Mass Effect 3 Kotaku Piece

I was interviewed for a piece on Kotaku today, which you should check out. It's amazing how many regulations are out there related to raffles and sweepstakes that most people don't consider when planning a contest. I'm glad that it seems that everyone involved with this were able to roll things back before anyone got into real trouble.

Online Video Game Gambling Still Questionable

In the past few weeks, a lot of sites have had coverage of BringIt.com, a new site purporting to allow you to wager on games like Halo 3 and Madden NFL 10. I've talked about some systems like this before, and one fact still seems to be lost in the shuffle: the legality of these sites is questionable at best and consumers should proceed with caution. I've reviewed the BringIt.com terms and FAQs (though I have not registered for nor tried the functionality of the site), and to illustrate my point, I'm going to use my home state of Texas as an example. BringIt.com says it is perfectly legal in my state, but a simple review of the Texas gambling statutes indicates otherwise, though the risk is much higher for the website than for the gambler. Let me again preface this by saying that this is simply my opinion on the matter, and it is possible that the purveyors of BringIt.com have received an attorney general opinion which they base their business upon in some or all states. More importantly, none of this post should be considered to defame or disparage the owners or attorneys for BringIt.com, it's simply a disinterested arms length commentary on the system in question, of which BringIt.com is a prime example.

For those unfamiliar, a good summary of Texas gambling laws exists here. On the face of it, anyone participating in the site is a gambler, and the site itself is a bookmaker. There are a number of ways this violates the letter and spirit of the Texas laws. First and foremost, by collecting bets, the site is almost certainly a bookmaker by statute. And this activity is almost certainly the offense of gambling, defined as being committed when someone 'makes a bet on the partial or final result of a game or contest or on the performance of a participant in a game or contest.' And more importantly, it satisfies the test for gambling in Texas, since the answer woudl certainly be yes when asking 'does it encourage the gambling instinct?' (see Callison v. State, 172 S.W.2d 772, 774.)

More importantly, Texas has an explicit prohibition to internet gambling, which is defined as multiple people using multiple computers to play a game and bet on the outcome. In my view, this spells out exactly what we have here, and that sentiment is clearly echoed in a 1995 Texas Attorney General Opinion. This system is no different than the third question presented, using a bulletin board to facilitate online card games.

While this may look one sided, there are often exemptions in the law. So, is there an exemption, though, that the site can rely on? The 'social game' exemption is certainly inapplicable because BringIt.com is making money on the transaction. The exclusion of awards for certain contests of skill from the definition of 'bet' basically only includes certain kinds of prizes for contests, not one on one 'challenges' that are wagers by another name.

This, of course, ignores the fact that many EULAs and TOS (both for the games and for services like Xbox Live) may explicitly bar this kind of behavior. To that end, not only could the consumer be penalized, but BringIt.com could be presented with a suit not unlike the Glider case, and we all know how that turned out.

That's not to say the whole site has no legal factors in Texas. I have some questions to the legality of the online element, but land-based cash game tournaments have been legally run in Texas, with MLG events and QuakeCon being two of the most well known. Assuming the rules are being followed appropriately, at least the multiplayer bracket portion might be legal in Texas.

Of course, this opens the larger question: If there's on state with these kind of questionable issues, what about the other 38 the site allows play in? And what about the Unlawful Internet Gambling Enforcement Act, which bars most of this activity nationwide regardless? And is the site complying with the IRS rules regarding reporting of winnings? I don't want to nay-say the concept, but it certainly leaves me with questions based on my own analysis. Granted, I would greatly prefer a unified Federal stance on online gambling both legalizing and regulating the industry, and I would certainly support sites like this were the legal landscape clearer in that regard. For now, however, I would certainly proceed with caution.

Law of the Game on Joystiq: Tournamentality

In this week's Law of the Game on Joystiq, a quick look at tournaments.

Read on!

Law of the Game on Joystiq: The evolution of Pub Games

In this week's Law of the Game on Joystiq, a little gambling law as it relates to the Pub Games.

Read on!

Poker, The Internet, and The Skill-Chance Continuum

A particular question has been bothering me for quite some time now, specifically whether the skill chance ratio changes for online poker versus real life poker. The issue seems fairly straightforward, but the more I've analyzed it, the answer is far more complex than I would have anticipated.

