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FINDING THE LOOPHOLE
Webpreneur Victor Palmer (26) from College Station, Texas claims he has a business model that enables his Centsports.com website to circumvent US online gambling constraints, and it's interesting enough to have attracted the reportage of Forbes business magazine.
Forbes summarises his model as: "Give people money and let them place any bet they'd like. If they win, they get to keep the spoils; if they lose, give them more money to play with."
In the Palmer concept, the three elements that make online gambling legally risky are avoided - "prize, chance and consideration." Because Centsports.com users don't bet their own cash, no "consideration" is involved, and thus it is legal. Palmer quipped to the Forbes reporter: "Congress assumes if you’re dumb enough to give away money, then go for it."
Each user starts off with 10 cents in his or her account, provided by Centsports. From there, they can bet on any event for which Las Vegas bookmakers set a line. Once users accumulate $20 in winnings - the equivalent of doubling 'their' money eight times - they can cash out a minimum of $10 and receive a check in the mail. Losers risk nothing and are immediately restaked with fresh dimes.
Cashing out is not exactly straight forward. Users compete with each other to snag their winnings from a community pot, with big winners having preference. Users can also earn money by referring friends to Centsports.com for an incentive bonus of 5 percent of any winnings their friends make.
Palmer's main revenues will come not from the gambling action, but from advertisers like Skype, Pizza Hut and the National Basketball Association anxious to connect with Palmer's claimed 200 000 player base, assembled on a miniscule marketing budget that finances the 10 cent player freebies and some touting on YouTube. Unless Palmer speaks with a forked tongue, that player base has doubled every month so far.
The young entrepreneur has apparently done his homework. He graduated from Lubbock Christian University at age 16 with a BSc in math, went on to win a Masters in physics at Texas Tech University and in 2006 achieved a Ph.D. in computer science from Texas A&M.
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