Legality
The legality of unique bid auctions depends on a combination of governing gambling laws and the design of the specific auction model. If an investigating authority were to determine that randomness or chance plays too large a role in the outcome, the auction may be considered a type of lottery. If, on the other hand, the investigating authority found strategy and skill played a sufficient enough role in the outcome, they may find the auction to be legal. Worldwide, there are no reported cases or statutes specifically outlawing the lowest-unique bid auction model.
The definition of a lottery differs among jurisdictions and is to be judged in a case by case manner. An English case held that "there will seemingly be never any finality on the question what is a lottery" because “attempts to do so may indeed be counter-productive, since each added precision merely provides an incentive to devise a variant which eludes it”. Legislatures tend to leave the definition open in order to encompass lotteries that were not envisaged at the time of the enactment of the legislation.
Under English common law, a lottery includes any game, method, device, scheme or competition whereby money or money’s worth is distributed or allotted in any manner depending upon or to be determined by chance or lot, whether the same is held, drawn, exercised or managed within or without the jurisdiction. A business model is therefore a lottery if participants are required to:-
(a) pay a non-refundable fee of money or money in kind, in (b) a scheme of lot or chance, to (c) receive a reward of some kind,
Depending on a combination of governing gambling laws and the design of the specific auction, unique bid auctions may satisfy the above criteria.
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