To illustrate the issue, the game of poker has to be examined from both a chance and skill angle. For the purpose of this discussion, imagine that the poker game in question is consistent between the online and real world application, because changes in the rules would make this analysis less accurate. From a chance perspective, the games are theoretically identical. There are the same number of cards dealt at random in the same manner. Seeing this identical chance element may make many people stop their analysis, and that is the trap I initially fell into.

However, examining the games from a skill angle, there is a difference. Now, bear in mind this analysis is examining online poker without the use of webcams or other direct feeds on the actual faces of the players. Running a poker that requires active webcam use and participation (i.e. every player's actual face and upper body must appear on camera at all times) may very well be no different than playing in person. But assuming a more traditional online poker venue where representation is by avatar and some sort of chat system, the online variant only has some of the skills that could be used in a real life game. Specifically, the online game does have the skill of reading your cards odds (although this may not be as great since online players can be referencing statistical information while playing) and reading your opponents' betting behavior. Real life poker adds the entire dimension of reading the body language and behavioral quirks of your opponents. Theoretically, someone who took full advantage of all potential skill play in real life poker would be playing a greater skill game than someone utilizing all skill in online poker.

Thus creates the difficulty. If skill/chance is a spectrum, as practically all legal scholars cite, then how can online and real life poker be reconciled? Both have identical chance elements, but one has greater skill elements than the other. This leads to one of only two conclusions: Either skill and chance must be viewed in terms of a relativistic percentage scale, meaning that games with identical chance elements can have variable chance percentages based on the total skill elements in the game or the skill/chance spectrum can be extended, and is therefore not a static spectrum as it is often discussed. To put this into numeric terms, if poker has a chance value of 40, then under the first theory, the maximum value is always 100, so online poker would be 40/60 while real life poker would be 30/70. Under the second theory, the respective ratios would be 40/60 and 40/93.333 for a possible total of 133.333. Clearly either one accounts for this particular issue, and neither one is universally optimal over the opposite approach. Of course, it's not as thought anyone is applying numerical analysis to the skill/chance ratio at this time.

However, where this may matter is for the discussion should the trend continue toward the legalization of skill games online versus the contined banning of chance games in the US, especially if a bill like the Skill Games Protection Act should pass. Really, this operates as an interesting thought exercise that may later prove more troublesome for figuring out there the skill game line will need to fall if this division is in fact going to determine online gambling legality in the US going forward.

Law of the Game on Joystiq: MMORPGambler

In this week's Law of the Game on Joystiq, I discuss MMORPG gambling.

Read on!

UIGEA Proposed Regulations - Sen. Sununu's Response Letter

I've recently learned of a letter, dated February 11, 2008, from Sen. Sununu on the topic of the proposed Treasury regulations for the UIGEA (the Unlawful Internet Gambling Enforcement Act). While I have not yet acquired a copy of the letter in question, my understanding is that the letter urges greater clarity in the proposed regulations.

The regulations (available here) essentially place all of the responsibility for the enforcement of the UIGEA on the banks and financial institutions. Why does this matter? It is another piece of evidence that the UIGEA is not the most ideal piece of legislation, and may in fact be short lived. As there are already at least three proposed alternative bills (including the Skill Game Protection Act), it may only be a matter of time before the UIGEA is pushed to the status of mere historical footnote.

However, I'm getting ahead of myself. The letter in question, as I understand it, notes this major difficulty in the regulations, specifically placing an undue burden on the financial institutions and wholly lacking clarity in what gaming is actually "banned." The law, as a global concept, is supposed to be a clear arbiter of an issue, and clarity is a feature that the UIGEA lacks.

The Treasury will release their revised regulations sometime in the not too distant future. Until then, we can only speculate as to what the end result will be, or what other bills may pass in the mean time.

Gaming Law Minefield

For anyone who happens to be in attendance, I will be at the ABA's Gaming Law Minefield conference tomorrow and Friday. I'll have copies of my Gaming Law Review article available for anyone who tracks me down.

