How Phil Ivey Beat (Or Maybe Cheated) A Casino For Millions

Over the weekend, a story about Phil Ivey, the best poker player in the world, made its way around the Internet. He's being sued by the Borgata casino in federal court for cheating at a version of baccarat using a method known as "edge sorting." All told, Ivey took the casino for close to $10 million. Here's how he did it.

This is an old story, surfacing now only because the Borgata finally filed suit. Ivey is actually involved in an almost identical case with the UK-based Crockfords Casino, also from 2012, but in that case, Ivey is suing the Crockfords for about $12 million in winnings, after it returned his original $1 million stake, but refused to pay him his winnings. We'll get to that, but for now, let's focus on how Ivey took down the house.

What is edge sorting?

Simply put, edge sorting is exploiting defects in the ways playing cards are designed and cut. Look at the cards below:

How Phil Ivey Beat (Or Maybe Cheated) A Casino For Millions

Image from A.P. Heat

The cards are supposed to cut off the pattern so that each edge of the card is identical to its opposite. However, these cards, manufactured by Gemaco, featured a defect that meant if you turned some cards around, and left the others the way they were originally, never shuffling them so that the edges were all mixed up, you could identify flipped cards from non-flipped. This is possible because in casinos, you're generally dealing with pre-shuffled decks, and if a shuffling machine is used, the vertical orientation of the cards will never change. And so, Ivey and his partner asked that the "good" cards for baccarat be flipped.

Here's the scene from Grantland's rundown of Ivey's other edge sorting incident:

The previous night he and his unnamed companion, a Chinese woman from Las Vegas, started with a million-pound stake and played punto banco in a private room until they lost a half million pounds. They asked to raise the stakes, from 50,000 pounds per hand to 150,000. The club agreed. Soon Ivey and company were up almost two million. They agreed to come back and play again the next night only if the club agreed to keep the exact same cards for them to use. "Superstition," the mysterious woman explained. Crockfords agreed.

The next night when Ivey and his friend returned to play, the woman insisted that the dealers turn certain cards 180 degrees before putting them into the shoe to deal. Again, Ivey is superstitious, she explained. He also happened to be a very good tipper. The club again agreed to the unusual request. A few hours later, Ivey and his partner had won more than seven million pounds.

There are a few forces at work here. First, casinos bend over backwards to accommodate peculiar superstitions by big time gamblers—especially at table games in which the house has the edge—and Ivey is one of the biggest gamblers who's going to walk through your doors.

On the other hand, come on, guys. In the Borgata incident, Ivey's partner, identified as Cheng Yin Sun, allegedly requested a Chinese dealer so that she could make her requests in Mandarin. But still, this is a well known method of cheating, and as soon as a player begins making requests like this, a lot of bosses would, without being rude, try to eyeball if they're getting an advantage from something like edge sorting. This apparently never happened, even as Ivey returned multiple times over several months during 2012.

How does this work, and how much of an advantage is this?

There are any number of ways to cheat in any number of games if you can identify a card before it's turned over. For the version of baccarat Ivey was playing, punto banco, you're betting whether the "player" or "banker" hand will get closer to a value of 9. So want to know when a 6, 7, 8, or 9 is coming. If you can know that, you can know how you should play each hand. And because you can bet on either hand that's been dealt, you can get an edge on every single hand, averaging 20.928 percent across all scenarios, as you can see from the following two tables by Eliot Jacobson, who runs A.P. Heat:

How Phil Ivey Beat (Or Maybe Cheated) A Casino For Millions

From there, you just follow these simple betting rules:

How Phil Ivey Beat (Or Maybe Cheated) A Casino For Millions

There are a few more intricacies to this, and presumably a lot of game theory on how to bet to avoid detection, since betting optimally in too many cases will be obvious, but these are the fundamentals of what Ivey was up to. For a fuller rundown of edge sorting in baccarat, read the A.P. Heat explainer.

OK, that's a good racket. But is it illegal?

It probably isn't! And remember, Ivey readily admits that he made these plays. But that's also not the point. The Borgata alleges that Ivey's play was against its own rules, by which it agrees to pay and honor bets made. This is a subtle difference, and there doesn't seem to be much precedent for the case. The key difference in this case and Ivey's against the Crockfords is that the Borgata paid Ivey out, and is trying to recoup that money now, while the Crockfords is a more traditional situation, where Ivey was caught while he was playing, and though he was given a receipt for his winnings, he was not paid.

The case against Gemaco, which the Borgata is also suing, is probably a little tighter, since that's just plain negligence. It does speak to the top-level supply chain security protocols generally in place throughout casino business, though, that a single defect from a single company could be noticed by a few players, and then tracked down to a few casinos where the cards were in play.

The lesson, if there is one, seems to be that a sure thing is hard to pass up, even if you're the baddest-ass poker player in the world.