It seems all but certain that online poker will not be legislated at a federal level before states begin negotiating online poker compacts.  There are a number of potential issues that need to be addressed before states can agree to share player pools.

Rake Allocation Formulas

The most important issue facing potential Interstate poker compacts is how to allocate rake.  There are five formulas that have been used in online poker to determine how rake is distributed to players.  This distribution is important in terms of taxes and player promotions.

Dealt – The dealt rake method was once used by most online poker rooms.  The formula is rake divided by the number of players dealt into a hand.  Each player dealt cards receives the same amount of rake regardless of whether they contributed to the pot.

This formula has been abandoned by all offshore online poker rooms with the exception of Revolution Gaming.  It was thought this formula attracted too many players that abused the system by receiving rake back or clearing bonuses without giving any action.

Ultimate Poker, the only regulated U.S. facing online poker room, uses this formula to determine bonus clear rates.  GamesGrid once used this software and also used the dealt method to determine rake back and bonus requirements.  The software may be capable of other rake formulas, but this could require testing for approval, which does not appear to be a part of the original launch.

Weighted Contributed – This formula attributes rake by determining what percentage of the pot a player contributed and dividing the rake taken by that amount.  This is the most common formula used today by online poker rooms.

Average Contributed –This formula distributes rake equally among all players that put any money in the pot.  This means that a small blind that folds pre-flop will receive the same amount of rake consideration that a player that reached the showdown receives.

Winner Takes All – The player that wins the pot is credited with all rake taken when this method is used.  High Pulse Poker, which has since failed, is the only online poker room that ever used this method.

Recreational Player Model – The recreational player model rates players based on their previous win totals.  Stronger players receive less rake credit than weaker players seated at the same table.  This is an advanced model currently used on the networks of BoDog and OnGame.  It seems very unlikely this method could be used in an already confusing regulated U.S. market.

Clearinghouse

Money that is lost and won with each hand must be held in a clearinghouse until sessions have ended. Online poker compacts typically settle up at the end of the month, but sometimes these are settled daily or weekly.  There are multiple issues that must be considered when poker players across state lines win or lose.

These include the frequency of payments, as well as how the interest on these accounts will be distributed to participating states.  It must be determined whether the online poker room or the state will receive the interest on this money that is held in what is certain to be a segregated account.

This story about online poker compacts originally appeared at Legal Poker Sites.