Saturday, February 26, 2011

Penny Auctions are Gambling, says South Africa

There was a recent stir about the legalities of penny auctions in the United States. They are perfectly legal in Europe that has much leaner laws on gambling. However, this question was raised when a class action lawsuit was filed against Quibids.

Now, South Africa seems to have classified penny auctions as gambling. The news report can be found here. Smokoo seems like the most famous penny auction in South Africa, along with sites like Bidchaser, Kooldeals, Viaziz etc. So now, Smokoo is illegal in South Africa.

The officials say that "(penny auctions are)similar to gambling and can be regulated under gambling regulations". Even though online betting is legal in South Africa, interactive gambling is not. So this would mean that these sites will have to shut shop. As of today, the sites are still running but I suspect it won't be long.

I am not sure whether this ruling will have any influence on the Quibids lawsuit at all. In any case, since it is a first against a major penny auction, it is likely to influence how the industry progresses in the United States. By all counts, Quibids is much larger than Smokoo. Perhaps they can find a ruling in their favor owing to their size, I don't know.

What are your thoughts on this?


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