Possible Tax Ramifications from UK Poker Study That Says It’s Game of Skill

March 29th, 2015 | by Greg Shaun

Now that a UK poker study has confirmed that the game is one of skill, British pro poker players like Sam Trickett could owe taxes on their winnings if the government decides to tax winnings as earned income. (Image: World Poker Tour)

A UK poker study says that poker is a game of skill, but that may prove to be an unlucky finding for professional British players currently used to walking away scot-free from the taxman.

Poker players have long been waging a campaign to make it clear that poker is, first and foremost, a game of skill.

And while that may be clear to anyone who studies the game, talking to non-poker players reveals a variety of opinions, ranging from thinking that poker is no different from playing the lottery to those who, strangely enough, don’t understand just how much luck can influence results in the short run.

Now, a new poker study has once again shown that the game is one of skill, though UK poker players might not be so happy about the tax implications of that research.

A study authored by researchers from the University of Nottingham, along with Erasmus University Rotterdam and VU University Amsterdam, found that players who win over a given time frame are much more likely to win in the future, a sure sign that long-term poker results are governed primarily by skill, rather than chance.

Even more convincing was the fact that the very best players were even more likely to hold on to that edge, showing that the most skilled players were very likely to stay at the top.

Best Players More Likely to Repeat Good Performances

Top-ranked US poker pros like Daniel Colman often move to other countries to avoid the taxman’s bite. American players can deduct losses against wins, but has Colman had any of those of late? (Image: WSOP.com/YouTube)

Using a database of 456 million player hands from a year of online poker games, researchers found that those players who had results in the top ten percent over the first six months were twice as likely to finish in the top ten percent over the second half of the year when compared to other players.

That’s a clear sign of an edge for those players, but nothing compared to those who finished in the top one percent: they were 12 times as likely to finish in the top one percent during the second half of the year as a random player.

The study also found evidence to support what poker players have been saying for decades: while a strong player has only a miniscule advantage in each hand, over thousands of hands, the better players will come out on top.

When researchers looked at what happens when the best players went up against the worst players in the study over just a few hands, the better players only won slightly more than half the time. But that edge increased as the sample size increased; by the time 1,471 hands were played, the better players came out ahead 75 percent of the time.

Proof of Skill Could Have Tax Impact

These factors were more than enough for researchers to determine that poker is, in fact, a game of skill.

But they also warned that such studies could have tax implications for players in the UK: if poker is deemed a game of skill rather than one of luck, profits from the game might be considered earned income.

“It’s up to legislators to decide whether the role of chance diminishes fast enough for poker to be considered a game of skill,” said Dr. Dennie van Dolder of the University of Nottingham’s School of Economics. “If so then our findings represent both good and bad news for players.

“The good news is they’ll have the satisfaction of knowing the game they love is recognized as requiring real skill. The bad news is that one day they might have to start handing some of their winnings to the taxman if the policymaking community takes notice of findings like ours.”

Of course, for US players liable for handing over as much as 40 percent of their tournament wins already, the study will more likely to serve as a simple affirmation than anything else.