Social gaming and gambling, a thin difference that might be risky

Social gaming can be tricky as it can be requalified as gambling or prize promotions which can be lead to major sanctions.

The hottest regulatory challenge for social gaming

We have been advising several social gaming operators on their European expansion. Therefore we have got to know the position on social gaming under several jurisdictions. And through such reviews, the issue that often arises on the qualification of social gaming pertains to

what can be deemed to be “monetary value“?

The issue arises when players are requested to purchase virtual currency to be wagered on the games available on the platform. And the question is

what can you do with the purchased virtual currency?

In most of the cases, players can only win further virtual money and are restricted from withdrawing it, purchasing items through them and transferring them to other players. As a consequence, players can only continue playing on the platform with their virtual money.

It might be argued that they paid for the initial amount of virtual money (unless this was granted for free to them), but it may be also argued that if I put a coin in a videogame in an arcade and I am so good to win some additional lifes/credits during the game, I would face the same scenario of those how win virtual currency. Indeed, I paid to play and I can only get the possibility to play some more!

I remember a comment from a representative of the UK gambling commission at EiG of a few years ago when he stressed that their position at that time was to consider the parameter for the qualification of a game as “social” rather than gambling

if players were not able to get the money out of the game! 

This might be a quite strong position, but if the money cannot even be exchanged for anything or transferred to anyone, is it really possible to argue that they have any value in the real world?

What happens if you don’t comply?

If social gaming is not properly qualified, it risks to fall under gambling regulations with potential criminal sanctions and tax liabilities. Likewise, social games can be considered prize promotions which in countries like Italy are subject to considerable restrictions.

You can find a valid support on a minisite that my law firm created to cover prize promotion regulations from 35 jurisdictions which is available for FREE at the link HERE

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Giulio Coraggio

I am the head of the Italian Technology sector and the global head of the IoT and Gaming and Gambling groups at the world-leading law firm DLA Piper. IoT and artificial intelligence influencer and FinTech and blockchain expert, finding solutions to what's next for our clients' success.

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