Playhem Brings Gambling to Online Gaming (Sort Of)

All forms of online gambling are illegal in the U.S., but there’s a small loophole: If you are wagering on yourself in a game of skill, it’s completely fair game.

That’s where Playhem enters the picture.

This week, New York-based start-up Playhem officially launched its gaming platform, which allows friends to compete against each other for cash or prizes or compete in tournament-style games.

In recent months, the federal government has cracked down on several foreign companies operating online gambling sites in the U.S. But Playhem co-founder Ryan DeSanto says what Playhem is doing is legal, except in about a dozen states, including Arkansas, Iowa, Maryland, South Carolina, Illinois and Vermont.

He says you purchase credits, you wager them, and then you can redeem them for cash and prizes.

While technically they could wager cash, he said, “We removed wagering with dollars because people are used to dealing with virtual currency and people like that more. It’s a softer entry point as well with our partners, publishers and media companies.”

The site went into beta in February, but is now live, allowing anyone to sign up and compete.

So far, it is allowing people to play console games, like Tiger Woods, FIFA or Madden, or online games, like StarCraft.

DeSanto compares it to Fantasy Football, except with videogames. “We sat down to build this so groups of friends can compete with each other,” he said. “I have friends across the country, and this is safe, secure and it’s actually legal.”

In the states where it’s not legal, people can still play — just not for cash.

In addition to catering to the guys on the living room couch, Playhem is also leveraging the platform it built for tournament-style games played by professional videogame players (Yes, they are real).

It has partnered with IGN Entertainment, a media company, and Caesars Entertainment, to help bring pro leagues to Caesars casinos. Playhem will manage the qualifying rounds that will be played online ahead of a tournament to take place in Atlantic City in October.

Playhem competes head-on against Major League Gaming, a professional video game league, as well as Virgin Gaming. As you might guess by the name, Virgin Gaming is backed by Richard Branson. It too facilitates professional tournaments or just friends playing for money. Virgin Gaming has a partnership with EA’s sports division.

Playhem is financially backed by angel investors and is currently seeking a first round of funding.

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