Yes, Poker Champ Phil Ivey Cheated, Even If He Didn’t Think He Did

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Phil Ivey is known as one of the best all-around professional card players in the world, in part because he notices things that other players, even great ones, may not. While playing baccarat at the Borgata Casino in Atlantic City in 2012, Ivey and a friend noticed  inconsistencies on the back of the cards that allowed him to read some of them as if they were marked. He even asked the dealer to position the cards so he could see them better, as in “see what nobody else noticed, giving him an unfair advantage.” Some advantage: he and his associate, Cheng Yin Sun, won $9.6 million at baccarat over four visits to the casino, then won an additional $504,000 betting their winning at the  craps table.

A federal judge has now ruled that the two must repay the $10 million. What they did is called “edge-sorting,” and it is considered cheating, though technically the ruling was that Ivey and Sun breached their contract with the casino.

In baccarat, players bet on the relative value of two hands of two cards each before the hands are dealt or the cards are revealed. The game is  played with six or eight decks of cards placed into a dealing “shoe,” and the object is to bet on the hand that will have a total value closest to nine. If a player knows the value of the first card in the shoe before it’s dealt, the player has a significant advantage over the house. Borgata accused Ivey and Sun of exploiting defects in playing cards manufactured by Gemaco Inc. that were not cut symmetrically during the manufacturing process, so Ivey and Sun were able to spot the manufacturing defects and  read the “marked”  cards without actually touching or defacing them themselves. The New Jersey Casino Controls Act requires that all casino games offer “fair odds to both sides.”  Without intending to or knowing, the casino was creating unfair odds against itself, and these two players made out like bandits as a result.

Ivey’s lawyer argued in a court filing that since his client never touched the cards, his advantage was like the casino trying to distract players with “free alcohol served by only the most curvaceous and voluptuous females in the industry.”

That, perhaps, was not the strongest argument he could make.  In fact it’s ridiculous. I made a better one in a 2012 ethics quiz about a casino that got fleeced by baccarat players after the company that was contractually obligated to supply the casino with decks of pre-shuffled cards inexplicably did not. Once the alert gamblers noticed that they were being dealt the same sequence of cards repeatedly from unshuffled decks, they started raising their bets.  After forty-one consecutive winning hands, fourteen players had won more than $1.5 million. I wrote…

If the casino, which is responsible for the cards, deals from an unshuffled deck intentionally or not, tipping the odds to the gamblers, isn’t it the casino that is violating the “fair odds” regulations? How can the gamblers be held responsible for what they had no control over, and why should the law allow the casino to benefit from violating the law?

Surely the gamblers should be able to keep their money. They didn’t cheat; they were just paying attention. Their tactic wasn’t without risk, either: at any time, a shuffled deck could have turned up (for all they knew) costing them a bundle. Essentially the casino is arguing that if it plays games uncharacteristically ineptly, players are unethical if they take advantage of it, but if gamblers play badly, the house can take them for all they are worth. Why didn’t the casino’s employees figure out that the cards weren’t shuffled? That’s their responsibility, not the players’.

Were the winning gamblers dishonest? No. Irresponsible? No. Unfair? Are you kidding? Unfair to take full advantage of the cards being dealt to them? The gamblers had no obligation to mitigate the damage to the casino from the failure of the casino’s own contractors, when the gamblers were engaged in a competitive enterprise against the casino.

Unfortunately, I don’t believe that argument works in the Ivey case. (Those 2012 players were also ordered to return their winnings.) It’s a thin distinction, but a material one: it is not the gamblers’ duty to assist the casino’s when it is playing its own games badly, but a card game played with a marked deck is unarguably invalid and unfair. Ivey’s case reminded me of a 1966 movie called “Kaleidoscope,” in which a gambler (Warren Beatty) tampers with a playing card company’s card design plates so that he can read the backs of every card dealt in every casino all over the world. We can all agree that this is cheating, I presume. OK—what if Beatty tells another gambler about the markings? It would also be cheating for that second hand beneficiary of the information to use it to win money, agreed?

Now imagine that a third gambler just notices the markings on his own. I believe he or she would have an ethical obligation to alert the casino, and not exploit the fact that the backs of the cards could be read.  The 2012 episode where the gambler noticed a flaw, not in the decks themselves, but in how the cards were being dealt is close, but short of cheating. Marked cards do not allow a fair game, so Ivey cheated. Noticing that cards are being dealt in the same order is taking advantage of bad playing, and any gambler is entitled to do that.

The courts, however, didn’t see that distinction. In their estimation, both are cheating.

