Could social gaming companies get nailed for illegal gambling?

[The Buzz]

This is an interesting question posed by Eric Eldon in an article from The Venture Beat. Eldon does his homework here and the article is very well-written and insightful. He puts out the facts in simple verse for those who aren't familiar with the UIGEA or online gambling.

He points out that:

Some companies, like Zynga, are rumored to be bringing in revenues of more than $100 million through games like Texas Hold ‘Em poker. This year alone, companies on Facebook’s platform could see $500 million in total revenue, and most of it is in the form of virtual goods purchases and advertising-based offers. Add in MySpace, other social networking sites with developer platforms — and soon, the iPhone — and you can see how big this market already is, and will be.

Eldon goes on to write:

The government has yet to make clear rules defining some forms of gambling in social games, especially when it comes to regulating virtual currencies and games. Until then, entrepreneurs need to be pro-active about not crossing the line, as a former federal prosecutor, a gambling-industry attorney and other legal experts tell me. The market is just that young.

For the complete article, follow this link:

http://venturebeat.com/2009/06/04/co...egal-gambling/

[CityGuard]

Some thoughts:
I do think there is some risk in the way the Facebook Texas Hold'em Poker application is operated, at least when I looked at it some time ago. At the time the application allowed people to purchase poker chips for real money. There was not a formal cashout system through the application, but there was a forum within it that seemed to be primarily used as an informal cashout system, with many offers to buy and sell the chips for real money available in that section. The fact that chips were sold to players for real money with payment going directly to the application operators, and players could earn real money by selling their chips in an overtly-present market within the application certainly seems to make it more of a grey area than if it were purely fake money with no exchange value.

[bbonline]

Some thoughts:
I do think there is some risk in the way the Facebook Texas Hold'em Poker application is operated, at least when I looked at it some time ago. At the time the application allowed people to purchase poker chips for real money. There was not a formal cashout system through the application, but there was a forum within it that seemed to be primarily used as an informal cashout system, with many offers to buy and sell the chips for real money available in that section. The fact that chips were sold to players for real money with payment going directly to the application operators, and players could earn real money by selling their chips in an overtly-present market within the application certainly seems to make it more of a grey area than if it were purely fake money with no exchange value.

^ I know that Facebook was created for online business promotion but the category pertaining to online games like gambling has always been eliminated. Maybe they are just following the US with regards to issue of online gambling for the reason maybe not to take their business down.