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Do I need a specific license for operating a casino game (lets say poker Hold'em or video slots) that players are supposed to play with virtual money (chips) only? I am speaking about games like Zynga poker, Poker Deluxe, Slotomania and the hundreds other similar games on iTunes or Google Play. Players start with a certain amount of chips and if they run out they can rebuy a bundle of coins to keep playing. The users may not exchange those collected virtual funds (chips) for products or services, or cash out for real money, but just keep on playing for a fun.

Do I need any license for operating such a game?

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What does "re-buy a bundle of coins" mean? Does that mean they put real money in? –  Byte56 Mar 12 '13 at 16:15
    
Bundle of coins means if you spend your initial amount of virtual money, then you can buy via in app purchases "bundle of virtual coins" lets say 10k virtual coins for real $2,99 or another bundle 20K virtual for $3,99 ... etc –  KalinHad Mar 12 '13 at 16:19
    
I can't say I would recommend making a game like this. I think you would be safe since you are not returning the money to the user but the laws regarding gaming are pretty strict and sometimes random. I currently work for a slot machine company now and there are a lot of things required for these products (a gaming license is the big one) so I wouldn't be surprised if your game would also encounter similar legal issues. If you are completely set on making a game like this, you definitely need to talk to a real lawyer who specializes in casino gaming. –  Benjamin Danger Johnson Mar 12 '13 at 18:55
    
Yes, I'm completely set on making that game and it falls into entertainment category but not casino... Your company is probably casino operator... out there the things are much more complicated as you noticed already... Mr. Fredman has explained the things the best way below... Thanks –  KalinHad Mar 12 '13 at 20:45

1 Answer 1

I'm going to amend my answer a bit, as the situation is much more complex than I let on. The previous disclaimer (i.e., this is not legal advice, and you should consult an attorney) still applies. I am an attorney, but this is not my area of law (and indeed, it is a complex area), so please consult with a professional.

This answer is focused on the United States. Laws differ by jurisdiction. And within the U.S. gaming law is primarily a product of state law, which is to say things differ across the states. Also note, laws are changing very quickly in this area.

A few more points of clarification: I'm taking your question to refer to casino games that are played with virtual (not real) money. You use the phrase "supposed to play with virtual money" which is a bit disconcerting. (Does that mean, in other words, that players are encouraged to not play with real money but somehow the system allows for real money play? If so, we're in a very different territory.) The games you're describing are generally known as Casino-Like Social Games.

You also mention that the users may not exchange the virtual funds for . . . "services," but I'm assuming you're defining services in a manner to exclude playing casino games on your software, which is arguably a service. (Software is sometimes treated as a good and sometimes as a service.)

The legal issues in this area fall into two main groups: Legality and Compliance. Many of the laws in this area were written long before the internet, and there's still a good deal of ambiguity how the laws apply to internet sites and services.

Most states define gambling and regulate it by prohibiting illegal lotteries. An illegal lottery generally consists of three elements:

  1. Payment of some form of consideration by user
  2. Result determined by chance
  3. Award/prize, something of value

If any of these three elements are not present, the activity is normally not considered gambling. The games you're describing likely satisfy the first two elements, but remain legal by virtue of not providing any award or prize of value (step 3).

Note that alternative approaches to the "prize" can still run into trouble. In Japan, Japan's Consumer Affairs Agency gave notice to a number of game companies that "Kompu Gacha" would no longer be allowed, a system where players receive a valuable grand prize for completing a set of "gacha" prizes, which are awarded randomly. Prizes don't have to be money, e.g., a car or an iPad would still count. (In one case involving the NCAA lottery system for awarding tickets to Final Four games, a right to buy a set of tickets was not deemed to be a prize, but there's not much law on this.)

The more pertinent question for you is whether virtual currency constitutes received value? The answer to that is going to depend on a number of factors, such as whether the currency was acquired with real cash or earned through game play, what the player can do with the virtual currency (e.g., cash it out for real money or physical goods? or just use it for in game virtual goods?), with whom can the currency be used? (i.e., can it be spent on third parties?).

Some games try to reduce the risk on this issue by implementing a form of dual currency: one currency that is purchased, another form that is awarded through game play.

The consensus view among game developers who make these types of games (at the moment) is that they are generally in a safe zone with virtual-only currency, but, as I mentioned earlier, this is something you're going to want to discuss with a competent attorney in your jurisdiction. Indeed, many online gaming companies switched to virtual-currency-only for players within the United States in an effort to avoid prosecution on illegal gambling charges.

So far, this discussion has focused entirely on the legality, but your question was on compliance and licensing. The reason for this focus is because if it isn't gambling, you don't fall within the regulatory scheme for licensing gaming sites. If it is gambling, the short answer is yes, you need a gaming license, and you'd need to make sure your games comply with various gaming regulations. There are all kinds of them, things like the display of near-misses on slot-machines, etc. The licensing and compliance regulations are outside the scope of this answer.

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