Rake-Free Model Impossible in Regulated Online Poker

John Mehaffey March 6, 2014 1779 Reads

A recent debate among the poker media got me thinking about how a real money subscription site might work in the day of regulated U.S. online poker.  The current model used by real money poker sites takes a percentage of the pot to cover site operation costs and profit.  This is known as rake.

There have been several attempts to replace rake with a subscription model at real money poker sites over the years.  The motives have ranged from trying something new to bringing players into a diversified gaming site in an attempt to increase sports and casino handles.  All have been failures. 

Why Rake-Free Sites Fail

Rake-free poker sites often fail because the critical mass does not understand the concept of rake.  Poker rooms have mastered the art of quietly removing the house fees from cash games and adding tournament fees to the price of a buy-in.  This makes paying a subscription fee to play rake-free poker a difficult concept to sell.  For this reason, game quality would suffer.  That is because only players that are aware of the destruction rake causes to a bankroll will trade promotions for rake-free games. 

There are also other fees a subscription site must charge.  A $20 or $30 fee is not going to cover payment processing costs.  These can run as high as 5 percent of a deposit.  A player that deposits $1,000 in a month could incur payment processing fees equal to the subscription charge, making that player a loss for the site.

Withdrawals are an additional expense for poker sites.  The cost of cutting a check can be a few dollars.  An electronic check also runs a few bucks.  The poker site would have to pass all of these fees onto customers.   

Players are accustomed to receiving perks while playing.  This may come in the form of rakeback or free merchandise.  That cannot happen under this formula.  Tournament guarantees, one of the most popular poker promotions, would be impossible under this model.

Regulated sites have massive upfront costs.  The license is expensive, as are the associated legal fees.  Employee training costs, facilities and software development are all costs of doing business.  Charging players $20 or $30 a month will not pay the bills. 

Examples of Failed Rake-Free Sites

There have been several online sites that have tried rake-free poker in the offshore market.  None were a success. 

World Poker Exchange

World Poker Exchange might be the best known subscription model site.  It was the poker room under the World Sports Exchange umbrella.  The site launched rake-free poker for its struggling poker site in 2006.  The goal was to bring deposits to the site in the hope that players would bet on sports and play casino games.  It brought action to the site, but there were other issues that prevented the site from catching on with mainstream poker players.  The lack of experience or backend capabilities to investigate collusion became a problem.  The poor software was another complaint.  Rakeback was dropped slowly before the program was completely abandoned.  WSEX eventually completely imploded, stiffing all players.

ZeroRake

The industry has come a long way since Zerorake.com first attempted to create a subscription model in 2004.  The site used Action Poker software but the player pools were kept separate.  ZeroRake took rake from the pot to demonstrate its cost before returning it to the winning player at the end of the hand. 

The introductory membership fee was $5.95.  It went up to $29.95 after the first month, although the site allowed players to join for free for most of its existence.  Players had the option of playing without paying the membership fee and just pay the rake.  The site eventually failed due to a lack of interest.   Players were refunded.

PayNoRake

PayNoRake is a member of the Chico Poker Network.  It was once the rake-free skin for Action Poker.  Unlike ZeroRake, PayNoRake players had access to the main network.  Players could receive 100% rakeback when paying over $220 in rake in a day.  Rakeback was paid on a sliding scale with a 50% minimum. 

The Action Poker Network ran into major financial problems and was bailed out.  The PayNoRake business model was restructured to favor losing players.

CardCrusade

CardCrusade was another site that did not charge rake.  It operated in 2006.  It failed to meet wide acceptance by players.  It also had problems with members spamming poker forums. 

 

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