QUESTION
Is my idea for an online business legal?
Asked on Feb 12th, 2013 on Entertainment Law - California
More details to this question:
My idea involves trying to win prizes with real money, which would be considered illegal online gambling. But any money you spend is returned to you in full. The catch is, the money that is returned to you can only be spent on my site. Surely you will ask me how I could possible profit from this. Well, the money that is returned to them cannot be used to try and win prizes, it must be used to purchase items from a separate section on my site, and these items a marked up considerably. Therefore, no money is actually being gambled. You try to win, but even if you don't you still get to buy something.
3 ANSWERS
If I understand what you are saying correctly, the players are not actually gambling but where is the incentive to play. Since they all get 100 percent of their money to buy goods they are not even exchanging money among themselves, unless the prizes they might win exceed the amount being gambled. In that case, losers have gambled - assuming they are playing games of chance. Net winners have gambled, too, and if the markup is too high, you won't get any players.
Answered on Feb 17th, 2013 at 8:19 PM
Susan Marie Basko
This sounds like a combination of online gambling and consumer fraud. Online gambling is legally restricted. Make an appointment and talk to a lawyer in your state.
Answered on Feb 17th, 2013 at 8:02 PM
I believe it would still be illegal. Because of the mark-up, you are retaining something of value (i.e. the economic value associated with the money). The more important question is whether the game you are taking about is a game of skill (legal) or a game of chance (illegal). Here is a link to an article that describes this distinction.
Answered on Feb 17th, 2013 at 7:47 PM