Exclusive: Gambling Commission dismisses social regulation rumours
Social gaming for virtual chips and currency is not considered gambling by Commission " experts admit Gambling Act's definition of "prizes" is not clear.
The UK Gambling Commission has moved to quash rumours that it is investigating ways of regulating social gaming in a similar fashion to real-money gambling, but admits that it is forced to monitor the sector due to technological advances “testing the boundaries” of the 2005 Gambling Act.
Rumours that the Commission was examining the social gaming sector emerged over the weekend in UK newspaper The Mail on Sunday, with its corporate affairs manager John Travers telling the publication: “We are monitoring developments and assessing any wider implications for licensing objectives,” going on to say that social gaming was “at the perimeter” of current legislation.
When contacted by eGaming Review the Commission’s corporate affairs officer James Cook supported Travers’ comments, but explained: “The key question for the Commission is whether or not a gambling-style product on a social gaming website is gambling as defined under the Gambling Act 2005 “ more often than not it isn’t.”
“The gambling industry is innovative and technological advances are testing the boundaries of the Act so we monitor what is going on across a wide range of activities, whether on-line or terrestrial, such as lotteries, gaming machine sales and including social gaming sites, to ensure that unlicensed gambling “ as defined by the Act “ is not taking place,” Cook said.
The Gambling Act defines “gambling or games of chance” as a game played for the chance to win a “prize”, which in turn is defined as: “money or money’s worth, and includes both a prize provided by a person organising gaming and winnings of money staked.”
Nav Summer, head of computer games at media law firm Wiggin LLP, explained that such a definition did not fully define what constitutes a “prize” and could therefore be open to further interpretation: “I think regardless of whether the game is a game of chance or a game of mixed skill and chance, the real issue is whether winning virtual coins rather than real money is a prize.”
Ivor Jones of Numis Securities highlighted the fact that the definition of virtual currency as having no monetary value is only supported by the fact that players cannot withdraw their balances:
“Whether social gaming is or isn’t a gambling product doesn’t hinge on whether or not it is a game of chance, it hinges on whether you can win “money” or “money’s worth”. If regulation only stated “money” then casinos would be able to bypass regulation by handing out goods rather than currency as prizes, so leglisation needs to say something of monetary value.
When to comes to virtual currency, if I want to buy more of can I do so? Yes. Is there a direct conversion rate between real money and virtual currency? Yes. Is virtual currency denominated in a real-world currency? Yes. The only thing that makes it not money is the inability to cash out,” he explained.
Sunner explained that “Currently the law is falling on the side that playing a virtual poker game on Facebook for Facebook Credits is not gaming for the purposes of the Act. The other element is that the ‘virtual coins’ that are won in the game are not transferable outside the game or games from the same producer.”
This theory was supported by Cook, who confirmed that “as long as chips cannot be converted back into money or money’s worth then the activity would not be considered gambling.” He went on to confirm that this was not open to reinterpretation “under current legislation.”
Social gaming regulation was described as potentially catastrophic for the industry by Raf Keustermans, CEO and founder of social operator Plumbee. On Monday he told eGR that a fragmented regulatory framework similar to the egaming sector would make operating a social gaming business all but impossible:
“The thing that scares me the most is the possibility of a fragmented market. The big advantage that the social gaming sector has is that it is a global market, with companies operating one game working across all territories. This gives you economies of scale, working with a small team, with one centralised system and centralised host for the product.
“If we see what happened with the gambling industry it’s going to make that impossible; if countries all adopt their own individual models of regulation it becomes totally unsustainable,” Keustermans said.
Another social operator who wished to remain anonymous said that attempts to force operators to acquire a gambling licence would be more likely to prompt companies to pull out of the UK market rather than go through a costly compliance procedure, potentially even seeing companies follow egaming operators in moving operations offshore under the current point of supply tax rate.