Whether or not penny auctions are gambling has been a question of much controversy. To date penny auctions have not been regulated or formerly considered to fall under the same category.
Well-known gambling lawyer, Anthony Cabot of Las Vegas law firm of Lewis and Roca to the NY Times stated “Lotteries are games of chance, and an auction does not have what you would call any systematic chance, a random event that determines the winner.”
The UK Gambling Commission, as of March of 2011, still does not consider penny auctions to be gambling. However, they did say that they’d be keeping a close eye on their developments.
Tony Northcott of the Trading Standards Institute believes some people may spend more than they realize on bids.
“My concern about these online penny auction sites is that people will bid for goods and not realise at the end of the day they may spend quite a large amount of money,” he said.
The Gambling Commission said it could not comment on individual sites and was not convinced that penny auctions amounted to gambling. -Originally posted June 2009.
Originally posted on the UK Gambling Commission’s website:
“Do I need a licence to run a penny auction website?
You can run a penny auction website without a licence from the Gambling Commission. We do not consider such sites amount to the provision of facilities for gambling under the Gambling Act 2005.
However, as penny auction sites continue to evolve, we will continue to monitor the way in which they operate to ensure those providing facilities to gamble are properly licensed to do so.
You should take specialist legal advice before proceeding to ensure you are acting within the law.”
What about lowest unique bid auctions?
“Can I run a reverse auction without a licence?
You can run a reverse auction without a licence from the Gambling Commission, as long as it qualifies as a prize competition rather than a lottery. The Gambling Act 2005 requires the outcome of a prize competition to rely on skill, knowledge or judgement, rather than chance.” -See also Lowest Unique Bid ”Reverse” Auctions
Last year Italy declared lowest unique bid sites to be illegal and shut them down.
If you’re looking to run a penny auction make sure you find out the laws for your state/country.
There are many critics of the space who believe penny auctions should fall under the category of illegal gambling due to the thoughts that it’s a game of chance, yet others argue that their is skill involved. I personally think that there can be some level of skill exercised, but who can say that penny auctions are really predictable and that you will really win?
Perhaps, if bidding against real consumers who are not privy to inside information it can be argued that you will win, you just might not get a good deal. You may even end up thousands in the hole.
Here in the US government agencies have just recently started to take in interest in online penny auctions due to the sheer number of consumers that have been ripped off by them.
There are still dozens of penny auction who have been inflating prices and bidding against paying consumers. Many of these, and other sites, still haven’t shipped items out.
Plus, there are still penny auction sites who run fake consumer review sites, for i.e.: Bidstick.com now a PennyAuctionInvestigator.com
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