Illinois is poised to pass a bill that deals with the definition of gambling in that state, and more to the point, removes the classification of "gambling" from particular activities. The relevant portion of the bill states:
Put simply, they are legalizing certain payouts to a specific new classification of players. The Joystiq article seems to imply that this will legalize all betting as related to video games, but this is not the case. Let's take a look at the Illinois statute.
The new language is an exception to the general rule of what is considered gambling in Illinois. These designations are under subsection (a) of the bill, but include the typical wagering aspects as well as organizing wagering type activities. This exemption is narrowly drawn to allow for payouts in specific circumstances which would generally fall in the organizing section of the restricted activities.
This bill has a few key points in the exemption:
1) Offers prizes, awards, or compensation
2) to actual contestants
3) in a bona fide contest between 2 or more individuals
4) the specific game types allowed
Taking these issues one at a time, the first speaks to a payout exclusively. It does not exempt wagering on the activity. The second requires that the people being paid are contestants. The third requires it be a bona fide contest. And the final describes, generally, video games that involve skill.
Applying this analysis, I will outline what I believe falls on each side of the line.
First, the legal activities are fairly discreet. I imagine it is designed to mostly include events like QuakeCon or Major League Gaming or pay-to-play events. Specifically, a large, organized tournament where the winner takes home the prize, often paid by the entry fee or donations or a combination thereof. On a smaller scale, private tournaments could also qualify, assuming the games are those included in the bill.
This does beg the question, what is a game that involves skill? First person shooters, rhythm games, and even MMORPGs all require skill. The only games which would not qualify are games that are predominantly based on chance, like electronic blackjack or video poker.
On the other hand, the illegal activities are still left to be fairly broad. The restriction that players be actual contestants eliminates any possibility for outsiders to bet on video games. So, I couldn't go put $5 on the outcome of the next big Halo tournament. And the bona fide contest requirement will likely pose a difficulty for anyone who wants to bet on the next, spontaneous round of a game being played at a LAN party.
So, the Illinois bill would essentially legitimize large scale pay-to-play tournaments. If this bill passes, it is good news for anyone planning such an event in Illinois. The bill has yet to be signed by the governor, though, so don't start planning your big pay to play tournament in Chicago just yet.