If I made this app, is there any way for this to be a legal loophole and not considered gambling, since the players do not put up any capital?

It looks like you have partly defined one of the Exceptions that are written into the Internet Gambling law in 31 U.S. Code ? 5362 Definitions that defines Bet or Wager. Bet or Wager does not include participation in any game or contest in which participants do not stake or risk anything of value other than personal efforts of the participants in playing the game or contest or obtaining access to the Internet; or points or credits that the sponsor of the game or contest provides to participants free of charge and that can be used or redeemed only for participation in games or contests offered by the sponsor. The law also exempts fantasy sports games, but with very specific limitations. The difference between this exception in the law and your proposed game is that your game includes the players eventually cashing out for real money. The law seems to say that the only thing that can be won is the right to play more of the games offered by that sponsor. You may find it is legally easier and financially just as rewarding to design games that do not involve anything that resembles gambling. It seems at least half of Americans are addicted to video games and this number will likely increase as more people have their own screens at ever younger ages. There is a huge market out there for good games.