Law of the Game on Joystiq: Gambling Hero

On this week's Law of the Game on Joystiq, I discuss the potential application of gambling to the Guitar Hero franchise.

Read more.

Real Money Transactions Can Lead to Gambling Problems

Worlds in Motion has an article up detailing a new surge in the efforts to legitimize real money transactions in MMO games. Generally, the idea is a good one, as RMT can provide the players what they want, as demonstrated through the vibrant black market, while the legitimization gives the developers what they want. In fact, RMT based games are widely successful in other parts of the world. However, given the current state of US gambling laws, increased RMT in MMO games where gambling exists could put the MMO providers on thin ice. Second Life has already seen attention for gambling, and other worlds may not be far behind.

The tricky issue to deal with is the conversions between the virtual goods or currency and real currency. This is something I've discussed at length in my SSRN Papers. From a broad perspective, if a game either lacks gambling or lacks RMT, then there should be no cause for concern. However, when both elements are present, it becomes more problematic. Second Life (while gabling was still permissible), for example, as a direct currency exchange, could be viewed no differently than online casinos. In fact, even if gambling were using a more barter-like system, where, for example, weapons were wagered in fights, there could be a gambling issue assuming the weapon has a real world value, for example, from the ability to buy or sell it for real currency. The even more complex situation arises where the market price can fluctuate, especially given the prospect of reporting winnings or losses for tax purposes.

Obviously, this issue could take a number of turns depending on what the developers end up implementing in future games. It will be interesting to see if more developers place outright bans on wagering to avoid the issue entirely.

Skill, Chance, and the Unlawful Internet Gambling Enforcement Act

Prior posts on this site about Tournament.com and Kwari have both raised some eyebrows about my particular interpretation of the UIGEA as it relates to games of skill and games of chance. As such, I thought this would be an appropriate time to discuss both types of games, and the reasoning behind my conservative approach to the UIGEA.

Put simply, there are three types of games in the world: games of pure chance, games of pure skill, and games somewhere in between that employ both elements of chance and skill. There are readily available examples of all of them. Lotteries, roulette, and bingo are games of pure chance. All in all, no matter what system you think you're using to select your winning numbers, it's pure luck. You cannot affect the odds of which number will be picked. To be a true "pure" skill game, there must be no chance involved whatsoever, and to that end there are very few, prime examples being chess, checkers, and othello. In any of these games there is no chance element as every move and rule is pre-defined and determined by the rules. After all, rolling a dice, drawing a card, or spinning a spinner are all "chance" elements, even if they are not always treated that way under the law. Between the two extremes lay a spectrum of other games with varying degrees of chance and skill weighing upon the outcome, be they board games or casino games or video games. As such, some games which can be played in either way to be classified as one or the other. Blackjack is typically lumped into the games of chance, even though a card counter would argue otherwise. Poker has been classified both ways. Competitive board gaming, such as Scrabble or Monopoly, would likely be classified as skill since the chance element is so minimal. Of course, these interpretations also vary by county, and the major difficulty with the internet is addressing these games on a multi-national level.

This brings us to the difficult proposition of classifying video games, the vast majority of which I believe fall into the "in between" category. Granted, arcade games are likely games of pure skill, Galaga or Donkey Kong or House of the Dead for example. However most anything else has some chance element to it in a multiplayer context, even if it is minor. The most relevant example would be spawning. In a FPS that has respawning, spawns are the luck of the draw. While many people claim FPS games to be pure skill, there is no amount of skill that can alter the result of spawning in someone's crosshairs. Similarly, in any RTS map, say Starcraft, that has unequal resources at the starting point, there is an element of chance. In a similar fashion, the terrain from a given spawn point may give some players an advantage. The most often cited counter argument is Counter-Strike, where there is no real "spawning." However, even Counter-Strike can have a random element to it if either team is filled out with random players. Even the most skilled players will be severely disadvantaged round after round if their team is arbitrarily filled up with an inept hodgepodge of other gamers. It would be the equivalent of filling out an NFL team with random fans who happen to be in attendance at the game and making them play. Thus, only in the event where both teams are controlled can Counter-Strike be a true "skill" game.

