"Send me $20 now through PayPal and I promise to pay somebody in this thread $1000 later. "

Absolutely - it's down to perceived benefit.  Right now there are three people in the thread and my odds for twenty bucks is looking pretty good.  But that's a stake and the $1,000 is a prize and that puts you on the wrong-side of the law in lots of jurisdictions.  My cash is coming from outside the US, can you prove I'm not just laundering it because the odds on winning are better than my costs in having to process it illegally by another route?  If it's a game of skill you're still going to need to be able to prove that to each licencing body - or register it with a single off-shore licensing authority but the cost of that will make a big hole in your mortgage savings!

 

How long can you finance a free play?

 

Look at something like the Candy Crush model - no staked amounts but instead in-app purchasing that could increase your chance of a win, plus items and skins that may have a value in a secondary market (see Steam).

 

I can't talk about the legal situation in the US but have no doubt that the effort and cost to place this in that market if it's deemed a gambling app (and the threshold for when “skill” out-weighs “luck” keeps lawyers employed worldwide!) will significantly impact any business plan you have setup.

 

Now, who do I send the $20 to …?

>>Now, who do I send the $20 to …?

Me.  I'm holding all donations, um, I mean entrance fees.

Legal perils?

Most giveaways (say it's $100/day) are done as “sweepstakes” and those are fine - as long as you are not required to buy something in order to qualify.

That doesn't mean that you can't offer entries for people who pay, but you must also offer a path for people to enter without buying anything.

 

If you do that, those are generally OK.

 

And as for $100/day vs $1000/day.  $100/day is still a nice incentive - very few games give anything away.  Or you can offer it in commodities - “all the coffee you can drink in a day (up to $100)".  Might sound bigger :)

 

To make this work as a business you need enough revenue from ads + micro transactions (selling hints etc) to exceed $100/day.  It won't get there for a while, but it could in time.