Yesterday morning, a Hartford, Connecticut community watchdog website posted an article titled: Bidcactus Sued In Hartford On Claims Its An Illegal Gambling Site [Click to view entire article.]

George Gombossy, the author of the article, states that:

"Westport is the home of one of the largest penny auction sites – Bidcactus – which was sued recently on claims that the site is nothing more than illegal gambling.

Bidcastus [sic], along with Oklahoma headquartered QuiBids, have been targeted by a Texas law firm for possible class action lawsuits, seeking millions of dollars in damages, legal fees and to force the companies to clearly state on their site that its gambling not an auction.

Bidcastus [sic] said it denies the claims in the Hartford Superior Court suit and will defend itself against the charges. QuiBids is also defending itself saying it is doing nothing improper. It has sought to dismiss the lawsuit."

Here at PennyBurners, we have talked ad nauseum on the subject of penny auctions being considered illegal gambling. We unequivocally disagree with the premise that they are. Gambling is legally defined in most states as playing in, or wagering, betting, staking, or pooling money on contests which may involve some skill, but is based mostly on chance, and includes lotteries as well.

Why are penny auction bids not considered wagers, bets, stakes, or pools? The penny auction bids spent, and their value, are not being wagered, bet, staked, or pooled cumulatively for the purposes of winning the sum total therein. These are merely the price for playing the game. Legally, bids are defined as a participation fee. These are allowed, by law, as other games of "American Tradition" such as horse shoe tournaments, basketball games, or hole-in-one events -- all have prizes and entrance/participation fees, and were ruled not to be gambling by varying courts.

[See: Penny Auctions Not Deemed Gambling By UK Gambling Commission]

Why are penny auctions not considered gambling?*

• By definition, a lottery or gambling event must result in the winner being awarded a prize. This is not the case with penny auctions, as winners of penny auctions must pay for the item being auctioned, not unlike any other traditional auction.
• The per-bid fees are no different than other entrance fees in traditional auctions, or other American Traditions which courts have ruled are not gambling.
• Penny auctions employ no strategies to ensure the odds are in the "house's" favor. All strategies are employed solely by the participants of the auctions, where users with more skill and experience have a historical and demonstrable advantage over new players.
• Penny auction bids are not wagers to begin with, but this case is made even more strong when penny auction sites employ a "buy it now" system. This nullifies any argument that penny auction bids are "bets" or "wagers," as such items become worthless upon losing.
• Penny auctions do not have a "random" or "element" of chance that is beyond the player's control. If a new bidder comes in and places a bid, the current players can out bid them.
• Chance, luck, or random events are not what end a penny auction, nor cause someone to win.
• Penny auction players who are more experienced and more skilled win much more frequently. You may practice rolling dice, picking lottery numbers, or playing slot machines for your whole life, and not develop any predictive utility from your time spent doing so.
• By definition, a lottery or gambling event must result in the winner being awarded a prize. This is not the case with penny auctions, as winners of penny auctions must pay for the item being auctioned, not unlike any other traditional auction.

We do not believe Mr. Mendelsohn has a real case against BidCactus and believe that, given the facts above, the presiding judge will dismiss this case. Penny auctions are not gambling, and BidCactus is not responsible for a bidder's lack of financial discretion.

If you are a consumer who is interested in a foray into the penny auction industry, the PennyBurners Team recommends that you do your research first. Penny auctions are fun and entertaining, and if played right, even rewarding. You just have to know what to look for, and you have to play smart. If you have questions or need help, please join the PennyBurners Penny Auction Forum. We have thousands of members, both bidders and site owners, who are ready and willing to help you with penny auction tips and bidding strategies.

*Other references:
Are Penny Auctions Gambling?
Are Penny Auctions Scams?