Staking a friend

[Kips Bay Kid]

What are fair terms for both parties in terms of %'s.

Consider these two different options:

Option 1 where the player takes on no risk, meaning if I give him X dollars and he loses the full X dollars he is not responsible for paying back any of it. What percentage of profit should I allow him to keep?

Option 2 where the player is liable for losses he incurs. What percentage of losses should the player be responsible for repaying and what percentage of profits should the player be allowed to keep in profit?

If there are any good articles or discussions that have already taken place on this subject I would be happy to read them.

[Kips Bay Kid]

Ok this forum seems more appropriate.

Assuming Option 1 is the only set of terms he will agree to, he is a winning player but he does not want to or cannot assume liability for losses.

I am thinking 75/25 - I get 75% of the profits, he gets 25% of the profits, I take 100% of the losses.

Does it make any sense to change terms once a threshold is met?

For example -

I stake him $5k - this is for online cash games.

When he is able to pay back the initial investment to me in profit, meaning he turns a $6666.67 profit making my cut $5k then we change the arrangement to a 60/40 split, and then when he turns an additional $8,333.33 in profit then we set the terms to a 50/50 split? Let's say we stop the staking if he is able to run that up to an additional $10k giving me another $5k in profit and then have my initial $5k investment returned.

In summary, assuming he never goes negative (ideal world):

I stake him $5k
After he makes a $6,666.67 profit (at 75/25 terms), I take $5k out and he takes out $1,666.67.
After he makes an additional $8,333.33 profit (at 60/40 terms), I take $5k out and he takes out $3,333.33.
After he makes an additional $10,000.00 profit (at 50/50 terms), I take $5k out and he takes out $5k.
Staking ends and he sends the initial $5k back to me.

I might want to make this more granular, just not sure how these agreements are usually capped. Any advice?

[Wongboy]

Fair for you will depend on how good he is. You need a return equal to what you could get on an investment with similar risk. If he is a winning player and he agrees to only play games where he is properly bankrolled (which reduces risk), then you wil need a fairly small return. Look at your other options for investing this money, and if you can get a better return for the same amount of risk, then the deal is not fair. Once you have reached that point, the deal is fair. For example, if a similar investment would return 1% a day (365% per year), and your friend plays 10 hours a day with an EV of $40 per hour, then a fair return on your $5K would be $5 per hour, or 12.5% of winnings (EV).

For your friend, a fair arrangement is one where he will make the same amount as he would make by doing a job that he enjoys as much as he enjoys playing poker. This will have to be increased by a risk factor since he could do the work and get no pay (if he loses). If he could average $20 an hour selling cars (assume no draw), and he likes selling cars as much as he likes playing poker, then a fair deal for him would be one where he averages $20 for every hour played. If he is playing with an EV of $40 an hour, then a fair split for him would be 50% of winnings.

Ideally, the fair return for each of you will still leave some unclaimed money. Divide that equally, or however you wish.

[InVogue]

option 2 seems more like borrowing money as a possible investment if it goes right, and is not staking IMO 70 30 seems fair