Is my online business idea legal?

[memphistnguy]

i want to start an online business, but im not sure if the premise is entirely legal. The site would operate much like "penny auction" sites, where users buy "bid packs" to then use to bid on prizes (gift certificates to online retailers at $20, $50, and $100 denominations). Users would place bids on the prizes until the total cost of the prize is reached (If 20 users each use 1 bid on a $20 gift certificate prize, this goal would then be reached). Once the initial price is reached, the users have a specific time window in which they can place more bids if they wish. Once the auction time limit is over, the website picks a random bid as the winner. Obviously, a user that has placed five bids has more of a chance at winning than a user that only placed one bid. My question is: is this type of online activity legal in Tennessee? I have done some research on the subject, and it seems that most sites argue that what they are selling is "entertainment shopping", not "gambling".

 

[postdreams77]

That sounds pretty much like a sweepstakes type of thing. People buy "raffle tickets" and enter to "win" the prize. It doesn't sound like shopping. IMHO, as long as sweepstakes or raffles are allowed in TN, then it should be allowed, right?

 

[Michael Wechsler]

Gaming laws vary from state to state and "allowed" doesn't mean you can just do it. In most states you need to register with the state. The problem you have is that a purchase is required to enter and this might make what you're trying to do into an illegal lottery. If people didn't have to buy anything and just had to register to get a chance of winning, that might work. This way I'm not quite sure it will.