Staking - Key Financial Tool of the Poker Economy

Backing, #swapping, #staking, selling action, chopping - these are all financial instruments used on a daily basis in the poker stock-exchange where the pros are both 'traded' and 'traders' themselves, where there are undervalued and overpriced stocks, high-risk and low-return investments and futures deals.

The Wall Street Journal recently brought up the subject of staking in a story entitled 'The Hidden Game Behind Professional Poker'. @Daniel Negreanu is one of the players Alexandra Berzon cites in her WSJ article:

"Two years ago, he says, he invested about $2 million in 10 players at the World Series of Poker. ..he thinks not all the players he backed played seriously enough or treated his money as their own; ultimately, he says, he lost about half of his investment. Nowadays, he's backing only two players."

"I don't let players quit me. If you've got me stuck $200,000 and say, 'Yeah, I don't want to play for you anymore, I want to play for this guy,' I would be like, 'Huh, that's really shady.' That's really not fair."

@Jason Somerville on staking and the poker economy (2013 PCA Q&A session):

"You can definitely make a lot of money in backing if you're really good in accounting, really smart with who you're staking, picking guys that are loyal to them. Actually, accounting is probably the toughest thing is staking... especially because we're so lazy, you know,"

A few weeks ago @Mike McDonald talked at length to poker writer Remko Rinkema, including on his own staking experience (read the interview here). 

Unfortunately, the power of one's stare cannot guarantee a good ROI in poker staking and Mike McDonald no longer backs other players.

"..having to send $10,000 over and over and over again to various players, while only getting back money a few times was just very stressful. Looking on PokerNews and seeing your horses play hands in ways you don’t agree with is hard too, and that comes from someone who’s already extremely critical of himself. I even lost sleep over the stress of staking and once I got a chance to get out of it I did.

..I was well above expectation and I still found it stressful, so that should tell you something."

During the PCA, in January 2014, @Vanessa Selbst , @Isaac Haxton and  @David Williams  gave a Team PokerStars Pro Q&A on the topic.

You can read the summary of the session here, but basically, the most important conclusion and advice to backers is to make sure their 'horses' are in for at least 20-25% themselves so that they are really (and literally :) invested in their game. As for contracts (rare) or handshake deals (most of the time), neither guarantee payback so it is important to know and trust the person you decide to back.

Finally, staking is happening on all buy-in levels and in live and online tournaments alike. Here is one offer for this weekend if you are curious about the way it's done and as usual, you can find lots of useful tips on twoplustwo - http://forumserver.twoplustwo.com/163/staking-selling-shares-online/