I actually think that giving money is probably more of a problem than taking money. If you only take money (but don't give anything of value), then I would think it can be thought of as a subscription or pay to play a game like you would in an arcade game. But if you give prizes based on winning these games, common sense says that someone must be directly or indirectly funding the wagers, bets or chances to win. If advertisers give vouchers that are used as prizes in poker games, they are in essence breathing value into the “free” poker chips and they are not doing this out of charity — one way or the other the player must be contributing something besides their “personal efforts of the participants in playing the game or contest or obtaining access to the Internet” (as cited by from the UIGEA by Andreas), whether that be responding to marketing surveys, viewing served ads, click-throughs, etc. The difference between the site operator acting as a middleman to arrange this “funding” rather than receiving the money from the player directly may be thought of as nothing more than a shell game… I could imagine that players might be persuaded by the chances for seemingly large prizes (the chances probably having values much less than they seem – see pogo discussion above) to do things they might not otherwise do to get their “free” chips. And when prizes are at stake in many of the games, there is an opportunity for cheating especially in the online environment (eg dishonest site operators, collaboration between players). In the end players may indeed be swindled to do things they might not otherwise do by illusory prizes from free poker sites even though they don't put money in. I think that is the idea why the states regulate advertisement sweepstakes.

There are other targets out there for the legal forces. Sites like Pureplay and Spadeclub have a considerably higher risk exposure due to that they take credit cards and allow people to win money.

Before you assume that such large reputable companies are just ignoring the law, you should probably consider that these offerings have been carefully constructed with the advice of sophisticated legal counsel to at least be a good faith attempt to comply with the law. To jump to the conclusion that these companies are ignoring the law so others might as well do whatever they want in this space makes the article and commentary worse than useless: its harmful because it may lead people to do things that they shouldn't. Use common sense – gambling, lotteries, etc are large, profitable, highly regulated industries and entering this space without advice of legal counsel is reckless.

Without competent legal advice, entrepreneurs may modify these models in ways that they think don't matter, but may make a big difference under the law. For example, if they transform a “pogo” like poker game into one where players who win games get 25 dollars cash rather than a chance to win $25 in cash, suddenly users are playing poker for $25 rather than one-hundredth of a penny and this may convert a legal game into an illegal game. And I doubt it would make a difference if it was a valuable prize that was not convertible to cash.

One of the comments suggests that blackjack is being played for cash in worldwinner cash games on msn games. I looked at the site and saw that is not true. They do not offer blackjack but instead there is a new game called catch 21 that they describe as a mix between blackjack and solitaire. The cash games sometime reference well known terms like blackjack and monopoly, but all these games seem to be significantly modified versions of those games to completely remove the chance element so that it is a game of skill. Of course there are all sorts of laws they need to comply with, but looking at the california penal code 337j I referenced in the other post, I think they probably comply with that because (1) none of these games are poker or pai gow which is specifically included in the definition of controlled games, (2) they are not games of chance which is also included in controlled games, and (3) they are not card games … approved by the [california] department of justice. I think that last term probably means that all card games are not regulated (e.g., solitaire) but only those that the dept of justice’s gambling division approves for play in casinos and/or cardrooms (i.e., traditional casino games like blackjack, etc.). If you look at the legal disclaimer, they prohibit players for certain states (and prevent play based on ip address location) because they determined their games are not legal in those states. This model may turn out to have problems, but it looks like a lot of thought and legal analysis went into this model.

Its very different than trying to position classic poker games as games of skill rather than chance and therefore claim it is legal. A gambling law attorney states “I have not been able to find any case law that has ever squarely held poker to be a game of skill free from illegality under applicable state anti-gambling laws.” [http://www.gambling-law-us.com/Articles-Notes/online-poker-skill.htm].

I think pogo is an example of a site that the value of the tokens played for are extemely low and the configuration of the payouts are really like the traditional advertising sweepstakes that have been around for years. I have not actually registered for the site, so may be wrong on the details, but think the general point is right.

