Legal Question in Securities Law in Illinois

Internet Gambling/Safe Port Act

Myself and two others are in the process of writing a web application that allows people to trade nothing (there is no economic product, that is). The basic use case is people buy a number of products or credits from the house for a given amount (let's say each product/credit costs a $1.00, $0.05 of which goes to the house, $0.95 goes to the pot), then buying products is disabled, and trading begins (short selling is not allowed, nor is having negative credits, so it'd be wise for users to buy a mix of credits and products), and ends after a given period of time (let's say 3 months). When trading is complete, the top player is awarded $0.95 for each chip/credit s/he holds (so if s/he holds all the credits/products, s/he would get (everyone's input)($0.95). Lower places get nothing and the excess is returned to the house, if there is a tie for first, the money will be split accordingly. Is this legal throughout the United States and, if not, what can be done to make it legal short of making it free and, whether it is legal or not, what laws may apply. I apologize for what I'm hoping is a difficult question, and understand if nobody is able or wishes to answer, and hope anyone who does answer enjoys the question.


Asked on 7/04/09, 7:15 am

1 Answer from Attorneys
Adam S. Tracy Securities Compliance Group Ltd

Re: Internet Gambling/Safe Port Act

Thank you for your email. I focus my practice on corporate/securities law and also represent some online gaming companies. The basic rule of thumb is that if it is a game of skill, it is not gambling, and therefore regulated. On the other hand, if it is a game of chance, it is gambling and will be regulated. That is the first part of the anlaysis. The second part deals with whether you are trading securities. Generally speaking, a security can be anything that has value or stores value. Based on your description, I do not believe you are creating a security. However, I do not fully understand what you are trying to accomplish. One question: do people get equal value for money they put in?? Feel free to email me on my firm email: [email protected].

Very interest product and question, thanks.

Adam Tracy

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Answered on 7/04/09, 10:36 am


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