Charging for Virtual Currency

[Anthony Parsons]

Split from Sportsbook Add-On.

Charging for virtual cash becomes gambling in most countries, and thus you need a relevant state gambling license. It isn't worth it...

The moment you charge for virtual cash, is the same moment you stop being for "entertainment" purposes, and become classified as providing a gambling service. I looked into this surrounding sites that charge a "signup" fee as well, and they do that legally as a guise for membership and not the virtual credit they give you to start with... even though basically you're paying a membership fee to obtain starting credit. They do however then provide free methods of obtaining further credit by participating in their community and they don't sell it directly. Those big sites who do sell credit to bet with, have gaming licenses.

If you sell virtual credit for betting purposes, you open yourself up to be reported and criminally charged for illegal gambling. I wanted to do it for my sites... and quickly found out the consequences without a gaming license.

 

[Mike Edge]

Charging for virtual cash becomes gambling in most countries, and thus you need a relevant state gambling license. It isn't worth it...

The moment you charge for virtual cash, is the same moment you stop being for "entertainment" purposes, and become classified as providing a gambling service. I looked into this surrounding sites that charge a "signup" fee as well, and they do that legally as a guise for membership and not the virtual credit they give you to start with... even though basically you're paying a membership fee to obtain starting credit. They do however then provide free methods of obtaining further credit by participating in their community and they don't sell it directly. Those big sites who do sell credit to bet with, have gaming licenses.

If you sell virtual credit for betting purposes, you open yourself up to be reported and criminally charged for illegal gambling. I wanted to do it for my sites... and quickly found out the consequences without a gaming license.

hmmm, I was under the impression that some sort of prize or cash would have to be rewarded for winning for that to be the case. If what your saying is true, 90% of the games on Facebook, including several Zanga gaves are illegal.

 

[Mike Edge]

Maybe @jadmperry would be able to shed some light on the subject

 

[Anthony Parsons]

90% of the games on Facebook you aren't paying to "bet" with, you're buying actual additions to continue in the game. Betting has a strict definition by law... and sportsbook falls under it IF you charge money for virtual currency. Do the research yourself, you will quickly find the information needed. If a game charges you for virtual currency to "bet" with, then that game company most likely has a gambling license and the game has gambling warnings and all sorts of terms that come with gambling products and services.

As I said, there are a couple of ways to technically get around some of it through membership methods and other ways, but not if you charge x for y virtual currency. That is considered gambling.

 

[Anthony Parsons]

http://uscode.house.gov/download/pls/18C50.txt

The term "gambling establishment" means any common gaming or gambling establishment operated for the purpose of gaming or gambling, including accepting, recording, or registering bets, or carrying on a policy game or any other lottery, or playing any game of chance, for money or other thing of value.

Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

Australia and the UK are stricter... Europe can be pretty fuzzy in places.

 

[Mike Edge]

http://uscode.house.gov/download/pls/18C50.txt

The term "gambling establishment" means any common gaming or gambling establishment operated for the purpose of gaming or gambling, including accepting, recording, or registering bets, or carrying on a policy game or any other lottery, or playing any game of chance, for money or other thing of value.

Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

Australia and the UK are stricter... Europe can be pretty fuzzy in places.

Interesting. I wonder what loophole Zynga found for Zynga Poker, Zynga Slots, Zynga Bingo and several others.

 

[Anthony Parsons]

Are you sure they don't have a gaming license?

Poker is also different to sports betting. Casino games are handled differently to sports betting, though both are typically strict in the sense of betting. One is a game of skill, the other is a game of chance, which is why they differ in how they're handled legally.

Sportsbook is perfectly fine how it is because it only uses virtual currency, which is legal. You can give it away, members can obtain it via performing actions... but if you charge real money for it to be used, you crossed the line of entertainment to now sports betting.

 

[Mike Edge]

Are you sure they don't have a gaming license?

Poker is also different to sports betting. Casino games are handled differently to sports betting, though both are typically strict in the sense of betting. One is a game of skill, the other is a game of chance, which is why they differ in how they're handled legally.

Sportsbook is perfectly fine how it is because it only uses virtual currency, which is legal. You can give it away, members can obtain it via performing actions... but if you charge real money for it to be used, you crossed the line of entertainment to now sports betting.

