Fledgling Poker Room Offers Players Equity Stake

Anyone crazy enough to try to start their own online poker room this late in the game had better have a strong hook. Lucan Toh, CEO of this week’s online poker newborn, PokerShare.com believes that giving players an actual piece of the company is just that hook.

"There is a big expense in getting players to your site, but the bigger expense is keeping them there," he said. "In the economics of online poker, you either had to be in at the start or be a little bit clever."

Regardless of whether or not you think PokerShare.com’s idea is clever, it is definitely different. 60% of the firm is owned by partners and principals, with the other 40% held by a trust based in Gibraltar, where the poker room is located. This trust will hold “share points” that players earn and then distribute a dividend each quarter to them, based on the company’s profit. The dividends do not come with voting or other management-related rights.

Players can never lose their share points, but they must play each quarter in order to be eligible for that period’s dividend. Fortunately, PokerShare.com is not strict in that regard, as single hand is enough to remain eligible.

If PokerShare.com ever goes public, which Toh says it intends to do within twelve months, players will also receive shares of the company.

And even though Toh does not feel that PokerShare.com will have a positive cash flow for three months, the poker room will not leave customers dividend-hungry. The firm will immediately put one million into the dividend pool, which it will make back as play increases.

While U.S. citizens have not been able to purchase shares in companies like PartyGaming that have gone public on the London Stock Exchange because of U.S. legal issues, PokerShare.com will offer all the normal perks to U.S. players, as well as players all over the world. The problem is, once U.S. players do own shares in the company, could they be in violation of the law?

Anthony Cabot, an attorney at Lewis & Roca, a Las Vegas law firm which specializes in electronic gambling, believes this issue could arise. He said that the Illegal Gambling Business Act does provide penalties for those who own shares in a publicly traded, foreign company that does business which is in breach of U.S. law. On the bright side, PokerShare.com players may hold such an insignificant number of shares that they would not be bothered.

“…as far as I know, it (the aforementioned statute) has never been applied to a person who holds an interest in a public company or a fractional or marginal share of a private company."

PokerShare.com already has plenty of full tables, as it is running on Ultimate Bet's poker platform.

Originally published August 17, 2005