Joel I think you should think about your idea a lot first. I follow you on your blog and you happen to jump from project to project and your mind just can't settle with one on the long run. How about planning the business first with all the legal things (which everybody hates and leaves the last). After that you may see if it will be a success or not. Read back your ideas and look at why they change every day :) If you have one for more than 5 days than that will be the winner!
I have been thinking about this for a couple of months now, ever since I commissioned the Flash client. It's obvious to me that I cannot plan this business, there's just no way to predict the way the cookie crumbles.
I have another daughter coming up this month and a certain limited amount of savings. I'm throwing my weight behind this project.
Do you have any specific legal concerns in mind? I'm not going to run a gambling business and Wager Labs, SA has been in business since 2002.
Tournaments, bots, & book sales (perhaps via Amazon affiliation) seem to be the best roads to driving traffic & monetization. Perhaps you could check out legalities of small entry fee tournaments with book prizes? (Perhaps give large discounts on entries for monthly subscribers?) Also - bot friendly tournaments with entry fee for bots, with monthly subscriptions available. Leaderboards!
But that's just my 2 cents.