____________________

Pointer: Fred

Sources: Law 360, Huffington Post

 

22 Comments

Filed under Arts & Entertainment, Business & Commercial, Etiquette and manners, Law & Law Enforcement, Popular Culture, Professions

22 responses to “Yes, Poker Champ Phil Ivey Cheated, Even If He Didn’t Think He Did

  1. Would it be unethical if say instead of playing the advantage, they pointed out the flaw for a finders fee?

  2. Is gambling inherently unethical? Or *merely* a strong incentive for follow-on unethical behavior?

    If it is by it’s own nature unethical, how can any follow-on behavior *within the system* be considered ethical?

    • dragin_dragon

      I do not believe gambling to be unethical, even though it can lead to a mental problem akin to addiction. However, you must consider gambling to be a game of skill, rather than one that relies solely on ‘luck’ (chance). There are some approaches to gambling that rely on statistical probabilities, but they don’t always work…see the movie “21”. However, taking advantage of incompetence MAY be unethical, whether it is on the players or the house’s side. Thus, Putin taking advantage of Obama may legitimately be considered unethical.

  3. Alex

    I find it hard to form an opinion of this starting from the premise of “fair odds to both sides” since the games are designed to favor the house already. I think that most ways players improve their odds while following the rules should not be considered illegal (as in for example card counting in blackjack, where they can kick you out but not actually bring a suit against you). Ethically, I’m pretty close to Tex’s opinion above: gambling in any organized form (I draw the line at church hall bingo) is too close to unethical for me.

    • I was actually thinking the same thing, “The New Jersey Casino Controls Act requires that all casino games offer “fair odds to both sides.”” was in my copy buffer on the way down… Of course the odds aren’t FAIR, that’s what the 0 and 00 on the roulette wheel are for. But perhaps the assertion is that the odds must be known and free of irregularity.

    • Pennagain

      The most popular of the gambling games today do not “favor” the house, they just pay a fixed percentage to them. In tournaments, the hosting casinos get a split of the entry fees. The main money is in card games like Texas Hold ’em which usually goes to the best players but once in a while a Moneymaker comes along.

      • Alex

        I think that is a good development because the entity running the game is not affected by the outcome, removing an elephant sized conflict of interest from the equation.

  4. Pennagain

    Poker: my not-so-guilty pleasure for over 50 years, though no longer. Watching Phil and the other pros go at it is as much fun as watching a game of bas…uh, never mind.

    Ivey’s total tab is a bit more than the Borgata judgment however. He and his pal, Kelly Sung, were pulling the same stunt at Crockford’s in London for years. Crockford’s caught on first and withheld their winnings — then exchange-rated at $12.7 million, over 2 million less these days due to falling crates. Ivey and Sun sued for their winnings, lost, and are planning to go another appeal higher with the white-wigged judges but Crockford’s may bring them to the negotiating table sooner: not only has the casino put the withholdings back in their cash drawer but they are fining the players. Whatever the outcome, it won’t make much of a dent in the $100 million Ivey has acquired over the years as the third highest of the poker earners … keeping in mind that that includes all the losses as well as his ongoing winnings that continue to add to it.

  5. Slick Willy

    Why is gambling unethical, in and of itself?

    I ask as one who seeks to understand a belief I have heard but never understood. I get that it can be an addiction (like alcohol or smoking) and that it can strongly influence unethical behavior (like drug addiction), but any gambling?

    Where is the line drawn? The Office Playoff brackets? Poker played with chips (no money)? Bingo? Where is it just a game and where is it wrong?

    • Alex

      In my view, and following up on my comment above about organized gambling:
      Gambling is what Jack calls a pre-unethical condition. Once you’re involved in gambling the incentives are to earn a benefit through unethical means. When a regular person gambles their own ethics alarms will usually kick in and prevent outrageous behavior (con men, gambling addicts, your friendly neighborhood loan shark do not count as “regular” for the previous assertion). Once gambling is run by an organization, individual’s ethics alarms are relegated to the wayside and the organizational incentives are to obtain as much as possible; thus my opposition to organized gambling (be it casinos, lotteries, racetracks, sports betting, etc.)
      There might be cases that break this pattern, but I find it a pretty useful heuristic myself. Your weekend poker game with your college pals is ok, organized sport betting for the public good (that is a thing in Mexico, really) is not.

  6. Gambling is not some sort of platonic ideal of probability. If it were, casinos would advertise, “Come and play a game that’s rigged slightly against you so that you might get ahead once in a while, but over the long run you will lose, on average, a small percentage of your money on every bet.”

    Casinos don’t say it out loud (I presume because of regulation), but the lure of gaming comes from the excitement, the lucky streaks, the hot tables, the stories you can tell afterward, the possibility of walking into some of the most famous casinos in the world and walking out with a lot of their money. And casinos want people who have systems, they want people who think they have a trick that will beat the house, they want people who think they’ve noticed a pattern that they can take advantage of, because for the most part, the casino is going to take their money.

