Gambling and Skill
- posted by Jim Leitzel @ 12:24 AM

Day trading on the stock market looks a lot like internet gambling, yet day trading is legal in the US, while internet gambling is in a sort of legal limbo in many states (though the Justice Department thinks that most manifestations of internet gambling are illegal everywhere in the US). Insurance markets also share features with gambling, as do some fantasy sports leagues. Whether or not an activity is deemed to constitute gambling has a profound effect on the regulations that apply to it, or on whether it is legal at all.

Many legal rules that pertain to gambling refer to the role of "chance." For this reason, those who like to think that their gaming is legal frequently go to great pains to point out that theirs is primarily a game of skill, not chance, more like chess than roulette. (Poker players are particularly drawn to this type of argument -- but not universally.) The horse racing simulation that Vice Squad talked about several days ago hosts an FAQ page with four entries; here are the first two, which almost have a protest-too-much air, no?:

Definition of a skill-based game.
A skill-based game is defined as a game where skill predominates over chance in the produced results.

Why we are not a gambling site.
Gambling is generally defined by states as an activity containing the following elements: (1) award of a prize, (2) basis of chance, (3) consideration. If any of these three elements is missing then the activity is not considered gambling. Since this game is skill-based the basis of chance has been eliminated.

Anyway, the reason I am droning on about this issue today is that I received an e-note from a Friend of Vice Squad referring me to this short "news" item about a federal lawsuit claiming that a contest sponsored by the television show "Deal or No Deal" constitutes illegal gambling. The contest is free to play over the web, apparently, but a text message entry costs 99 cents. It does sound as if the text message version meets the three criteria for gambling listed above -- but I am not sure I would have made a federal case out of it. (Nor does it suggest that the plaintiffs will prevail.)

Every now and then I mention that I am not a lawyer and under no circumstances should you rely upon anything on Vice Squad as constituting legal advice or opinion; in fact, you shouldn't rely upon it more generally.

Labels: gambling, litigation, poker