Hi, I am looking to start a website where I can host different kinds of contests and charge a monthly or weekly fee when users register in my site, or charge for an inexpensive product. Is that legal? *I am not charging for the entry of the contest. *Users will win tvs, dvd players, game consoles,ext..
Nope. That is against the law. You can't change people for a chance to win a contest....they call that gambling. If you have a membership site that has a purpose other than that, and you just happen to give away stuff, that is O.K., but if the sole purpose of the site is the fee to be entered into a "givaway" or "giveaway's", then no. You cannot do that. Now your next post is going to be: "But I see others doing it, how do they get away with it, is there some kind of loop hole?" No there is no loop hole, and how do you know they are getting away with it ? How do you know they are not under investigation as we speak ? Then after that, you will rack your brain to come up with a gimmick that will make it legal which will probably be a half effort that any U.S. Attorney could see right through, and get yourself in trouble anyway. You can however enter people for a random drawing with no purchase necessary , but you better know your laws from state to state because it is illegal in a few states to solicit it's residents for such things, and you will need to disqualify those residents on your site. You can also have a give away for customers, people who have previously purchased something, but you cannot charge to be entered into a give away.
It depends though where you are. In North American it is illegal (you have to be licensed in the U.S at least and in Canada big no no, only the government can). So just check if you are allowed locally...
In Asia, it is legal if you host contests and then make it free. When you start charging money for it, it becomes more like gambling for which a license is needed. Just like the contests I am hosting on my site, it is completely free.
You can give away what ever you want. I have contests all the time, i actually have 3 going right now, but you cannot charge for entry into the contest. You can ask for email, registration required, subscribe to RSS feed, join my My Space, Facebook, or any other action that is free. You cannot charge people for entry. That is a lottery and it's illegal. I am in the U.S. so I am stating U.S. law.
A further problem - besides local legal obligations - is that paypal doesn't allow it, so if you were planning to use this payment method, you have a second problem.
Gambling is quite the same as drugs or weapons. You have to be a government to run such business. Why? well..it is obvious- it is too profitable to allow simple mortals to touch it. Lottery issued by government is OK... delmargraphics for President!!!!! =)