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Of bread and games - is skill gaming for money the next big thing?

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GIGSE 2007 Could skill gaming be the next big forum for online gambling?

One of the hottest topics at the Global Interactive Gaming Summit and Expo (GIGSE) in Montreal this week was the economic potential of wagering on skill gaming. Software and gambling providers alike are looking for new sources of revenue after a year of heavy-handed prosecution on the part of the DOJ, and skill gaming - which is professional, played in public arenas, and attracts 10s of thousands of spectators in Asia - is seen as a viable and potentially legal alternative to traditional casino-style games.

The basic requirements for a game to be considered a "game of chance" for regulatory purposes are three things: a prize, an element of chance, and consideration. Consideration is a legal term of art for the stake a player must put up to play the game; an "element of chance" generally means that chance predominates over skill, since a certain amount of randomness permeates everything we do. The prize, of course, can be anything.

If any one of those three elements can be eliminated, the game is no longer a "game of chance" for legal purposes. Sweepstakes are legal, for example, because no purchase is required, thereby eliminating the consideration element. Skill games are legal because the element of chance is missing; and poker may be played for free online because there is no prize to be won, although anyone who plays knows that it is not the same game without it.

The World Series of Video Games (WSVG) and the Championship Gaming Series (CGS) are already pushing this concept, though in different ways. The World Series of Video Games is more of a prize-based offering, whereas the CGS seeks to create professional regional leagues along the lines of those in South Korea, where players can earn upwards of $200,000 per year and have coaches and training regimens.

The WSVG is sponsored by Intel and CBS, and has teams of players from all over the world competing against each other in round robin and double elimination format for tournament prize money in games like Fight Night Round 3, Quake IV, World of Warcraft and Guitar Hero II. The CGS has modeled itself after the National Football League, with its first player draft scheduled to be televised on Fox on June 12 at the Playboy mansion in LA. Players get a base salary of $30,000, with potential bonuses that could boost compensation to over $100,000. The player scouting combine is already underway.

Of course, for the gamblers out there, things become a bit tricky as these events become more and more similar to actual sporting events; after all, gambling online or over the phone on sporting events is one of the few things everyone agrees is illegal under the Wire Act. No one has ever been quite as sure about whether or not poker is covered, since the internet did not exist in 1961 and nobody played poker over the phone then, either. Would the party poopers at the DOJ class a Fight Night or World of Warcraft tournament as a sport for purposes of the Wire Act? Who can say?

Individuals are allowed to wager with each other in almost every state, and individual competitions between players might be legal, although whether a business would be allowed to profit off of those wagers under the Illegal Gambling Business Statute, even in the form of a subscription service, is not entirely clear. The statute piggybacks on state law, so potential liability could vary considerably.

Although potential pitfalls are out there, it is clear that at least some forms of skill gaming are poised for a major expansion.®

Burke Hansen, attorney at large, heads a San Francisco law office

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