their money and blow their bankroll in various activities. Gambling is one of the biggest destroyers of bankrolls. Pit gambling, sports betting, prop betting and more can quickly decimate one’s roll.
These players will then turn to backing or loans in an attempt to regain their former wealth and they point to their previous success. Backers looking to get a piece of the “next big thing” take a chance and bad loans happen.
What IS Proper Repayment Etiquette
The recent repayment drama begs the question of what is proper repayment etiquette in poker? On the surface, the answer would seem to be “repay your debts in a timely fashion.” What qualifies as a timely fashion?
The default answer to these questions would be to pay one’s debt when they say they will. If Player A takes out a $100k loan to be repaid in six month, they should repay that debt within the six-month period. Should circumstances arise that will prevent them from paying on time, they should contact that lender and work out an arrangement.
Barry Greenstein makes a point in his book Ace on the River that if a player is unable to repay their entire debt, they should at least attempt to make payments on that debt. That is something that I personally agree with.
Poker players can never truly guarantee long-term earnings, regardless of skill. There are times where variance is going to kick our asses. Other times, players take on more debt than they can reasonably handle. In these cases, it is still best to make payments on the debt.
This shows that one is serious about repaying their debts and they can still be trusted. I’d rather see a six-month loan completely repaid over a period of two years in installments than someone duck a player for months or years before finally repaying (if they repay.)
Furthermore, it would seem appropriate that players in debt to other players refrain from taking out additional loans until they have repaid their debts. Of course, how many people out there are in tons of debt and then take out additional loans or mortgages to pay off that debt. The concept of “don’t borrow additional money while in debt” seems wise but many don’t follow that wisdom.
Lastly, is it appropriate to “out” players that don’t repay their debts? Outside of the drama that it inevitably causes, it is not a bad thing that players rat out bad debtors in the game. Granted, this should also be done with discretion. If we are talking about a slow-paying player that ultimately pays off his debts, it seems a bit silly to out them.
I'm owed about a million from poker from other TOP TOP Poker players. I know they are in tough shape. I will not shame them or out them.— Brandon Cantu (@brandoncantu) February 16, 2017
Adversely, if a player is known to frequently default on debts but is still getting others to regularly back him, I see no problem with the poker community being informed on these activities. This is a matter of protecting others in the poker community that may or may not know of the situation they are getting into.
Odds are that there will never be a true solution to the problem of poker player debt due to the unregulated nature that it occurs. Most players are not willing to sign a legal contract for their debt.
A poker player that defaults on a debt in many cases will face nothing worse than a destroyed reputation. While reputation is considered to be everything in poker, as we have seen over the years, there are plenty of players that don’t give a damn about their reputations as long as they have a chance to play poker and win.