It's actually humorous to me how many people here are expressing firm opinions about whether or not this is legal despite the fact that they clearly have no understanding of the complexities of gaming law in the United States. This is why I always tell people "ask a lawyer". Non-lawyers think they know far more than they really do.
As someone whose startup has spent huge amounts of time and money on online gaming legal advice, my guess is that this is legal in at least 44 states, and possibly the other 6 as well. It's certainly not gambling, since there appears to be no random selection of the winner, but it may fall under the sweepstakes header. It may merely be an auction (legally, though maybe not morally).
Yeah, it's been a while since I've boned up on my online gaming/online poker stuff, but I would consider myself an expert on marketplace dynamics and structures (as we invented our own structure for Dawdle.com). This meets all the requirements of an auction site, and by a country mile.
As someone whose startup has spent huge amounts of time and money on online gaming legal advice, my guess is that this is legal in at least 44 states, and possibly the other 6 as well. It's certainly not gambling, since there appears to be no random selection of the winner, but it may fall under the sweepstakes header. It may merely be an auction (legally, though maybe not morally).