    In the case at hand, the casino argued in court that if Ivey and Sun hadn’t done what they did, the casino would have won $5.4 million. Well, what if Ivey and Sun had done exactly what they did and it didn’t work for some reason, would they be able to sue for their $5.4 million back because the casino deceived them about the nature of the cards? Or suppose Ivey and Sun won their $10.1 million at baccarat and then switched to blackjack and promptly lost it all. Could the casino still sue them for $10.1 million, even though it got all the money back? What if we combine these two scenarios so that Ivey and Sun’s observation only worked part of the time, so that they won $10 million on the hands where it worked and lost $10 million on the hands where it didn’t. Since their gains were tainted but their losses were legit, would the casino be able sue them for the net $10 million they should have lost?

    We could easily pick apart those examples and find ways to distinguish the scenarios to apply different rules, but my point is that the possibility of crazy things happening, of massive winning streaks, of noticing something odd, or of finding a way to work the system, is all part of the game. Which is why my gut feeling here (setting aside what may be important contractual issues) is that players should be entitled to take the games as they find them.

    The idea that you can figure out how to win is part of the fantasy. When the casino inadvertently fulfills the fantasy that they’ve been selling, I can’t help but think the players should be allowed to keep their winnings.

    • That’s a strong position and argument, Mark. Of course, we all have biases against the casinos, so its hard to be sure we’re getting clear transmissions from Ethics Central.

      There’s a scene in a TV show or movie—I can’t recall—when a bridge game between neighbors turns into accusations and rancor when they find out that they had been playing with one couple’s son’s marked deck, and that couple won all night. The losing couple accused their hosts of cheating by reading the cards, and the husband of the winning pair admitted that he knew the markings and may have unconsciously been reading some backs. I remember having a discussion with my lousy bridge-player dad in which he said he would immediately flag the use of the marked cards, and doing otherwise was cheating. What if the only one who could read the cards was a member of the team that did not have the card reading son? (Possible, because marked decks are pretty similar). Doesn’t matter, held Dad. The duty is the same.

      Now, a friendly bridge game, isn’t an adversary poker game. But, as usual, I still agree with my Dad, an honesty absolutist.

      • I think it comes down to a question of whether or not everybody can reasonably be assumed to have consented to the same rules of the game. Are the rules exactly as stated in some gaming guideline, where the cards are identical except for the face, or are the real rules slightly more rough-edged?

        I’m thinking, for example, of fouls in basketball. If one player fouls another and the refs don’t see it, are they ethically bound to self-report the foul? (I think a golfer in an analogous situation might be.) Or is that fair play?

        When I was a child I used to play Monopoly, and more than once I got into arguments with adults who weren’t taking the game as seriously as I was over whether or not I had to pay rent for landing on a property if they didn’t notice it right away. The official rules say you don’t have to pay if the owner hasn’t explicitly demanded rent by the time the next two players roll the dice, but some adults acted like I was cheating when I invoked that rule, because they weren’t aware of it.

        So is gambling a strictly by-the-rules game? Or is it more of a jungle? My gut feeling (and I admit it’s no more than that) is that gambling culture makes it the latter. The casinos naturally feel differently, especially when they lose. The same may not be said for a game between friends.

        Interesting post.

        • Golf and tennis both have traditions of players correcting official mistakes and their own as well. The contract issue and “house rules’ confuses the ethics calculations quite a bit. For example, casinos can and do declare card counting as cheating, though it is just skillful playing. But if you agree to play, you have agreed to House rules, and violating them is cheating because you agreed. The “It’s a dumb law/stupid rule” rationalization is just made for these situations.

  7. Neil Dorr

    Jack,
    If my memory serves me correctly (and it often doesn’t), you also consider card-counting cheating as well, yes? Or just unethical? I seem to remember and article on the Scoreboard some years back, but can’t remember the exact context — it may have been as a result of the Kevin Spacey movie about the MIT blackjack team.

    In such a case, the player neither tampers with the cards nor takes advantage of a dealer mistake; rather, they’re just better at calculating odds. What about that crosses the line? I guess the heart of the question is: when does an advantage become unfair?

    The reason I ask is that I’ve always wondered what made it unfair for superheroes to use their powers for personal gain. Arguments could be made in the case of Superman (alien with abilities no other human has) or even Spiderman (gained his abilities through extraordinary circumstances not available to others). But, what about mutants who are otherwise human but born with natural abilities?

    I may be getting into murky territory that might require too much of a response, but any ethical guide you can provide would be helpful? Law and the Multiverse has touched on some of these issues in a legal context, but I’ve always been curious where the ethical line is.

    Anyways, feel free to respond or not at your interest and leisure.

    -Neil

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