UKGC Discussion Paper Tackles Digital Currency, Social Gaming

The UK Gambling Commission has recently published a discussion paper tackling some gambling ‘grey areas’, in particular concerns about how the gaming landscape has changed as a result of new technologies and games. The publication is just a discussion paper for the moment, though it could inform future policy as these sectors continue to grow.

One area the paper tackles it the use of virtual currencies. Bitcoin is, quite predictably, at the top of that list, along with in-game items and currencies that have little or no exchange value to real currency.

On the topic of Bitcoin, the UKGC is quite clear on its thinking, particularly because it recently updated a clause in its License Conditions and Codes of Practice to include digital currencies as a valid method of transaction for licensees. Bitcoin has already established itself as a viable gaming currency in several online casinos and its popularity has grown as a result.

In-game items

The case on in-game items however is less clear-cut. The paper has raised suspicions that the UK Commission would seek to regulate the eSports betting market specifically, as they are where digital currencies are more likely to be used.

“Like any other market, we expect operators offering markets on eSports to manage the risks – including the significant risk that children and young people may try to bet on such events given the growing popularity of eSports with those who are too young to gamble,” stated Gambling Commission General Counsel Neil McArthur.

From a regulatory perspective, the Commission holds that betting on eSports is no different from betting on the outcome of any other event and similarly, eSports carries the risks of match fixing, excessive gambling and cheating.

The UKGC states that in its view, an organization providing a platform for players to play against each other and bet on themselves would need a licence, as it would be acting as a betting intermediary. On the other hand, however, the Commission recognises the difficulty in distinguishing between this kind of activity and genuine, paid multi-player tournaments.

Social gaming under scrutiny

In the recent discussion paper, the Commission reiterated the position it outlined in a 2015 ‘Social Gaming’ paper – gambling-style games that look and feel like traditional gambling are its main focus, and virtual items are not considered prizes within the meaning of the 2005 Gambling Act, even when those items could also be bought via real money.

The story is different however, when it comes to the trading of these virtual items, rendering them a form of digital currency. In such games where virtual items can be won, it is not enough for an operator to prohibit the trading of these value items – if the operator is not taking reasonable steps to prevent unauthorised trading, they could invite the attention of the UKGC.

The case of Counter Strike: Global Offensive

Such in-game trading came to the online world’s attention recently, when a controversy within the world of eSports was thrown into the limelight.

The drama centered around a video game called Counter Strike: Global Offensive (CSGO). Within the game, players can pay real money for a virtual key, which then unlocks a crate, inside which can be found modified weapons (or ‘skins’) of different value. There is already an element of gambling at this point – after redeeming the key, players are presented with a slot machine-like reel that eventually pays out their item.

However, the issue raised eyebrows even further when unaffiliated websites popped up, allowing players to bet their skins in hopes of winning better ones. This completely circumvented gambling laws and exposed the game’s younger fans – some too young to gamble legally – to an activity that lies squarely within the realm of gambling.

In response, the creators of CSGO announced new restrictions for its players, as well as announcing its intention to acquire a gaming license.

“Starting from Monday, 1st August 2016, we will start limiting the access to the betting functionality for users visiting us from countries and regions, where online eSports betting is forbidden,” it said.

“We will add additional registration and verification process and we require you to comply with our new Terms of Service if you want to keep using our service. We also remind that our service is only for users who are at least 18 years old.”