Skill games are not defacto illegal under the UIGEA. In fact, it's rather ambiguous on that matter. When laws are ambiguous, the courts are free to look at elements like legislative history, and one of the key issues the UIGEA hoped to address was online poker. As such, I have been erring on the side of caution in my analysis. Why? Poker has fairly equal elements of chance and skill (skill which includes reading your opponents, an element absent from Blackjack). If poker is covered, then arguably, anything short of a pure skill game could be lumped into the UIGEA if the courts so decide (absent the Skill Games Protection Act). Moreover, the overwhelming sentiment in the US congress seems to be anti-gambling, and thus I would be inclined to surmise that future legislation or interpretation would follow this same thought process. Accordingly, most of my articles have erred on the side of caution in pointing out chance elements that could push certain games into the UIGEA domain. As such, the articles reflect the direction I think the law can go rather than how I would personally interpret it or how I hope it would go. I hope that serves to clarify the two above referenced analyses.

Kwari: The First True "Gambling" FPS

Your "buy in" is the purchase of ammo. Your health bar is your wager. You lose money for damage taken, and gain money for damage inflicted. This is the basic concept behind the first true "gambling" First Person Shooter, Kwari, and it seems like a mild adaptation of the basic concept in poker to a completely new game and genre. This is truly a game of skill that you wager upon.

However, while the concept is a step beyond the model employed by sites such as Tournament.com, the legality is still questionable in the United States. As I've pointed out before, the Unlawful Internet Gambling Enforcement Act ("UIGEA") was created, at least in part, with online poker particularly in mind. Hence, the Skill Game Protection Act ("SGPA") is proposed to specifically exempt games for skill, which includes poker, from the UIGEA. However, the SGPA hasn't passed, and so therefore it is reasonable to assume that the UIGEA still encompasses games of skill until the courts say otherwise, even though the UIGEA is quite ambiguous on the matter.. As such, even though Kwari is purely a skill game, it may be covered. But, the overwhelming ambiguities in the UIGEA may provide Kwari with a loophole, or the SGPA would almost certainly exempt Kwari from the UIGEA.

There's also a bigger tax implication for players. If you are a master of Kwari and can walk away with thousands of dollars a month, is it ordinary income or gambling winnings? I think the argument can certainly be made that winning in Kwari is no different than what, say, Tiger Woods wins in golf or what any other professional athlete is paid. On the other hand, poker winnings are gabling winnings in the eyes of the IRS. The classification of Kwari winnings could easily go either way, and mean a significant difference in taxable income depending on the result.

[Via Joystiq]

A Tale of Two Worlds: New U.S. Gambling Laws and the MMORPG

Back in late April I finished an article titled A Tale of Two Worlds: New U.S. Gambling Laws and the MMORPG. That article has been published in the now available August edition of the Gaming Law Review. I must admit that some of the substantive MMORPG analysis is a bit simplistic (mostly in defining the volume of real money transactions as they relate to World of Warcraft), in part due to to audience considerations, but the legal analysis is quite thorough. While my SSRN revisions are still under review, the paper is available to those who may have access to the journal through academia or other means.

For those interested, here is the reference information:

A Tale of Two Worlds: New U.S. Gambling Laws and the MMORPG

Mark Methenitis

Gaming Law Review. Aug 2007, Vol. 11, No. 4: 436-439

Abstract

Full Citation:
Mark Methenitis. Gaming Law Review. 2007, 11(4): 436-439. doi:10.1089/glr.2007.11404.

Gaming Law Review, Volume 11, Number 4


[UPDATE: Just to clarify, the simplification was in the following regard: I assumed, for the purpose of the paper, that Blizzard's ban on real money transactions was completely effective, rather than just mostly effective. The concept of the "black market" complicated the comparison to a high degree and would have easily doubled the length of the paper. It also plays to a greater assumption that Blizzard will, in all likelyhood, continue to crack down and may eventually wholly eliminate real money transactions, even those on the "black market" type level.]

Second Life Bans Gambling...Sort Of

As I continue to play catch up from my hiatus, I have been hit by a bit of an irony. During my time away, I did submit the finalized version of "A Tale of Two Worlds: New US Gambling Laws and the MMORPG," which will be appearing in this month's Gaming Law Review. Of course, a mere few days later, Virtually Blind reports that Second Life has issued a clear "ban" on in game gambling, making some of the examples I used in the paper moot.

