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The ABCs of Backing Deals

by , Jun 9, 2011 | 4:28 pm

Comments (5)

Here’s a question from a reader that I thought might be useful to answer for everyone, including me! Chuck in Fort Worth writes:

Hi Dan,

Jake and I will be in Vegas the week of June 13. A buddy of his will be staking him in event #26. Do you have access to any kind of staking agreement we could prepare prior to the event? Thanks.

Chuck

Hey Chuck! I’m not Dan, but I am Dan-ielle so … close enough! 🙂

There are no set-in-stone guidelines for backing players but the most common practice is a 50/50 split of winnings, after the backer has been paid back on his investment. (i.e. the buy-in.) The second most common is for the backer to get his investment back and 60 percent of the remaining winnings, with the player keeping what’s leftover after that.

Backing deals can get more complex depending on if the player is responsible for paying back all or some of the money if he doesn’t cash. Usually deals that require no make up from a player would have a higher percentage going to the backer, usually 70/30 or even 80/20.

Here’s a video I found — Mike Frazin – Backing Poker Players and the Rules — explaining “make up” a little more.

http://www.youtube.com/watch?v=IqPoRwnz9Hw

Ethics play a large part in making these deals, so Jake and his backer should know each other well or both already have a trustworthy reputation before agreeing. It would be a good idea to use a lawyer to draw up a contract but if they just want to keep it simple, just make sure that each party understands the terms and writes them out, clear as day, for both parties to sign or have notarized. You may also want to be sure you both are clear about the breakdown for tips and taxes.

Hope that helps and tell Jake I said, “Good luck!”


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5 Comments to “The ABCs of Backing Deals”


  1. Brad Polizzano     says:
    June 10th, 2011 at 12:16am

    If a backed player is fortunate enough to win, he/she should want to make sure the tax documents that the casino issues (Form W-2G in this case), if required, properly allocate the winnings between the backed player and the backer(s).  The IRS actually has a form (Form 5754) to address this situation. 

    Note, however, that Caesar’s does not recognize partnerships at the WSOP.  This means a backed player with requisite winnings will be issued a Form W-2G reflecting total winnings, regardless of how they are actually split between the backed player and the backer(s).  Thus, from the IRS’ point of view, the backed player is responsible for paying tax on all of the winnings.  A backed player clearly should seek to avoid this result, and should consult a tax professional in order to make sure proper steps are taken to allocate the winnings for tax purposes.


  2. Danielle Ford     says:
    June 10th, 2011 at 3:05am

    Thanks for the extra info, Brad! Tax stuff is definitely not my forte’!


  3. CK BWoP     says:
    June 10th, 2011 at 3:19am

    Danielle,

    The arrangement you describe above (50/50 with makeup) is “typical” for longer-term, multi-event full staking arrangements. That generally doesn’t work out well for an individual tournament (or limited number of tournaments).

    If it’s just a one-off tournament on a full (or very high percentage) stake, there’s generally no makeup, but the person providing the staking usually has a higher percentage of the action (i.e., 80/20 split).

    Alternatively, people sell “shares” for an event at a markup (not to be confused with makeup). So if the event is a $1,000 NL tournament and the player wants retain 20% of his / her action, she would be selling 80% of action at 1.25 markup. Markup means the amount of juice a player charges for a % of the action. So no markup for a $1,000 event means that for 10% of the action, a buyer would have to pay $100. With 1.25 markup, for 10% of the action, a buyer would have to pay $125. The player could sell 80% (8 x $125) and have enough money to pay for the buy-in and retain 20%.

    The markup system makes sense when you are trying to evaluate a person’s chance of success in the field and how much that skill set is worth. For example, a lesser skilled player could sell at no markup, while a very skilled player could sell at 1.25 – 1.30 markup.


  4. Htucker     says:
    June 11th, 2011 at 3:25am

    huh?


  5. Poker Kentucky     says:
    June 11th, 2011 at 4:50am

    Thanks. You just prevented our annual ‘almost sort of’ fist fight at the Hooker Bar…………….. 😉