I ask because I am planning a Start up where I intend to charge users to use my website. They can buy credit and gamble with each other. I understand players will not be exchanging money; so its not gambling ; but still .. They are paying to gamble. How do these companies stay legal ? Will mine stay legal ?
This is in response to myk 's post about zynga's ensuring there isn't a way for players to sell their chips on the open market. That is inaccurate. There are countless websites that sell zynga Poler virtual chips and at lower prices than that offered by zynga. Not only that but they also buy chips so a player who wins big can sell his winnings on the open market and collect real money in exchange for the chips. There people in Indonesia, singapore, Israel, Mexico, and yes the US who make a living by selling zynga virtual poker chips on the black market and some on the open market . But zynga still claims they are not a gambling site. Well I beg to differ. Zynga is well aware of this frenzy surrounding its chips abs knows that they are brig sold outside of the game on websites such as mom'schips.com; chipmunks poker.com, chipspal, pokerchipswinner.com, just to name a few. And yes, this is gambling and because it goes on unregulated, unsupervised and uncontrollred unlike all other gaming activities in the US, zynga's crimes are more serious than not having a gambling operations license. They are guilty of embezzlement, fraud, conversion, etc . They operate according to their own internal desires without being checked out or even questioned abjure how they have ruined so many lives of all those people addicted to their poker game.
At least in the US, recently there has been some major crackdowns on online poker. So you have to be very careful about what kind of business you are trying to start. But, there are legal subscription based websites. I have never actually used them, but I think they offer a bunch of free tournaments with some kind of cash prize for the people who win. This I believe is legal (I'm not a lawyer) because people are essentially paying a fixed price per month to use your service rather than being able to use the exact amount they added on the site to gamble with.
As an example, ClubWPT.com, says that they are not a gambling site, rather they are a members only sweepstakes. There are some limitations though as to which states allow it and which states don't.
Also, online gambling is legal in a lot of other countries other than the United States, so it still may be a viable business idea.
Not sure I understand, your users will pay you to buy "virtual credits", and will gamble with those virtual credits? and this is not gambling?
if they lose, they have to pay you more real money to buy more virtual credits, and what happens if they win then? how will get their winnings if you're not "exchanging real money" and this is "not gambling"? are you saying your system just takes money from people, allow them to gamble with it converted to virtual credits and never letting them collect winnings? this may be legal, but why on earth would someone pay you for that? If one can collect his virtual winnings in real cash, this is gambling.
so, as I see it, and please correct me if I am missing the point of your website, you're stuck between a product no one may want and a product that's illegal in many places.
Regarding how "others" do it -- they set up shop in some island where gambling is legal, and they spend their lifetime fighting with credit card companies that continue to sabotage their efforts to collect money from users. It's not an easy life for those companies.
Playing on Zynga poker is not gambling because Zynga poker chips are valueless. Zynga themselves go to great lengths to ensure that there is no way for players to sell their chips (on ebay etc.), since it would make their business illegal. "Chips" in Zynga poker are viewed in the same way that coins on Mafia Wars etc. are - just a worthless, one-way, digital consumable. It's similar to playing for bottle caps. So, if you wanted to copy Zynga's business model exactly, that would be fine.
Having said that, any business idea to do with gambling (or anything else treading the fine line of the law) would need to be discussed in detail with a good lawyer. You don't want to get fined / go to prison on a technicality.