While I do agree with Virtually Blind's Benjamin Duranske that the revised policy statement is far clearer than the previous, I can't go as far as to call this a true "ban." The revised statement leaves many loopholes that I'm certain will be exploited in the days, weeks, and months to come. The policy states that games cannot "(1)(a) rely on chance or random number generation to determine a winner, OR (b) rely on the outcome of real-life organized sporting events, AND (2) provide a payout in (a) Linden Dollars, OR (b) any real-world currency or thing of value."

First, the statement really makes no claims at all with respect to games of skill. In fact, Second Life poker wouldn't violate this policy under many interpretations of "relying on chance." Whether it would be interpreted this way under the UIGEA is an entirely different debate (without an answer at this point), but more than likely poker would not violate the Second Life policy. The same could be said for any other game of skill that could be integrated into the grid. I suspect it will only be a matter of time before someone builds a Quake Zero betting system that plays through Second Life.

The second loophole is actually one that was mentioned in the article, being that only betting on the outcome of "real-life organized sporting events" is banned. Thus, if your event is either not real life, not organized, or not a sporting event, it is excluded. Virtually Blind mentioned the Oscars or Survivor (although Big Brother would be more timely at the moment). But there are a large number of other excluded events. MMO-based sporting events (in Second Life, World of Warcraft or elsewhere) would not be "real-life" events, so they would be excluded. This means that theoretically you could bet on PvP matches. The definition of "organized" will likely be pushed, probably in drawing a line between "professional" or "league" play. However, the most critical designation may be "sporting." What is defined as a sport? Is Major League Gaming a sport? I know of people who would argue on both sides of that debate. This restriction is by no means as comprehensive as it appears.

Perhaps the biggest loophole is in the "payout in (a) Linden Dollars, OR (b) any real-world currency or thing of value" clause. First, as Virtually Blind points out, the phrasing doesn't seem to restrict gambling in virtual items "of value." This, taken broadly, means that a simple casino chip system implemented in Second Life could circumvent the restriction. The only restrictions are on betting with Linden Dollars or real world currency or items of value. Thus, any virtual good that can be bought, gambled with, and resold for value would not be included. While actual chips might be argued to be the equivalent of currency, a system that operates in a similar manner without using chips may skirt the rules. Moreover, as Play No Evil's Steven Davis points out in comment 1, the use of a pachinko style system would skirt the restriction. For those unfamiliar with Japanese gambling, pachinko is a game in which you play with, earn or lose metal ball bearings. Having played the game while in Japan, it's much like a cross between a slot machine, a pinball machine, and a video game. These ball bearings can be redeemed for prizes. Among the prizes are a tokens that are, in the parlor, worthless, but if you take them to a booth nearby, they can be exchanged for cash. A similar model could be employed in Second Life as a means to bypass this policy.

While this new policy does help in some respects, it is still probably inadequate to deflect the pressures the UIGEA is placing on the system. Whether these loopholes were intentional or the result of an oversight will not impact the government's investigation, which seems to be an inevitability at this point.

Tournament.com Opens Leaving Many Legal Questions Unanswered

Tournament.com has opened its doors, allowing players to wager real money on matches of Counter Strike and Half Life 2 Deathmatch, with Day of Defeat to follow soon. The site's FAQ points to what will be the issue for their viability going forward:


2. What are "games of skill"?
Games of skill, such as those we provide here, are games where the result and outcome are decided purely by the skill of the players involved and not by any element of chance or luck.
Unlike games of chance, skilled gaming is legal in most parts of the world and is determined by the skill of the participants.

While the statement is true, that many jurisdictions do not restrict games of skill, the US stands as a nebulous question in this regard in the wake of the Unlawful Internet Gambling Enforcement Act without the passage of the Skill Games Protection Act.

The questions facing Tournament.com are likely twofold.

1. Are the games they are allowing wagering on "subject to chance"?
2. Are the players "amateur athletes"?

Either of these could place the Tournament.com system well within the crosshairs of the UIGEA. Unfortunately, the answer to either question is convoluted at best.

