How Problems In Texas Poker Rooms Highlight The Need For Gambling Legalization

Written By Steven Schult on June 23, 2022 - Last Updated on June 24, 2022
Texas poker

Over the last few years, the Lone Star State has developed quite a reputation in the poker world. It includes a propensity for bluffing and overall wild action in some high-stakes games.

It’s a trend that was seen nationwide during the poker boom of the 2000s. But in recent years, as strategy evolved, players got better and most poker markets matured. Games typically got tougher and win rates diminished.

For a lot of poker pros, Texas is sort of a modern-day poker gold rush. However, that’s because the game was and technically is still outlawed. Texas poker rooms are operating in a legal grey area.

It’s true that the government’s reluctance to legalize more forms of gambling stunted poker strategy in Texas. It created the soft games that fill the state’s card rooms today.

But recent developments, specifically in the Houston area, highlight legitimate safety concerns for players. These issues would be squashed with legislation that at least specifically legalizes poker, and hopefully more gambling in general.

If gambling is illegal, how do Texas poker rooms operate?

In 2015, Sam Von Kennel opened Texas Card House in Austin in hopes of exploiting a legal loophole. Outside of a handful of tribal casinos, operating any sort of gambling was illegal.

Von Kennel didn’t call his business a poker room or a casino. He called it a social club.

Poker rooms make money by taking a small portion of the pots that are played. It’s called the rake. Under the law, the rake is what separates a legal home game from an illegal gambling operation. Basically, it’s fine to gamble as long as no operation makes a profit off of it.

Von Kennel didn’t take a rake at Texas Card House. Instead, he charged membership fees and allowed rake-free poker games to run inside his club.

It was an experiment. If state officials enforced the law exactly as it was written, he was in the clear.

The establishment didn’t encounter any pushback from law enforcement and the place was a success. What started out as a small, four-table poker room turned into a brand known statewide with four locations.

After Von Kennel paved the way, other entrepreneurs started opening their own clubs as well. Before long, there was a bit of a regional poker boom in Texas.

Poker rooms began appearing, but laws didn’t change

The success of the “social club” model put government officials in a weird situation.

The political appetite for gambling legalization hadn’t changed. In fact, just last year, as efforts to legalize casino gambling in Texas ramped up, Lt. Gov. Dan Patrick told a Lubbock-based radio show that gambling “wouldn’t see the light of day” during that year’s legislative session.

Some lawmakers even tried to take legal action against rooms in their jurisdiction. In 2019, two Houston card rooms were raided by the officers from the Vice Division of the Houston Police Department. They arrested nine owners and managers at Prime Social Club and Post Oak Poker Club on charges of money laundering and criminal activity.

Harris County District Attorney Kim Ogg made it clear that she was no fan of these clubs.

“Poker rooms are illegal in Texas,” said Ogg in a statement. “We are changing the paradigm regarding illegal gambling by moving up the criminal chain and pursuing felony money laundering and engaging in organized crime changes against owners and operators.”

Harris County dropped the charges a few months later, but the move highlights how some Texas politicians view gambling.

Casino companies wanted a piece of the pie, and laws changed

It’s no secret that the country’s largest casino companies want to get into the Texas market. Aside from the state’s massive population, gambling is a part of Texas culture.

Sheldon Adelson
Sheldon Adelson

Old western movies usually include a scene where a bunch of cowboys play poker in a saloon. While that is just a generalization about Hollywood’s depiction of Texas, some of poker’s most iconic players, like Doyle Brunson, got their start playing in illegal, high-stakes Texas games.

But there’s a big difference between the Texas road gamblers of the 1950s and 1960s and modern-day casino giants.

One group is fine settling their gambling disputes at gunpoint. The other would rather deal with a regulatory body. And there won’t be any oversight until the language of the law is changed.

In November 2020, Las Vegas Sands Corp CEO Sheldon Adelson hired eight lobbyists and sent them to Texas in hopes of swaying lawmakers to legalize casino gambling. Even after Adelson passed away a few months later, the company kept up with the lobbying efforts.

Ultimately, those efforts failed, but they will likely pick back up in future sessions. Texas poker players should hope they end up being successful.

The addition of Las Vegas-style casinos will certainly hurt the market for smaller cardrooms like the ones available now. But it will also come with new player protections that just don’t exist right now.

Oversight problems highlighted in Houston

It took a while, but we’ve finally got an understanding of what the poker landscape looks like in Texas. There is fantastic action, but with absolutely zero accountability for the cardrooms.

To be fair, most of the state’s cardrooms have been run well and without problems. However, Houston, which is the state’s largest city in both population and square mileage, has more than its fair share of problems with its poker rooms.

Alleged cheating at Prime Social tournament series

As poker became more popular in Texas, rooms began running tournament series. And as tournament poker became more popular, the fields and prize pools became larger.

Last March, Houston area poker room Prime Social ran a series called the Texas Poker Championship. It ran from March 10-29 and featured 22 events with a combined $4 million in guaranteed prize pools. The series culminated with a $5,300 buy-in no-limit hold’em main event with a $2 million guarantee.

Typically, when an operator runs a tournament series with these guarantees, poker players travel from all over to play. With a ton of players in town, the cash games typically fill up as well. Most of the time, there will be higher stakes available than what typically runs during the rest of the year.

During this particular series, a game of pot-limit Omaha with blinds of $25 and $50 was a regular occurrence. For those who might be new to poker, $25-$50 pot-limit Omaha is a very big game. Players in this game wouldn’t even blink an eye at five-figure swings. They happen quite frequently.

