The Department of Justice (DOJ) has issued an opinion (DOJ Opinion) that reverses its 2011 Memo, in which it opined that the prohibitions of the Wire Act are limited to sports betting. In the DOJ Opinion, the DOJ has concluded that the 2011 opinion was wrong! It now opines that only one of four parts of the Wire Act apply to sports betting, while the other three apply to any online betting. It also concludes that the 2006 enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) did not alter the scope of the Wire Act.
Continue Reading DOJ Does High “Wire Act” – Flip Flops on Legality of Online Gambling

How the Evolution of Games Has Led to a Rise in Gambling Concerns

Recently, there has been a frenzy of legal activity with U.S. gambling laws and the number of gambling-related legal issues with video games. U.S. gambling laws have changed more in the past few years than they have in a long time. Significant state law changes have occurred concerning online gambling, sports betting, fantasy sports, and skilled-based games, to name a few. Some significant recent changes under federal gambling law have also occurred. The evolution of certain aspects of games by the game industry—particularly those involving loot boxes, casino-style games, and chance-based mechanics with virtual items—has raised the perception of certain gambling-related issues. Despite being prohibited by game publishers, players’ engagement in unauthorized activities (e.g., selling virtual items on secondary markets and “skin gambling”) have exacerbated these issues. The financial success of these monetization techniques has led to greater legal scrutiny. The rise of eSports has also implicated sport betting issues. 
Continue Reading All Bets are On! Gambling and Video Games

Churchill Downs has filed a Petition For Rehearing En Banc, seeking to overturn the Ninth Circuit decision in the Big Fish case. As we previously reported, The Ninth Circuit Court of Appeals reversed a district court’s dismissal of a purported class action and held that a social casino game constituted illegal gambling under Washington law. According to the Court, all online or virtual gambling is illegal in Washington state. The panel held that the virtual chips extended the privilege of playing the game and fell within Wash. Rev. Code § 9.46.0285’s definition of a “thing of value.”
Continue Reading Churchill Downs Seeks En Banc Review of Big Fish Decision

We previously reported, that the Belgian Gaming Commission has recommended criminal prosecution against certain game companies due to the allegedly illegal use of loot boxes. This report follows previous reports on findings by the Netherlands.

The Belgian Gaming Commission includes recommendations that extend to certain companies doing business with game companies, including Licensors (e.g., FIFA) and platform providers.

In its Loot Box Report, the Belgian Gaming Commission stated: “A wager (bet) of any type is sufficient to qualify as betting for these games. Use of money is not necessary. Just because virtual currency is used in a game does not mean that there is no wager. It must be possible to attribute a value to this wager, however. Value can be defined as the degree of usability. Specifically, items that the player finds useful or nice and for which he pays money.”
Continue Reading Belgium Gaming Commission Loot Box Report – Extends Beyond Game Companies to Licensors and Game Platforms

The use of blockchain technology for crypto games, such as CryptoKitties, and other token-based digital collectibles is on the rise. Also growing is the number of tokenized-assets marketplaces such as Rarebits and cryptocurrency designed specifically for gaming, such as Enjin Coin. These innovative platforms are leveraging the power of blockchain technology as applied to games and other interactive entertainment.
Continue Reading Legal Issues With Blockchain-Based Crypto Games and Collectibles

This blog post originally appeared on the Class Action Defense Strategy Blog on February 8, 2016

Another lawsuit alleging illegal gambling in a social game has been dismissed. Over the last year, social gaming mobile applications have come under attack from the Plaintiffs’ bar as gambling in disguise. Plaintiffs’ attorneys theorize that in-app micro-transactions where consumers pay cash for virtual items (i.e., gold coins or gems) designed to speed up or otherwise enhance gameplay are, in effect, wagers insofar as other in-game materials can subsequently be “won” with those items. None of the plaintiffs have prevailed in these recent cases.
Continue Reading The Game Goes On: Sheppard Mullin Obtains Dismissal With Prejudice of Class Action Alleging Social Gaming Micro-transactions Constitute Illegal Gambling

As we have previously reported, the subject of loot boxes has received increasing scrutiny around the world. In one of the most recent pronouncements, the Dutch Gambling Authority (the “Authority”) declared the loot box mechanics used in a number of games to be illegal gambling and warned that it will begin enforcement actions as of June 20, 2018. It also indicated that the Authority is in close contact with other European regulators, so this report may lead to similar investigations and/or outcomes in other EU member states. Additionally, the Authority declared that all of the loot boxes that were studied could be addictive, but did not provide suitable control measures to exclude vulnerable groups from loot boxes and/or to prevent addiction.
Continue Reading Netherlands Declares Certain Loot Boxes Gambling; Warns of Coming Enforcements

As previously reported, The Ninth Circuit Court of Appeals reversed a district court’s dismissal of a purported class action and held that a social casino game constituted illegal gambling under Washington law. According to the Court, all online or virtual gambling is illegal in Washington state. The panel held that the virtual chips extended the privilege of playing the game and fell within Wash. Rev. Code § 9.46.0285’s definition of a “thing of value.” In response to this, at least one social game company, Poker Stars, has decided to deny Washington residents access to their site.
Continue Reading Social Game Site Excludes Washington Players; Gambling Commission Comments

The Ninth Circuit Court of Appeals reversed a district court’s dismissal of a purported class action and held that a social casino game constituted illegal gambling under Washington law. According to the Court, all online or virtual gambling is illegal in Washington state. The panel held that the virtual chips extended the privilege of playing the game and fell within Wash. Rev. Code § 9.46.0285’s definition of a “thing of value.”
Continue Reading Social Casino Game Found to Be Illegal Gambling

The use of creative business models and strategies involving contests, sweepstakes and gambling-like activities in social games and other online media has increased dramatically. These “gamblification” strategies aim for a balance between capitalizing on users’ excitement and passion for the mechanics inherent in gambling while not crossing the line into illegal activity. In some cases, the use of virtual currencies and goods causes greater confusion and misconceptions regarding legality.
Continue Reading Gamblification: An Overview of Legal Issues with Gambling