Adolescent variations not withstanding, as an adult, I've played this game with a wide variety of rules. In some versions, the 'loser' is the guy that cums first, the penalty for losing is consumption of the cum-soaked cookie/biscuit/cracker/cake after everyone's blown their load on it. In other variants, the 'loser' is the guy who cums last, or fails to cum at all.
I've been involved in variations where missing the target earns a penalty. This game is pretty popular at some CFNM events - it offers the female audience an opportunity to watch multiple males masturbate to orgasm, dirty talk, and humiliation, and in general sub. Two events I attended, organized by the same group of hostesses played the game with one of the women seated in a chair, legs crossed, with the cookie balanced on the toe of her stocking-covered foot, with the males organized semi-circle in front of her. The last-to-cum guy was declared the loser, as well as eating the cum-soaked cookie, he had to lick all the cum from the female's foot.
Several CFNM events I've attended have involved some form of circle-jerk and cum play.