According to poker podcaster Joe Ingram, the game was made up of a handful of high-profile poker pros and some unknown players. Ingram described them as “action players.” In other words, they were weaker and would almost certainly lose money to the pros.

Despite making countless unorthodox plays, the “action players” crushed the game and won tons of cash. Some of the players in the game felt like they weren’t playing in a fair game.

They thought they were being cheated somehow. Even without any substantial evidence, they took their concerns to management.

Shuffle machines were allegedly the cheating source

For the sake of brevity, I’ll spare some of the nitty-gritty details. But eventually, the players concluded that the alleged cheaters somehow hacked or manipulated the shuffle machine.

In most casinos, shuffle machines are commonplace. They ease wear and tear on the dealers’ hands and speed up the game, allowing for more hands per hour.

On the other hand, Prime Social did not typically use these machines. In fact, ownership installed them only at a handful of tables just a few days before the tournament started. One of the tables happened to be in the high-stakes area where this Omaha game took place.

Players in the game demanded the shuffle machines get turned off and dealers hand-shuffle the cards. According to Ingram and a few others with first-hand knowledge of the situation, once the machine was turned off, those players stopped winning and eventually stopped playing.

Clearly, this entire situation is vague and lacks any hard proof that cheating happened. But one of the more interesting developments came immediately following the controversy.

Prime Social hired Justin Hammer as a full-time tournament director in the months following the start of the pandemic. Hammer is a well-respected poker industry professional who previously ran some of the country’s largest events at the Commerce Casino in Los Angeles.

Shortly after the series concluded, Hammer left his position with Prime. He is currently running a summer tournament series in Las Vegas at the MGM Grand.

Ingram said that he spoke to Hammer and that the main reason Hammer left was because of how ownership handled the cheating allegations.

Insolvency at Johnny Chan’s 88 Social Poker Club

Aside from being cheated, poker players’ main concern when they are in a black or grey market game is making sure they get paid.

The most common example of this is what the online poker world called “Black Friday.” In April 2011, the U.S. government seized domain names and assets of the three largest online poker sites in the world. As a result, it was revealed the second-largest operator, Full Tilt Poker, didn’t have enough money on hand to pay back players’ balances.

Johnny Chan
Johnny Chan

Due to the vague wording of the Unlawful Internet Gambling Enforcement Act of 2006, online poker was technically operating in a grey market. The law prohibited banks from processing transactions related to illegal internet gambling but never defined what constituted illegal internet gambling.

About a decade later, poker legend and 10-time World Series of Poker bracelet winner Johnny Chan followed in Full Tilt’s footsteps. But with a Houston poker room.

Chan and a few business partners bought 52 Social and rebranded it Johnny Chan’s 88 Social Poker Club. The room ran relatively smoothly for a few years until Chan canceled a tournament series over fears of missing guarantees. He followed it up by instituting a daily max cash-out of $2,000.

Despite the obvious financial problems, the room still functioned (albeit with the max cash-out policy in place). But when players showed up one morning last December, they found the doors locked and the club emptied.

Chan closed the shop without any warning. Any outstanding chips were essentially worthless plastic. It should be noted that poker players who play regularly will sometimes choose to hold high-denomination chips instead of cash for convenience purposes.

Fortunately for those affected, another group bought the business, reopened the room and honored the old chips.

Multiple bouts of gun violence

The bolded headline is self-explanatory. Throughout the first six months of this year, there have been multiple violent incidents at Houston poker rooms.

In the most recent one last April, there was a shooting at Legends Poker Room. According to reports of the situation, someone who wasn’t actively in a poker game was hovering around the cashier’s cage. Eventually, employees became suspicious and asked the patron to leave.

About 15 minutes later, someone pulled up outside the poker room and fired 20 rounds into it. Thankfully, nobody was injured.

In January, someone attempted an armed robbery at that same location. But Legends’ security guards foiled the plot.

How would legalization solve these problems?

Legalization won’t technically solve all these problems. Rather, by operating in a legal market, oversight will reduce or lessen the likelihood of these events happening again in the future.

The Nevada Gaming Control Board is the longest-standing gambling-related regulatory body in the country. It’s arguably the strictest as well.

But it didn’t stop the infamous Bellagio bandit from successfully robbing a high-stakes craps table. And there have been several cheating scandals with regulatory bodies in place as well.

However, all these problems in Houston happened within the last 18 months. In most regulated markets, this would be about a decade’s worth of issues.

Oversight would’ve almost certainly kept Johnny Chan’s insolvency from hurting players, however. No gaming commission would ever allow that to happen. Regulators know the financial situation of its licensees just as well as the in-house accountants.

A gaming commission would also have procedures in place to make Prime’s shuffle machine scandal nearly impossible. In regulated markets, regulators inspect those machines before the casino uses them.

Under the current landscape, Texas poker will continue to thrive. But it could be so much better than it already is. And Texans deserve an improved product.

Photo by Shutterstock / Fer Gregory
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Steven Schult

Steve Schult is a veteran of the gambling industry with more than a decade of experience covering the space. After earning his journalism degree from Marist College, the New York native began covering high-stakes poker tournaments and the U.S. gambling industry for various outlets. Following stints as a writer for Card Player Media, Bluff Magazine and the World Series of Poker, Schult serves as the Managing Editor for PlayFL and writes about poker for several sites, including PlayTexas.

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