Surely this is illegal in the US. First you’re acting like a bank by taking deposits and paying interest, and probably you have to actually be a bank to do that; second you’re setting yourself up as a bookmaker.
This may be mostly an issue of terminology. Treat the upfront payment as a fee for the service and then there’s a contest with prizes. It’s not gambling for the same reason it’s not gambling when you pay an entry fee for a race with cash prizes.
Laws and regulations do not care what terminology you use, and many countries have extensive regulations on gambling and gambling web sites. If a technicality caused your site to be misclassified as gambling, then that would be the end of your site. And if you don’t have a limited liability corporate shield around the site, it would also be the end of your personal finances. Unless you’re really certain that you know what you’re doing, you should consult a lawyer before proceeding.
The magic word here is “escrow”. This is an escrow service, not betting or a bank. Alternatively, it might be considered a bonding service. Either way, though, it definitely needs competent legal advice and appropriate licensing for the jurisdictions you operate it in.
Surely this is illegal in the US. First you’re acting like a bank by taking deposits and paying interest, and probably you have to actually be a bank to do that; second you’re setting yourself up as a bookmaker.
This may be mostly an issue of terminology. Treat the upfront payment as a fee for the service and then there’s a contest with prizes. It’s not gambling for the same reason it’s not gambling when you pay an entry fee for a race with cash prizes.
Laws and regulations do not care what terminology you use, and many countries have extensive regulations on gambling and gambling web sites. If a technicality caused your site to be misclassified as gambling, then that would be the end of your site. And if you don’t have a limited liability corporate shield around the site, it would also be the end of your personal finances. Unless you’re really certain that you know what you’re doing, you should consult a lawyer before proceeding.
The magic word here is “escrow”. This is an escrow service, not betting or a bank. Alternatively, it might be considered a bonding service. Either way, though, it definitely needs competent legal advice and appropriate licensing for the jurisdictions you operate it in.