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James Gatto

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Jim Gatto is a partner in the Intellectual Property Practice Group in the firm's Washington, D.C. office.

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The allegations of gambling issues with games continues. Last week, a class action lawsuit was filed against  Apple relating to games in its App Store that include loot boxes. The complaint alleges that sale of such games are predatory practices enticing consumers, including children, to engage in gambling and similar addictive conduct in violation of California law. The suit alleges that loot boxes are like Vegas-style slot machines and allegedly constitute illegal slot machines when played on an iPhone or similar device.…
Continue Reading Players Sue Apple Over Loot Boxes

Iowa enacted a sports betting law last May. Section 99E addressed fantasy sports contests and Section 99F addressed sports betting.

Under Section 99E: a “Fantasy sports contest” includes any fantasy or simulated game or contest …” and 99E.2 states: “The system of entering an internet fantasy sports contest as provided by this chapter is legal when conducted by a licensed internet fantasy sports contest service provider as provided in this chapter.”…
Continue Reading Is Esports Betting Sports Betting in Iowa?

The Washington State Federal District Court recently issued a decision stating: “Washington’s definition of ‘gambling’ only reaches ‘staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under the person’s control or influence’ and that “[m]ost games not derived from casinos involve some amount of skill and would thus be unlikely to meet the statutory definition.”…
Continue Reading Most Non-casino Style Games Unlikely to be Gambling in Washington

In a controversial decision, the Illinois Supreme Court determined that a head-to-head, daily fantasy sports (DFS) contest was predominately skill based and thus not gambling. Despite agreeing with the appellate court’s conclusion that the DFS contest at issue was not gambling, the Court disagreed with much of the appellate court’s reasoning.…
Continue Reading Daily Fantasy Sports Case Skillfully Comes to a Head

Microsoft has announced a partnership with Enjin to offer a blockchain based recognition program. Azure Heroes aims to reward individuals for verifiable acts of impact such as coaching, creating demos, building sample code, blogging about Azure or completing certain challenges. Community members that have demonstrated their contributions will be recognized with badges across a number of categories. Azure Heroes is branded as a new and fun way to earn digital collectibles for meaningful impact in the technical community.…
Continue Reading Azure Heroes – Microsoft Partners With Enjin to Offer Crypto Collectible Rewards

Money laundering is no game. Yet, some games have been used for money laundering. That’s what prompted Valve to announce that it would end the online sales of loot box “keys” for its game Counter-Strike Global Offensive (CS-GO).

As of last week, Valve indicated that CS:GO container keys purchased in-game can no longer leave the purchasing account. Thus, they cannot be sold on the Steam Community Market or traded. Pre-existing CS:GO container keys are unaffected–those keys can still be sold and traded.

These CS-GO keys have historically been traded on the Steam Community Market as well as third party websites. The keys could be bought with money from the in-game shop or from Steam.…
Continue Reading Laundering the Loot: Videogame Developer Valve Ends In-game Key Sales Because of Financial Criminal Activity

In a closely watched case, a New Hampshire federal court has ruled that the Wire Act is limited to sports betting and set aside the DOJ’s recent opinion to the contrary. However, it limited the scope of its declaratory relief to the parties and deferred a decision on whether to extend the declaratory judgment to non-parties on behalf of the Lottery Commission, but gave the Lottery Commission 14 days to file an appropriate motion and supplement the record with adequate factual and legal support on that point.…
Continue Reading Federal Court “Discards” DOJ Interpretation Of Wire Act

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

In the latest salvo in the ongoing debate about whether certain game mechanics are exploiting kids, Senator Josh Hawley (R-MO) announced that he has introduced a bill to ban the alleged exploitation of children through “pay-to-win” and “loot box” monetization. According to Hawley, “The Protecting Children from Abusive Games Act” would apply new consumer “protections” to games played by minors including:

  • Games targeted at those under the age of 18 (this would be determined by subject matter, visual content, and other indicators similar to those used to determine applicability of the Children’s Online Privacy Protection Act (COPPA))
  • Games with wider audiences whose developers knowingly allow minor players to engage in microtransactions

…
Continue Reading Senator Wants to Ban Loot Boxes and Pay-to-Win Aimed at Kids

In an effort to side-step the lawsuit filed against it by the New Hampshire Lottery (and others), the Department of Justice (DOJ) asserts that its recent reinterpretation of the Wire Act doesn’t apply to lotteries. As we previously reported, the New Hampshire Lottery has sued the DOJ to prevent enforcement of the DOJ’s opinion (issued in January 2019) reinterpreting the Wire Act. As we also reported, the January 2019 DOJ opinion reversed the position it took in 2011 that the entirety of the Wire Act is limited to sports betting. The new opinion concluded that only one of four parts of the Wire Act apply to sports betting, while the other three apply to any online betting.…
Continue Reading DOJ Asserts Wire Act Opinion Doesn’t Cover Lotteries