Who: The UK Gambling Commission
When: January 2015
Law stated at: March 2015
The Gambling Commission (“GC”) published a paper on gambling in the social games sector in January 2015. This looks at the sector in some depth, and concludes that this remains an area which it would currently be inappropriate for the GC to seek to add to its regulatory portfolio. However due to the proximity to its area of control, the GC also states that it will continue to maintain a “watching brief”, to be able to respond if the position changes to the extent where the regulator would wish to get involved.
Social gaming, both online and on mobile platforms has been somewhat of a growth area over recent years. The social gaming sector is relatively diverse: “social” does not just encompass multi-player games, but also games which provide the opportunity to share achievements with friends on social networks. Sometimes such games are based around the free-to-play or “freemium” model, where real money in-app purchases may be made, for example, to acquire extra content.
An alternative or complementary approach is for such games to be monetised via the revenue from in-game advertising.
A subset of social games is gambling-style games: for example a casino game where the player receives a certain number of virtual chips, and can play to win virtual prizes (e.g. additional spins, credits, tokens or chips). No real money (or chips which are convertible to real money) is/are paid out to players. Such games are often not run by gambling operators, and are not licensed under the Gambling Act 2005 (the “Act”) because they are not considered to feature a prize of “money or money’s worth” as defined in the Act. They are therefore arguably outside the scope of the Act (a position untested in the courts, but which the GC has, to date, apparently accepted).
While the GC does not currently consider such activities to fall within the remit of the Act, gambling-style games within the sector have been on the GC’s radar for some time, and the regulator has commissioned a number of studies to identify whether the area poses a risk – for example as a gateway to real-money gambling, or more generally as being addictive and encouraging people to spend large amounts of time gaming.
The GC’s interest has also been piqued by a number of tie-ups and takeovers of social gambling-style game developers by real-money-gambling operators, for example IGT’s purchase of Double Down and Zynga’s collaboration with bwin.party.
In producing its latest paper, the GC commissioned research from Gambling Lab which produced a paper entitled “Exploring social gambling: scoping classification and review.” It has also carried out an analysis of player data provided by the gaming industry, both through industry body IGSA (the International Social Games Assocation) and individual social game operators. However, the paper indicates that reliable evidence has been difficult for the regulator to amass due to the limitations of statistical analysis on aggregated data, and many social games not collecting data on users (for example users’ ages).
Why this matters:
Some interesting points are raised in the paper:
• The GC writes about the “uncertainty and associated commercial and regulatory risk” regarding whether virtual prizes could be considered “money’s worth” being a “useful deterrent” to those operators who are tempted to push the boundary. While it is hard to ascribe actual value to virtual prizes being awarded in a completely free-to-play game, the boundaries seem to be more blurred if – for example – players may pay to obtain additional chips, as an argument could be made that this implies a value on the in-game virtual currency (despite it being “closed loop”).
• Furthermore, paid-for virtual currency will be covered in the remit of the upcoming Consumer Rights Act, and is set to acquire statutory rights similar to those applying to goods. Alongside increasing regulatory scrutiny worldwide of the free-to-play model in apps, operators of social games will need to follow this area carefully to make sure that changes in legislation or a judicial decision do not shift the sands, as virtual prizes having no monetary value is currently all that appears to stand between such games and the regulated category of “gaming” as defined under the Act.
• However, the outlook does not look that bleak for the social gaming sector. The studies cited in the paper seem to indicate little evidence of gambling-style games causing significant societal problems, or being particularly attractive to young people. While studies showed a correlation between young people playing free/practice gambling games and gambling with real money, the GC identified that correlation does not equal causation and there was insufficient evidence to show that the one led to the other.
• The GC has clearly stated that its findings therefore give it “no compelling reason” to seek to impose additional regulation on social games, given the existing regulation imposed on the sector by consumer protection legislation. It therefore seems that, for the time being (in the absence of the regulator’s hand being forced by a judicial ruling on non-redeemable virtual prizes/winnings having deemed monetary value) the social gaming industry will continue to operate without the administrative burden of being a licensed gambling operator.