In an ideal world, we'd have a true gaming league and none of this would be an issue. However, since games are relatively new, no such league has risen to the level of the sports leagues that exist. The league model has many issues, largely with anti-trust, but it doesn't face a gambling issue. The potential gambling issue comes from the typical tournament model that works well for a "new" sport: pay to play.
That's not to say there aren't other models. Free tournaments with donated prizes would likely be governed like giveaways and sweepstakes rather than gambling, and those are legal most everywhere. Pay-to-play charity events with token prizes are governed under an entirely different set of rules, and while more allowable, have to follow those rules to avoid being accidentally labeled gambling. Charity poker tournaments and charity casino nights face a similar problem.
"The American attitude is it's better to be able to bet on something involving skill than on chance."
But it's this pay-to-play model, where the winnings are based on the actual entry fees, that can become problematic. Let's be clear: If there's outside wagering on the tournament, there's no question that's illegal in most places, just like betting on sporting events or horse races. It all has to do with what are considered the three elements of gambling: consideration, chance, and prize. Consideration means you're giving up something of value. Your consideration is for a chance to win a prize. The American attitude toward wagering in this way tends to be: it's better to be able to bet on your own performance (but only that you'll win) than on someone else's performance; and it's better to be able to bet on something involving skill than on chance.
So, this typically comes down to the local opinion on video games. There are very few pure skill games
in the video game arena, as even the concept of random re-spawns can introduce an element of chance. However, by and large video games have more skill elements than they do chance ones. I have yet to see a district draw any lines within the "video game" realm, making tournaments of one game type legal and another not legal, but it's entirely possible.
Again, the first rule is to check with local authorities before hosting a tournament. Depending on the type of tournament you want to hold, different rules may apply. I should also mention that online tournaments can also bring federal law in the US into play, and international law into play if you aren't thoroughly screening the players. Until the point that there's some sort of uniform federal gambling regulation (other than an outright ban), I would use far more caution in organizing an online tournament for a prize than I would with a local one.
However, this isn't always the case. The most analogous sport to professional gaming is, in my mind, golf. In fact, in solo games or team games, it would be pretty easy to create a professional league that mirrors the PGA. (For the unfamiliar, the PGA in a nutshell: each player is an "independent contractor" subject to a series of restrictions, but also eligible for some group benefits, such as the pension fund. Your ability to participate is largely governed by your performance. You either play in or out. Open events allow outsiders to play too, but there is a registration fee. The PGA pays out winners based on its revenues.) The difficulty is a game league has to rise to the level of having enough revenue to support this model. After all, the PGA pays a hefty sum to tournament winners. If someone can find a marketable model for televising gaming matches that draws in viewers, then gaming would certainly graduate to the "major leagues." In fact, it seems to be more of a matter of when than if.
So, what is the downside of tournament violating laws? Well, fines and jail time are the typical result of illegal gambling. It varies from state to state whether the organizers or the organizers and players can be held liable for the activity. If you frequently play in pay-to-play tournaments, it might be in your best interest to check your local laws on player liability for gambling. Ideally, someday someone will make an online resource that simplifies researching this issue in your state, but for now, just play it safe.
Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.
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