European Gaming Lawyer magazine EGL_Spring2017_opt - Page 17

and lotteries. Similar to the more traditional forms of gambling, players transfer their skins to the particular website offering skin gambling products in order to play these kind of games. In the eventuality that the player wins, the winnings given by the website are in the form of additional skins, which the player may then ‘withdraw’ back to the Steam account. There is no arguing that the market for skin gambling is significant. During 2016, it was estimated that $7.4bn worth of skins would be wagered worldwide across a wide spectrum of gambling products. 1 However, these estimates are based on studies which do not take into consideration recent events within the gaming industry. Recent Events In the US, the Washington State Gambling Commission (WSGC) was one of the first regulators to address skin gambling by taking legal action against Valve Corporation, alleging that Valve violated gambling laws by facilitating the use of skins for gambling via its Steam platform. The WSGC is requesting the Court to order Valve to take all necessary actions to stop third party websites from making use of skins for gambling purposes through its platform. On their part, Valve Corporation argue that it is not engaged in the promotion of gambling and that it does not in any way facilitate gambling, arguing also that the operation of Steam and CS:GO is lawful under Washington law. Valve Corporation contends that as per its policy, it sent cease and desist letters to gambling operators, conceding however that operators made use of bots in order to disguise gambling transactions. Proceedings are still under way. In the UK, the UK Gambling Commission (UKGC) instituted proceedings against Craig Douglas and Dylan Rigby, owners of the website ‘FUTgalaxy’ which is based on the best- seller electronic game ‘FIFA’ developed by EA Sports. FUTgalaxy provides players with the opportunity to make use of the coins earned in FIFA (FUT Coins), which can then be exchanged on the website for the in-game currency FG credits to bet on events. FG credits can also be purchased in real currency. Players earn FUT Coins in FIFA by competing in and winning matches and completing tasks in the game’s Ultimate Team mode. These FUT coins earned in FIFA can then be converted to FG credits through FUTgalaxy in order to place bets on real events, after which players can convert the winnings back to FUT Coins. The court heard how Douglas promoted the site to more than 1 million subscribers of his YouTube channel, including minors and specifically, how one 14-year-old boy lost around GBP586 in a day. Rigby was fined by GBP174,000, whilst Douglas was fined GBP91,000. In March of this year, the UKGC issued a position paper on virtual currencies, eSports and social casino gaming. 2 The UKGC, dedicating a whole section to gambling with in-game items and virtual currencies, explains how it is also the video game industry which acknowledges that even though in-game items, such as skins, were provided in a “closed-loop fashion”, “users of their game networks are occasionally exploiting their open nature to offer players opportunities to buy and sell in-game items”. 3 The UKGC went on to clarify that this ability to convert skins into cash, and the ability to trade such skins for other items of value means that these skins attain a real world value and become “articles of money or money’s worth”. 4 (The UKGC went on to conclude that a licence is required in the same manner as the use of casino chips as a method of payment for gambling requires a license. The Isle of Man has addressed the situation by taking measures earlier this year to allow its licensees to offer betting using virtual currencies, including skins, thereby placing such operators within a regulated framework. Earlier this year, the Norwegian Gaming Authority published a note by virtue of which skin gambling was legally placed within the definition of ‘gambling’ after reports of minors in Norway having spent considerable sums of money on such games. The Authority concluded that a gaming site which allowed betting and winnings in skins was effectively an online casino, and that operators, apart from the state monopoly Norsk Tipping, faced sanctions if skin gambling were to be offered in Norway. 1 C Grove, Narus Advisors, ‘Understanding Skin Gambling’, July 2016. 2 UK Gambling Commission, ‘Virtual Currencies, eSports and Social Casino Gaming – Position Paper’, available at , accessed 22 March 2017. 3 ibid. 4 (no. 2). European Gaming Lawyer | Spring Issue | 2017 | 1