I think you are awarded chances to win prizes based on playing time and/or winning a game. You can estimate the value those chances based on the expected payout. For example, there is a $50 drawing each day. If you assume 5000 tickets are entered into the drawing that day, that means each ticket has an expected value of $50.00/5000 = 1 penny when given to the user before the drawing. Each ticket is given for 100 tokens, which are awarded during game play (not sure if based on winning, playing time, or both) but that would suggest each token is worth one-hundredth of a penny when awarded to the user. My guess is that many more than 5000 tickets are entered each day so that the value is much lower. The weekly and monthly prize probably translate into roughly the same expected value since the prize value and the period for entries roughly scales 7 and 30 times bigger than the daily prize. If the token is used to by a ticket that enters someone into the daily, weekly and monthly drawing, that would suggest a token is worth 3-hundredths of a penny and a ticket is worth 3 cents.

Same with the instant spinner jackpots for winning a game. There are instant win jackpots of $5 to $25 and the value of each spin won can be calculated by considering the odds of winning. If pogo configures the jackpot to pay out one each $5, $10, and $25 ($40 total) on average every 4000 “spins”, then the value of a spin won in a game is 1 penny. The chance of winning may be much lower and therefore the value of a spin may be even lower.

Even the progressive prize of $4999 sounds large but it starts at $50 and only goes up $90 per day (0.01 every 10 seconds) until someone wins and then restarts at $50 so the typical payout is probably much smaller. The value of a spin here is probably not much different than the others prizes.

Finally, if you look at the link on prizes at the bottom of the pogo page, you will see there are ways to enter spin jackpots and get tickets for drawings without playing the games. For example, you can send handwritten postcards in to get free tickets (10 per postcard). Given that you can get chances to win without playing (similar to the no purchase necessary that is common for advertising sweepstakes) it becomes hard to argue that the tickets that one earns by game play is worth much more than tickets one can get by spending 2.6 cents each (26 cent postcard for 10 tickets). I doubt many people take them up on this, but it helps the negligible value argument and I suspect is required to comply with sweepstakes laws.

I think your consensus definition of gambling should be more logically connected to value issue you discuss. Your consensus definition seems to suggest that actual money out is required for something to be gambling. I think this flies in teh face of common sense. I would think most people would recognize that if I win a free nontranferable all expense paid trip to hawaii for playing a poker game that that would not avoid gambling laws simply because I could not resell it to convert it to cash.

I would say the laws regarding poker are not as ambiguous as some companies in this space might like. Whereas there may be general laws about gambling, some states may make laws that specifically call out important traditional gambling games like poker to make sure it is covered. For example see california penal code 337(j)(e)(1) [http://law.onecle.com/california/penal/337j.html]. As I read this, it prohibits playing for anything of value (so not limited to actual money out like your consensus definition) and it does not seem to require money in (so may cover sites that give valuable non-money prizes but pay for those prizes through ads rather than cash purchases of chips). Why? in part because these games are important to casinos.

Your statement about poker being allowed under municipal licenses is written in a misleading way. It seems to suggest that its licensed in california because its a game of skill. As you can see from the preamble of ca penal code 337j, it is illegal to carry on such games without required licenses. It comes under the code related to gambling. That said, companies like zynga may avoid liability under this section because they arguably do not give anything of value. But if there is a black market in their chips and they sell these chips for cash directly to their customers, its also arguable that the chips won (not purchased) also have value.

The attorney generals need to manage resources. I think the craigslist prosecution seemed weak, but I think compared to the other advertisers of such services, they probably were one of the most successful (high volume) and egregious (where posters blatantly advertised what was illegal prostitution) such that they were not a bad company to make an example. Same with online gaming. Attorney generals are probably not going to waste their time on a company that is unsuccessful or is very careful not to cross the line, but if they start to be successful and start making impacting the revenues of local cardrooms for example, they may get prosecuted. High profile cases are how AGs get the most bang for the buck because its an example everyone pays attention to so they can effect public behavior.