Skillz brings real-money gaming to the U.S.

Real-money gaming is now reality in the U.S. with Skillz, a first-of-its-kind multiplayer tournament platform, which gives players the chance to compete for real money and virtual currency in mobile games of skill. The platform launched today in beta for Android.

“We’re bringing real-money gaming to the U.S. right now, and we’re the first people to do that,” Andrew Paradise, co-founder and CEO of Skillz, tells Inside Mobile Apps.

Skillz enables games of skill to be played in cash tournaments in 36 states — such as California, New York, Texas and more — as well as virtual currency tournaments in any game worldwide. All a mobile developer has to do to enable cash and free multiplayer tournaments is integrate Skillz’s SDK, which can be implemented in as short as an hour to three work days.

Skillz has come out of stealth with 10 developers with 10 games on board, including Gnarly Games with GnarBike Trials, Spooky House Studios with Bubble Explode, Rocketmind with Big Sport Fishing 3D Lite and more. The first batch of titles run the gamut genre-wise, with genres like endless runners, bubble shooters, mini golf and more.

The obvious question to ask is how did Skillz make real-money gaming legal in the U.S.? The easiest answer is that real-money gaming via a skills competition has been legal for years in most states. First, it’s important to define the difference between a skill versus a chance game. On one end of the spectrum is a skill game like chess and on the other end is a chance game like roulette. The legal definition of a skilled game is if a skilled player predominantly beats an unskilled player about 75 percent of the time. Examples of games of skill where a cash competition is legal include chess tournaments, running marathons, golf tournaments, fishing tournaments, esports tournaments for games like StarCraft 2 and Call of Duty, even the arcade game Golden Tee, and more.

“One of the things we created is a way to statistically verify the level of skill versus chance in a game, and so one of the things we do is plug in these virtual currency tournaments into a given game and then we’ll run virtual currency tournaments and gather data,” Paradise says. “Basically, we can look at how often skilled players beat unskilled players and then determine if a game is skill versus chance.”

Real-money gaming, in the form of gambling, is still illegal in the U.S., and most experts believe it won’t be legal in any significant fashion for at least another 18 to 24 months. With that said, top mobile game publishers such as Zynga, Digital Chocolate, and more, have been trying its hand at real-money gaming with casino games in countries where real-money gaming is legal like the U.K.

One thing to make skill-based games remain fair, Skillz replaced any randomness to a game by holding a particular level that does have random elements by keeping the level constant across multiple users playing in the same game and corresponding tournament. For example, in Imangi Studios’ Temple Run (note that it doesn’t have Skillz integration), obstacles and coin placements are randomly generated in levels.

“The thing that we’ve done that’s really different is we’re the first people to bring this both to mobile and to turn it into an SDK,” Paradise says.

It should be made clear that there’s no wagering in the tournaments. Users are staking money on themselves via an entry fee, relying on their skills to win a cash prize — not by winning through chance.

First-time users create an account in a Skillz-integrated game, fund their account, and then they are now good to go. Users can tap an Add Cash button, which takes the user to a deposit screen where they can add funds to their account from either a Visa debit card or PayPal account. Right now, tournament entry fees range from $0.25 to $5, with prizes going as high as $20 in an unlimited entry tournament with a $1 entry fee. There’s two types of tournament formats — asynchronous player-versus-player tournament or an asynchronous tournament with multiple people. Players can withdraw their funds at any time, which Skillz’s will then send a physical check through the mail to a user’s provided address.

“We’ve literally tripled revenue for our early partners, which is pretty exciting,” Paradise says.

Skillz and the developers monetize through a 50-50 revenue share, which comes from a portion of the entry fees. The revenue share deal is standard for all developers. All other streams of monetization — such as from ads or in-app purchases — still work for any game that integrates Skillz’s SDK.

Some of the early results seen by Skillz were positive, Paradise says. The first game that launched with Skillz integration increased seven-day retention from below 4 precent to more than 18 percent, a more than 300 percent increase. The second game increased engagement, which was measured by time spent in app, by 200 percent. The third game saw skilled users logging in three times more often than non-skilled users.

Right now, users can’t play against their friends, Skillz only allows for public competitions, but the company plans to add that functionality later. Paradise says users can’t play with their friends due to significant challenges around cheating and fraud. For example, users may try to pick who they want to compete against, in this case their friends, so there could be collusion between players that would create unfair advantages in a private tournament.

“We’re very sensitive to fraud and cheating with a system like this and we spent a lot of time building out technology to handle that, but we really want to be sure we’re ready for the specific issues that private play can create before we launch that,” Paradise says.

As for brining Skillz to iOS, Paradise says due to Apple’s terms of service, it’s not possible for its service to work on Apple’s mobile platform. He adds that Skillz is in talks with Apple to allow the service to work for iOS sometime down the road.

Skillz, which was founded in March 2012, was in stealth mode as Lookout Gaming until today. The company raised $1.3 million in first round funding from Atlas Venture, Nextview Ventures and angel investors in November 2012. The team that built Skillz is comprised of veterans of the mobile commerce and mobile payment spaces as well as the game development area. Developers can learn more about Skillz tournaments here.

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