I wonder if this clause is the loophole.. Since you are indeed purchasing to bet, but everything purchased or gained remains in the game with no outside of game "cash in".

Outside of the game, you may not buy or sell any Virtual Currency or Virtual Goods for "real world" money or otherwise exchange items for value. Any attempt to do so is in violation of these Terms and may result in a lifetime ban from Zynga Service and possible legal action.

 

[Anthony Parsons]

I believe you have the answer... I was just looking for it in their TOS as well and seen the above. I haven't played the game, so I don't know how it works to comment with accuracy.

Games of skill have such avenues (loopholes if you want to call them that), compared to games of chance, which have zero tolerance for loopholes. I have read that games of skill have methods that as long as there are no winnings to take away, then it remains entertainment purposes, but if you can win and cash out your money, then it becomes gambling.

Again... games of chance has zero tolerance, being sports betting. People have argued that sports betting be reviewed as a game of skill, being you have to study so much data to make accurate bets, however; at the end of the day you have zero input into the outcome, thus it is chance with no skill on your part defining the outcome.

Slot machines fall under games of chance, but card games don't. Roulette does... so forth.

 

[Mike Edge]

Slot machines fall under games of chance, but card games don't. Roulette does... so forth.

Zynga Slots and Zynga bingo use that exact ToS too, so indeed that might be the loophole with stating the currency can't be bought or sold to 3rd party or used for anything outside of the game regardless if chance or skill. From my taking on it, buying the currency via the site, betting and winning and then spending it to bet again is legal. As where buying the currency, winning 20 times the amount and then flipping it to a site member for 50% real cash of what the site sells it for is illegal and the person doing it could face legal issues, not the site as they weren't involved in the transaction. Not a lawyer, but just my take on it from how the ToS is written.

 

[jadmperry]

If you were to look at one of the threshold issues for courts to hear cases, it is that there has to be a real "case or controversy." I start with that to put this next statement in context. It is very hard to give solid analysis in a "vacuum." That is, without solid facts about a particular case, all anyone can do is give their best guess about how issues might play out. That can be done (and often is). But, without concrete issues and facts to apply to the law, there is always the risk that you are either just handicapping a hypothetical or guessing about how facts might play out. So, with these caveats, here are some thoughts:

The "skill vs. game of chance" distinction is important.

The issue of whether there is a "payout" in cash vice a "reward" in a game is a huge issue.

The location of the game and the location of the "purchaser" or "bettor" depending on the circumstance is very important.

Strict legal compliance is, of course, an important issue in avoiding legal issues. But, at the same time, there are gray areas that might not trigger oversight/compliance issues. Decisions about how to proceed in the face of such decision should only be made with an appreciation of the issues, benefits, and risks attendant with each course of action.

If this sounds like a "punt" on any type of answer, it might well be. But, in large part that is because there are no fixed facts (or real "case or controversy") necessary to fully analyze the issues. Jurisdiction in any analysis would be a major part of any analysis.

So, my guess is that my input on this point is not very helpful.

 

[Anthony Parsons]

It's always helpful @jadmperry ... thank you. I think we both understand it is complicated and a case by case basis.

I looked into only the specifics of what I wanted to do, which was using sports book (this add-on) and wanting to sell virtual credit for real money, so users could use that virtual credit to bet upon sports games listed on my site, which I discovered was illegal in most countries, both mine (reside Australia) and the US (hosted location).

 

[jadmperry]

I looked into only the specifics of what I wanted to do, which was using sports book (this add-on) and wanting to sell virtual credit for real money, so users could use that virtual credit to bet upon sports games listed on my site, which I discovered was illegal in most countries, both mine (reside Australia) and the US (hosted location).

Not weighing in on this specifically (for the reasons stated in my post)....but, I would not be so sure that it is definitely illegal in the US.

In some circumstances, it could be. Not sure, on first look, that it is.

 

[TeflonDon]

I've always given virtual cash(vbookie money on vb) to members when they donate as a thank you. We don't charge for it, everyone gets some when they register and we give it away to all the members every couple of months. There is also no option for them to "cash out." Would this still be considered gambling and illegal?

 

[RobParker]

For it to be a gambling, don't they need to be able to win something?

