Is choosing the outcome of the stock market legal for a business in the U.S.?

Asked almost 2 years ago - Anaheim, CA

Could you have a business in the U.S. which allows you to deposit money and make an investment in a share of stock and pick the outcome? Let me give an example.

I deposit money to the site and each dollar is represented as credits. Facebook stock is at $3/share. I decide to put up $3 for one share. I then choose if the stock will go up or down and the length of time. If I choose it goes up, and it indeed goes up, I win say 70% credits, and if it loses, I lost 85% of my credits toward that share. People could then cash out afterward.

So, would this be legal, or is it online gambling? I live in California. This system would be used online.

Thanks.

Attorney answers (2)

  1. Michael Charles Doland

    Contributor Level 20

    2

    Lawyers agree

    Answered . You could not do it without a securities license and no one would "play" your game when there is a traded "options market" traded on exchanges around the world. In addition it would also be considered gambling, and the fact that you use credits or chips or matchsticks while the game is being played changes nothing.

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more
  2. Robert V Cornish Jr.

    Contributor Level 16

    2

    Lawyers agree

    Answered . Absolutely not legal -- this violates many of the CFTC rules on futures contracts.

    The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client... more

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