The laws in the US (generally local or state) are almost always written to criminalize transactions that involve “chance, consideration, and interest”.
“Chance” basically means that the outcome is outside the control of the participants. In Texas, poker is defined as a game of skill, so the outcome is, by definition, not a matter of chance. Most other places don’t take that stance.
“Consideration” means that the parties put up something of value. Another way around these laws is often taken by prediction markets (or casino nights) within a company. The participants might win something, but the initial stake is provided by the sponsor.
“Interest” means that the parties stand to gain something if the outcome is in their favor. If the winnings will go to charity, you aren’t breaking any laws. This is the work-around exploited by Long Bets.
It seems to me that one could make a solid case that prediction markets demonstrate skill, since there is consistency over time of who wins and who loses. A variety of PMs have demonstrated that there are super-predictors who have a consistent ability to do well. The issue is that the laws are written and enforced locally, so there’s no one to go to to get a blanket ruling that you won’t be prosecuted. If you offer PM services throughout the US, then every local prosecutor who thinks the publicity will help her in the next election can take you to court, and you have to win all the cases in order to not lose your shirt.
If everyone involved donates a consistent amount to charity every year (eg 10% of income), the loser could donate their losses to charity, and the winner could count that against their own charitable giving for the year, ending up with more money even though the loser didn’t directly pay the winner.
Hard to test, as these laws are so spottily enforced anyway, but I’d suspect that if this mechanism were formalized and enforceable, courts would find the monetary value being wagered to be just as prohibited as actual money.
The laws in the US (generally local or state) are almost always written to criminalize transactions that involve “chance, consideration, and interest”.
“Chance” basically means that the outcome is outside the control of the participants. In Texas, poker is defined as a game of skill, so the outcome is, by definition, not a matter of chance. Most other places don’t take that stance.
“Consideration” means that the parties put up something of value. Another way around these laws is often taken by prediction markets (or casino nights) within a company. The participants might win something, but the initial stake is provided by the sponsor.
“Interest” means that the parties stand to gain something if the outcome is in their favor. If the winnings will go to charity, you aren’t breaking any laws. This is the work-around exploited by Long Bets.
It seems to me that one could make a solid case that prediction markets demonstrate skill, since there is consistency over time of who wins and who loses. A variety of PMs have demonstrated that there are super-predictors who have a consistent ability to do well. The issue is that the laws are written and enforced locally, so there’s no one to go to to get a blanket ruling that you won’t be prosecuted. If you offer PM services throughout the US, then every local prosecutor who thinks the publicity will help her in the next election can take you to court, and you have to win all the cases in order to not lose your shirt.
If everyone involved donates a consistent amount to charity every year (eg 10% of income), the loser could donate their losses to charity, and the winner could count that against their own charitable giving for the year, ending up with more money even though the loser didn’t directly pay the winner.
Hard to test, as these laws are so spottily enforced anyway, but I’d suspect that if this mechanism were formalized and enforceable, courts would find the monetary value being wagered to be just as prohibited as actual money.