The rising prevalence of crypto and virtual currencies has invited the scrutiny of several regulatory bodies who continue to grapple with the unique challenges posed by blockchain technology, FinCEN being one prime example. The Financial Crimes Enforcement Network (“FinCEN”) is an arm of the United States Department of Treasury that seeks to impede financial crimes such as money laundering and terrorist financing, and was the first financial regulator in the U.S. to address virtual currency.
FinCEN has issued updated guidance addressing the use of crypto currency and other convertible virtual currency (CVC). A portion of this guidance addresses the use of CVC in games. The guidance does not establish any new regulatory expectations. Rather, it consolidates current FinCEN regulations, guidance and administrative rulings that relate to money transmission involving virtual currency.
In 2011, FinCEN issued a final rule (“Bank Secrecy Act Regulations – Definitions and Other Regulations Relating to Money Services Businesses,” 76 FR 43585 (July 21, 2011)) defining a money services business (“2011 MSB Final Rule”). The 2011 MSB Final Rule made clear that persons accepting and transmitting value that substitutes for currency, such as virtual currency, can be money transmitters.
Continue Reading What Game Companies Need to Know About FinCEN’s Updated Guidance on Virtual Currency
The United States Securities and Exchange Commission (“SEC”) has indicated that nearly all initial coin offering (“ICO”) filings they have seen are securities offerings. Based on this expansive view, it may be more likely to find a Unicorn than an ICO that is not a securities offering. Ironically, a recent lawsuit was filed against Unikrn, a block-chain based betting platform, primarily focused on esports betting.
Continue Reading Is there a Unicorn Among ICO Issuers?
The SEC has formally announced that Ether is not a security. The U.S. Securities and Exchange Commission Director of Corporate Finance William Hinman said that the commission would not be…
Continue Reading SEC Declares Ether Is Not a Security
As we have previously reported, the number of blockchain patents being filed and granted is continuing to increase. According to a Thomson Reuters report, 225 out of the 406 blockchain patents (55.4%) filed in 2017 came from China, followed by 91 (22.4%) from the U.S. and 13 (3.2%) from Australia. The following is a brief summary of a few such patents that have been recently filed or granted in the U.S.
Continue Reading Recent Blockchain Patents of Note
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 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
As the number of blockchain-based patents and patent applications increases, more companies have become interested in pursuing these patents. Other companies still think that blockchain-based inventions are not patentable. To…
Continue Reading Drafting Effective Blockchain Patents