Subject to Chance

The "subject to chance" language was most likely added to combat online poker, and as most people know, while there is a skill to playing poker, it is still subject to the luck of the draw. Anyone who's played has probably had a run of bad hands in a row, and that's just how the game can go. On the converse, you can also have a run of good hands in a row.

First person shooters can have the same effect. Everyone has had one of those rounds where you just spawn in the wrong place every single time. Or one of those rounds where you just seem to get every kill. Or in a game like Counter Strike, there's always the chance that you get stuck with a horrible team. Or you're the one dragging behind on an excellent team.

In the grand scheme of things, I would place most FPS games in about the same chance strata as online poker, and given that, they would fall in the UIGEA unless the SGPA passes.

Amateur Athletes

The classification of gamers as athletes is still widely debated. Dictionary.com defines an athlete as: a person trained or gifted in exercises or contests involving physical agility, stamina, or strength; a participant in a sport, exercise, or game requiring physical skill.

To me, a gamer is, by that definition, an athlete, even though it is not in the traditional vision of an athlete. For that matter, if you consider professional billiards players or archers or marksmen or curlers athletes, then a gamer is much the same. These are sports of precision rather than brute force or extended stamina.

Why does this matter? Well the UIGEA references "includes any scheme of a type described in section 3702 of title 28." This refers to the Professional and Amateur Sports Protection Act, which reads:

Sec. 3702. Unlawful sports gambling
It shall be unlawful for -
(1) a governmental entity to sponsor, operate, advertise,
promote, license, or authorize by law or compact, or
(2) a person to sponsor, operate, advertise, or promote,
pursuant to the law or compact of a governmental entity,

a lottery, sweepstakes, or other betting, gambling, or wagering
scheme based, directly or indirectly (through the use of
geographical references or otherwise), on one or more competitive
games in which amateur or professional athletes participate, or are
intended to participate, or on one or more performances of such
athletes in such games.

In short, it is illegal to bet on sports online. Therefore, if these games are considered "sports" online, and then it would be illegal to bet on them. Since Athlete is undefined in the act, it comes to the "common meaning" of the term, which arguably does include gamers.

These are just my humble estimations on the matter. Tournament.com or any similar site would need to retain counsel to examine their individual situation more closely. Of course, the Skill Games Protection Act may change the playing field, so to speak, of online gambling. We will have to wait and see.

Even More Second Life Gambling: Two New Issues to Consider

In the wake of a bit of a gambling scandal in Second Life, two new points of concern have been once again made very public.

1. Second Life is not an inherently secure gambling platform, and as such, both the player and the house should be exceedingly wary of the integrity of the game.
2. Linden Labs, while claiming to "ban gambling," has done nothing of the sort, and needs to start worrying that the Feds may soon come calling.

Second Life Gambling Security

Gambling, at its core, is only as valuable as the integrity of the game. If the house is cheating, the player shouldn't play. If the player is cheating, the house shouldn't be letting the player play. In either case, when the integrity is placed into question from one side or the other, the game loses. Second Life has to be one of the few places where the integrity of the game itself is questioned more often than it is validated.

Here is just a short list of reasons why Second Life is not a good place to be involved in gambling:
1. There is no oversight of the house.
2. There is no oversight of the player.
3. The security is only as good as the scripter, and often, that isn't very good.
4. There is no real grievance system.
5. There is no way to assure payout.

To be honest, a player never knows if the house is paying out what it should, when it should, and without releasing information to other parties. On the flip side, the house never knows if the player has found a way to scam the system, short of an incident like this. Imagine if FrostyFox had, rather than take $200,000 up front, taken $500 per day for a few months. Would Bob Perry have even noticed, or if he did, would he have just considered it within the acceptable margin of error? As much as everyone likes to believe in the honesty of others, this should be example enough to make some people think twice.

