Caveat Vendor

When Does A Game Become Gambling? The UK May Be Barking Up The Wrong Tree

February 02, 2013

Behnam Dayanim

Consideration. Chance. Prize. Every U.S.gaming lawyer can recite that mantra. Those are the elements that are required to constitute gambling in most U.S. states. Yet, that is not true everywhere, and, as online social games continue to evolve, regulators at home are also looking more closely at precisely where the line between unregulated entertainment and regulated gambling resides.

Remarks by U.K. Gambling Commission chairman Philip Graf at a conference sponsored by the publication Gambling Compliance earlier this week highlight some of the struggles regulators are facing. Wrapped in a message that Mr. Graf may have intended as reassuring were some troubling signs of regulatory expansiveness.

First, the reassurance: Mr. Graf told his audience that the Commission has no “wish to regulate where we don’t have to” and disclaimed any interest in “those social games growing virtual crops or becoming lords of the universe.”

And here is the “but” (you know there is always a “but”): But, said Mr. Graf, “we are interested in the subset of social games that in commonsense terms have gambling characteristics” – even though in those games no real-money prizes are awarded and even though the overwhelming number of participants never pay to play. (According to figures cited by Mr. Graf, only 2 percent of players in social games pay.) One example Mr. Graf mentioned in his remarks was social poker.

So what does this mean? Is there any reason one game – because it “looks” like a real gambling game – should be treated differently than another? Many of those social games that lack those “gambling characteristics” nevertheless involve elements of chance. Can the standard for regulation really be (apologies to Potter Stewart) “I know it when I see it”?

Is there something truly different about a free-to-play slots game that warrants regulatory oversight, even if some players choose to pay to buy additional chances to play? How is that different from an arcade video game or a virtual fantasy or MMOG game? (No, I’m not going to define “MMOG.” As my mother used to say, look it up!)

Why is the choice to spend money playing an online social slot game any less valid or more nefarious than someone else’s decision to spend money playing World of Warcraft?

Indeed, the logic of Mr. Graf’s analysis (if not the law) would permit regulation of World of Warcraft as well, should the relevant regulator suddenly decide that is warranted.

The United States regulatory picture is somewhat different from that in the United Kingdom. Among other reasons, on this side of the Atlantic, unlike in the U.K., the element of consideration in most states is required in order for a game to be considered “gambling.” For that reason, for example, the award of a real-money prize alone (e.g., in a free-play game) should not trigger most states’ gambling prohibitions.

The UK has moved past that point of demarcation. Mr. Graf’s comments signal that perhaps the Gambling Commission is ready to move past yet another.