So I have a personal experience with this idea. I was living in Finland for the past year and a half, and came across this same idea with a site called fiksuhuuto.fi. I didn't have any moral opposition to the idea, because I believe that its no different than any other sort of lottery or game of chance. Adults should have the right to risk their money for the possibility of reward.

I was working remotely for a company at the time, so gave them 2 months notice and started developing, with the intention of launching a similar company in Canada in 6 months time. I had another Canadian partner, and started looking into all facets of the idea. The site development went fairly straight forward and allowed me the chance to return to web development after 5 years of Mac and Windows application development.

We had contacted the best law firm we could find with experience in gaming and intellectual property. After spending a fairly large sum of money to get a risk assessment, it was clear that the idea was definitely illegal. Because many people were paying for the chance to win a product, it was online gaming and illegal in Canada. We had a few options, none of which were very reassuring.

I am rambling now, but I just wanted to mention that I paid nearly $10K to have this looked into by lawyers, quit my job to implement it, and moved back to Canada from Finland to go ahead with the project. I am stunned that this is being done in the US, and am no going to be surprised at all when it goes bad for them. If it doesn't, then I made the wrong bet of calling it quits.

On a side note, if anyone wants to buy a nearly completed site with the same idea as this, feel free to contact me.