Linden Labs UIGEA Wake Up Call

It was not that long ago when the reports of the Feds visiting Second Life made their way into the blog-o-sphere. And for a while it seemed that maybe Linden had taken the matter seriously. But this new story just shows that Linden's efforts were far more hollow than they appeared. It is hard to fault them, as the methods described to fly under the radar, and because no companies have yet felt the wrath of the UIGEA, but Linden (and potentially other game developers) need to take notice before the Feds decide to dictate the outcome. And unfortunately for the MMO developers, the Skill Game Protection Act won't do anything for in-game slots or other games of chance, even if they are cloaked within a game of skill.

As we approach the 270 day deadline to construct the finding tracking system, we may be inching closer to the first enforcement of the UIGEA. The question remains, however, when that enforcement will spread to the MMO world. If the status quo continues, the answer may be sooner than you think.

H.R. 2610 - The Skill Game Protection Act

Law of the Game noted rumors of a proposal to exempt games of skill from the Unlawful Internet Gambling Enforcement Act last week. That bill has materialized as H.R. 2610 "The Skill Game Protection Act." As the text is now available, some analysis can proceed. The relevant portion of the bill reads:

(f) As used in this section, the term `bets or wagers' does not include operating, or participation in, poker, chess, bridge, mahjong or any other game where success is predominantly determined by a player's skill, to the extent that--

`(1) the game provides for competition only between and among participants, and not against the person operating the game; and

`(2) the operator is in compliance with regulations issued pursuant to section 5368 of title 31, United States Code.'.

There are three critical points in this act in terms of inclusion:
1. success is predominantly determined by a player's skill
2. competition only between and among participants
3. [competition] not against the person operating the game

In the simplest terms, it has to be a game won by skill, bet on by players, and the house must not have a seat at the table.

As I often like to do, I'm going to set forth some examples of what is and isn't allowed under this proposed legislation.

Allowed:
1. A system where players could wager on the outcome of the next round of, say, Halo.
2. A system where players paid to enter a tournament, with the winner or top few spots taking the money paid in.
3. A system that allowed people to wager on the results of PvP combat in an MMORPG (round or tournament), so long as the betters were all combatants.
4. A system that let people bet on the result of a a race in, for example, Forza 2.
5. Wagering on the outcome of a round of Mario Party you are participating in. (This is the most questionable, as there are so many chance elements in Mario Party. However, I believe that the game is more skill than chance, so I think application would work here.)

Not Allowed:
1. Betting on the outcome of a game you're not playing. For example, I couldn't put cash on a player to win the next round of Halo as an observer.
2. Betting on someone else to win when you're playing. (This is a traditional gambling issue. If you're playing poker, you can't put money on the guy 2 seats down the table. It would eliminate the integrity of the game.)
3. Betting on the outcome of a Player vs. Computer match, i.e. betting as to whether a player character could beat a high level creature in a coliseum.
4. It does not legitimize gold farming or other MMORPG profiteering, as those are generated in a player vs. computer (environment) model.
5. Betting on anything primarily determined by chance, i.e. blackjack within an MMORPG.

Of course, this is just revision one of the bill, and all of this may change, or they bill may never pass at all. However, it does pose some interesting possibilities.

Bill Proposed to Exempt Skill Games from the UIGEA

PlayNoEvil.com is reporting that Rep. Robert Wexler of Florida is going to introduce a bill to exempt "games of skill" from the Unlawful Internet Gambling Enforcement Act ("UIGEA").

What does it all mean, though?

Well, games of skill may or may not have been covered by the original act, which cites "games subject to chance." Largely, such a bill would clarify what is and isn't covered by the UIGEA. The major implication is that poker would be carved out of the law's coverage, but other games like chess, mahjong, and bridge would also be removed.

And so would video games...

...or at least it seems reasonable to assume that most, if not all, would also be carved out.

Of course, it seems likely some significant opposition will arise, as online poker (and the debt people have incurred as a result of online poker) was a major driving force behind the UIGEA in the first place.

However, returning to the video game issue, the vast majority of games are clearly within the realm of "games of skill." Games of chance are like lotteries, roulette, and slot machines. Most video games employ significantly more skill.

Theoretically (depending on the text of the bill, of course), this would mean a company that allowed players to bet round by round on games of, say, Quake 4 or Halo 3 would be legal, and the payments to and from this system would not fall in the jurisdiction of the UIGEA.

