Is Penny Auction Legal ??

A friend approached me & introduced an auctions site "PennyAuction". Wondering what is that ? Googled and found below :-

Site 1 :-

Swoopo is an online entertainment auction (a.k.a. penny auction) where individuals purchase bids to place towards an item that’s up for sale. The cost of the bids are usually $0.75 and once placed they raise the price of the item by either $0.15 or $0.01 depending on the product. A 20-second countdown timer is reset by each time a new bid is placed and when the timer reaches zero, the last bidder wins.

Site 2 :-

[Penny auctions] offer new televisions, computers, game consoles, appliances, handbags, gold bars and more for starting prices of a penny to 15 cents, depending on the site.

To "win" a product, shoppers must first buy a bundle of 10 to 700 bids for 60 cents to $1 each. Shoppers use one each time they place a virtual bid on a product. Each bid raises the price of the item by a penny to 15 cents, depending on the site. Some have automatic bidding functions similar to eBay.

Doing the math and not getting carried away is important: The final price of a product that retails for $100 might be $29, but the total price paid could be much more, depending upon the number of bids used. If a shopper bids 10 times at $1 a bid, for instance, the total price paid would jump to $39. And, there is the real possibility of using all your bids without getting the product.

Auction winners generally get their item for about 65 percent off retail but could save as much as 98 percent if there are few bidders.

Since the sites make the bulk of their revenue from the purchase of bids, they profit most when they feature a product that elicits a bidding war.

Personally, i think this type of business is more like gambling, as bidders may not able to bid successfully even spending all it bids. Secondly, it might link to legality issue where this area may be questionable since there isn't any involvement from the government and has thus far regulated this. Thirdly, the margin profit is just too tremendously huge that lead me to probably think this is a scam to bidders though the successful bidders will get thier product but the majority bidders have failed. I think better avoid this kind of activities.