 

[Jason]

Purchasing the virtual currency and making it redeemable really isn't the issue here, though you open yourself up to other legal risks, such as money transmitter and money service laws. Financial services are time consuming and costly, since there are compliance obligations and licensing requirements.

Allowing virtual currency to be earned through game play and redeemed for real property is risky, and could be considered gambling or an illegal lottery. It's still possible to provide such programs (at least here in the U.S.), but you need eliminate the elements of chance and/or consideration.

 

[Mike Edge]

Spoke to a local business lawyer on this today. Didn't get too much details due to it being a free phone consult type thing. As long as nothing is redeemable outside of the site, it would be legal in the US. Won points can't be used to purchase anything outside of the site, no payouts, not even items like turn in 2k points for a t-shirt as then your still winning a prize for betting. Further, you can't require the purchase of points to bet, points must be obtainable other ways as well in the case of a forum, registering, posting, clicking on sponsored links etc. He said a great example of that is the McDonalds Monoply, any household can request 4 game pieces without any purchase needed by requesting it in the mail. Suggested if the site starts making big bucks, should look into registering the site as a business as money laundring rather then gambling could become a concern at that point, though they wouldn't even flag someone making under 500k a year from it for consideration of it to investigate.

 

[Flexin]

I'm glad this topic came up. I knew about some of the laws around it but I guess I didn't know them all. I had thoughts of allowing members to use points to get discounts (if I add a store) or use points to get a gift card that might be offered buy or for a forum sponsor. I've is looking like that would cause a problem .

I have to look into this over the weekend but I know that the sportbook has its own cash system. I use BD banking. I think they can be used as too separate systems. Am I right about this? If so then I can give members a starting bank in Sportsbook and not have any think else go in that. Then use BD banking just for posting and so on. Then I can allow them to buy things with posting credits but not with virtual winning a from the Sportsbook.

I I'm right then this would stop any libel issues right?

Here is a question. Dies. Anyone know if I can have a post give a credit to BD banking and the Sportsbook system? So a post gives them more forum credits and more betting credits? This might still give them more of an incentive to post plus forum owners can allow members to get real things with credits without removing the Sportsbook add on or having pints from that causing any legal issues.

James

 

[Anthony Parsons]

@Flexin you can link credits or such system into sports book and allow them to earn credits to bet with, yes. You can't sell them credits under that setup though. It actually steps over the line if you have a virtual sports book system allowing members to earn credits by sports betting, and with those credits they can purchase virtual or actual goods or services. That is illegal because it's a game of chance.

You can run both systems side by side, without any issue. For example, you can sell credits that are used to do x, y and z upon the site, but they cannot turn those credits into betting credits or any other such distinction for use on the sports book itself. No transfer, so forth.

Sports book MUST not be capable of purchasing credits for betting, paying real money, goods or services for betting credits. That is the simplest form for my understanding.

My solicitor told me this... if I did this socially, away from the public and someone got addicted to gambling, I'm screwed when they seek help and tell them how they become addicted. I have no insurance, no registration, na da, to provide sports betting services. If it's a social game with zero ability for actual gain or loss in real life, then all is good.

There are some ways around all this with memberships and some other structures used... still controversial and it seems many are pushing to have those loopholes closed as part of sports betting.

I believe you could use the stock trader though, which is a game of skill, and allow credits to be used to purchase account upgrades and so forth, because chance is removed, as investing in the stock market is considered a skill.

The biggest distinction highlighted to me is between a game of chance and a game of skill. The laws differ significantly and so does action by authorities it seems, and industry, as to whether they really care of not for small social site events.

The simplest way to use sports betting on your site is to keep it isolated from anything that you may use to upgrade features or such... or do away with all such things so credits are only used in the games themselves and serve no other purpose... which is entertainment purposes only and legal.

As @jadmperry has said... it's complicated and needs to be assessed on a case by case basis. Australia and the UK are strict with sports betting... no room to move. The US is more complicated... Europe is extremely grey from looking at general sports betting information there.

I'm changing my sports books on re-release so they use the xf trophies... so if they blow their cash, then they have to do more on the site to get more points for use. They can't use them for anything else other than the sportsbook and stock trader games.

 

[Markos]

The gaming apps of Facebook that permits to buy credits are gambling? Mhhh