The flip side, however, is that casinos in Second Life would still be problematic if they ran slot machines, roulette, lotteries, or other games of chance.

I want to re-iterate, this bill has yet to be introduced, much less passed or signed into law. We're still a ways off from what I've described, but if you want to be able to place bets on your skills in the next big FPS, you should consider supporting this bill.

New Illinois Gambling Law - Cash For CounterStrike?

Full Text of the Bill

Joystiq Story

Illinois is poised to pass a bill that deals with the definition of gambling in that state, and more to the point, removes the classification of "gambling" from particular activities. The relevant portion of the bill states:

8		(12) Offers of prizes, awards, or compensation to the
9		actual contestants in any bona fide contest between 2 or
10		more individuals participating in (1) an electronic video
11		game simulating a contest requiring skill, experience,
12		dexterity, and precision in which the element of chance
13		does not predominate or (2) an electronic video game
14		requiring speed and accuracy of response to factual
15		questions in which the element of chance does not
16		predominate; but not including card games and simulated
17		card games and not including any gambling game or activity
18		of the type conducted under the Bingo Licensing Act, the
19		Illinois Lottery Law, the Raffles Act, the Charitable Games
20		Act, the Illinois Pull Tabs and Jar Games Act, or the
21		Riverboat Gambling Act.

Put simply, they are legalizing certain payouts to a specific new classification of players. The Joystiq article seems to imply that this will legalize all betting as related to video games, but this is not the case. Let's take a look at the Illinois statute.

The new language is an exception to the general rule of what is considered gambling in Illinois. These designations are under subsection (a) of the bill, but include the typical wagering aspects as well as organizing wagering type activities. This exemption is narrowly drawn to allow for payouts in specific circumstances which would generally fall in the organizing section of the restricted activities.

This bill has a few key points in the exemption:
1) Offers prizes, awards, or compensation
2) to actual contestants
3) in a bona fide contest between 2 or more individuals
4) the specific game types allowed

Taking these issues one at a time, the first speaks to a payout exclusively. It does not exempt wagering on the activity. The second requires that the people being paid are contestants. The third requires it be a bona fide contest. And the final describes, generally, video games that involve skill.

Applying this analysis, I will outline what I believe falls on each side of the line.

First, the legal activities are fairly discreet. I imagine it is designed to mostly include events like QuakeCon or Major League Gaming or pay-to-play events. Specifically, a large, organized tournament where the winner takes home the prize, often paid by the entry fee or donations or a combination thereof. On a smaller scale, private tournaments could also qualify, assuming the games are those included in the bill.

This does beg the question, what is a game that involves skill? First person shooters, rhythm games, and even MMORPGs all require skill. The only games which would not qualify are games that are predominantly based on chance, like electronic blackjack or video poker.

On the other hand, the illegal activities are still left to be fairly broad. The restriction that players be actual contestants eliminates any possibility for outsiders to bet on video games. So, I couldn't go put $5 on the outcome of the next big Halo tournament. And the bona fide contest requirement will likely pose a difficulty for anyone who wants to bet on the next, spontaneous round of a game being played at a LAN party.

So, the Illinois bill would essentially legitimize large scale pay-to-play tournaments. If this bill passes, it is good news for anyone planning such an event in Illinois. The bill has yet to be signed by the governor, though, so don't start planning your big pay to play tournament in Chicago just yet.

For the MMORPG Fans

I've noticed the comments about the upcoming MMORPG content. While I don't have any of the new content ready yet, other than my second post, I thought I would take the time to re-link an old paper I wrote about MMORPG gambling. You can read the paper here.

I re-posted the paper on GoogleDocs since my TTU posting will expire in the not too distant future. That paper has been referenced many times, according to my most recent searches, including Wikipedia, Kotaku, Answers.com, and other scholarly papers posted online. A quick google search will generate quite a few results.

One note on the content of the paper: it is officially out of date. Because of changes to eBay policy on the sale of virtual goods and the passage of the Unlawful Internet Gambling Enforcement Act of 2006, a some of the current analysis no longer applies, other than in the theoretical sense. I've written an update, but due to some potential publication restrictions, I cannot post the update at this time. Perhaps it will make an appearance here in the future.