Tuesday, September 20, 2016

Eve Gambling Sites And The UKGC

Friday's charging of Craig Douglas and Dylan Rigby in the U.K. for operating an illegal gambling site based on FIFA 16 leads to the obvious question: how will this affect EVE Online? Specifically, does the U.K. Gambling Commission consider EVE Online gambling sites as operations required to obtain a license from the UKGC?

I am not a lawyer, and I won't try to interpret the Gambling Act of 2005. Instead, this post will attempt to follow the guidelines contained in the UKGC's white paper published in August 2016. I do not know if the white paper contains factual inaccuracies in what the law allows. The white paper is the outline of how the UKGC intends to enforce the Gambling Act of 2005, so until the regulators are overturned in court, I will treat the white paper as accurate.

At first glance, one would believe that the EVE Online gambling sites are not violating any laws. The only transactions between the sites and their patrons are virtual currency and goods. The virtual currency, ISK, is an in-game currency and not a cryptocurrency like Bitcoin. The participants are just playing with pixels that have no value.

Indeed, in Mason v. Machine Zone, Inc., U.S. District Judge James Bredar ruled against interpreting gambling within a video game as actual gambling. "Even in the Internet age, there is a crucial distinction between that which is pretend and that which is real and true," he wrote in dismissing the suit. "The laws of California and Maryland do not trifle with play money." Judge Bredar also ruled that the presence of illicit real money trading sites was immaterial to whether the virtual currencies in Game of War had any real world value.

The ruling of a federal judge in Maryland, however, holds no sway in the United Kingdom. The UKGC white paper describes a concept called "money's worth," which is not defined in the law. The Commission considers the term very broadly, "meaning simply something which has a financial value to the player." In referring to lotteries, the white paper states:
In considering whether prizes are money's worth operators should look widely at the uses their prizes/winnings can be used:
  • Can they be converted to money via third parties
  • Are they tradeable with others to obtain goods or services
  • as virtual currencies to pay for goods and services
If so it is likely that your prizes/winnings you are offering are money's worth.
According to the above definition, is ISK money's worth? First, if I understand the terms correctly, virtual currencies in point 3 refers to cryptocurrency like Bitcoin, so ISK does not apply to that criteria. But ISK, as regular readers of The Nosy Gamer know, is converted into real life currency every day on the secondary RMT (aka black) markets. So unlike in the ruling in Mason v. Machine Zone, Inc., illicit RMT does come into play in U.K. law.

ISK also counts as money's worth according to the second point. The obvious answer is that ISK is tradeable for PLEX, which is worth one month's subscription to EVE. But ISK is also tradeable directly to other players for things like server fees, artwork, and payment to writers on various EVE Online news/fan sites. So ISK qualifies as money's worth under two of the UKGC's three criteria.

Having established that ISK is money's worth under the Commision's definition, let's walk through an example using one of the flowcharts contained in the white paper. The example is a player buys a spot in a micro-lottery for 50 million ISK looking to win an Armageddon.

Flowchart from page 10 of the UKGC white paper
1. Is it a lottery? Micro-lotteries would fall under lotteries according to Section 2 of the white paper.

2. Are persons required to pay to participate? The flowchart refers to Schedule 2 of the Gambling Act. The relevant passage is:
2. For the purposes of section 14 and this Schedule a reference to paying includes a reference to—
(a) paying money,
(b) transferring money’s worth, and
(c) paying for goods or services at a price or rate which reflects the
opportunity to participate in an arrangement.
Since ISK is money's worth, the answer is yes.

3. Are one or more prizes allocated to one or more persons? In our example, one participant of the micro-lottery will win an Armageddon, so the answer is yes.

4. Are prizes allocated wholly by chance? For purposes of this example, let's ignore charges of rigged games. Since the winners are selected randomly, the answer is yes.

5. Is the lottery an exempt lottery? I am confident none of the EVE Online gambling sites are filing paperwork or paying fees to any of the local authorities listed in the Gambling Act in order to qualify as an exempt lottery, so the answer is no.

Answer: "The product is likely to be a lottery and regulated."

Given the charges brought against Douglas and Rigby, I feel confident in saying that any EVE gambling site that wants patronage from players located in the United Kingdom must get a license from the U.K. Gambling Commission. Without such a license, the UKGC may come knocking on the door with a request to stop or go to jail.

Now for the controversial part of the post. According to Section 5B of the EVE Online EULA, CCP may suspend or terminate the accounts of players who violate the Rules of Conduct. One of the policies that makes up the Rules of Conduct is the EVE Terms of Service. Point 7 of the ToS reads:
7. You may not violate any local, state, national or international laws or regulations.
One could assume that running an unlicensed gambling website using EVE Online assets in contravention of U.K. law violates point 7 of the ToS.

I will not get all up in arms about this issue. CCP will to do whatever CCP wants to do. I've played EVE for over seven years now, so I try to save my outrage for outrageous things. The gambling issue, unlike botting and illicit RMT, isn't something I will mount a crusade over. I am, however, watching the fallout from the CS:GO gambling scandals, so I may write about the EVE gambling websites again if the UKGC gets even more aggressive in the future.

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