Platforms: Mobile
Making Money with “Virtual Money”
How to Avoid Legal Pitfalls When Establishing a Virtual Economy
W
ith Casual Games increasingly financed through micro-transactions, “virtual money” comes into play. The so-called threats of money laundering seem greatly exaggerated and may distract from the fact that virtual money can be an excellent way to both facilitate micro-transactions and to enhance the game-play experience. There are, however, a few legal pitfalls which should be avoided. Over the course of time, a player accumulates virtual money into an account either as a result of in-game success (as a credit) or through an upfront real cash deposit (made via credit card or by some other means). This virtual currency can then be exchanged for features, upgrades, and in-game assets, thus eliminating the need for costly real-world payments each time a transaction is made. Thus the player might spend virtual silver coins for a medieval dagger (for example) rather charging 21 cents to a credit card. The straightforward, virtual transaction is easy, cost-effective, and—since it takes place within the world of the game itself—completely immersive. In other words: Virtual money has a lot going for it. But as always seems to be the case when new businesses are emerging, sometimes the law can get in the way of developing new concepts. So it is that some are accusing game publishers of using virtual currency for money laundering. Others insist that publishers need a banking license if they intend to sponsor and maintain a virtual economy. I am happy to report that while I am counsel to several companies that depend on virtual money for revenue, none of them has been accused of laundering so far, nor has any of them actually Assuming you don’t want money obtained a banking license. Still, we should not take the latter issue too lightly. to get a gambling license, There are banking regulations in all major western economies, and you should make sure that you comply it’s best to avoid giving out with them. While details vary and case law is scarce, a useful rule of thumb: You are more likely to run virtual money as a reward here’s into trouble if your game provides a cash-out option. For instance, if you agree to buy the virtual money back, and in a game of luck. if the virtual bucks are accepted as a means of payment by third parties, then you are much more likely to be subject to some form of regulation by the government. In case of doubt, it’s always a good idea to discuss these issues with a qualified attorney or banking regulator. The same factors might also be important if you want to steer clear of gambling laws: Most jurisdictions will require you to have a special license for gambling (and they usually do not accept the one you can get so easily in Malta). Assuming you don’t want to get a gambling license, it’s best to avoid giving out virtual money as a reward in a game of luck. In fact, generally speaking you are pretty safe if your players cannot win something of actual monetary value within any of your games. Although a cash-out option definitely shows that your virtual money has a certain value, the lack of it does not prove the contrary. (Do you see how quickly legal restrictions complicate the implementation of virtual economies?) Finally, try to get your EULAs right. While EULAs are a difficult issue on their own, you will want to make sure you do not have to reimburse a player you have had to ban because he was in constant violation of the game’s rules. How the EULAs are drafted is important for your bookkeeping and tax declarations as well. Be sure to discuss this with your accountant to avoid having all the value of your virtual money treated as “contingent liabilities”—which is to say that you could end up having to reimburse your players for lost value if you don’t set up your EULA properly. You might also want to find out if and when you can have a player’s unused virtual money expire—just as many prepaid telephone cards do. Sound complicated? It might be, especially as there is still a lot of uncertainty. But remember that some of the most profitable companies of this industry are financed through virtual money, and their business appears to be more sustainable than of some banks dealing with “real” money. It’s just further proof that, whenever a good idea surfaces, smart people will find a way to take advantage of it. Don’t hesitate to create a virtual economy if it makes sense for your company, but make sure that you proceed with appropriate caution and expert counsel. n
By Andreas Lober Dr. Andreas Lober studied law in Tübingen, G e r m a ny, a n d Aix-en-Provence, Fra n ce. H e i s a lawyer qualified in Germany and holds a French “maîtrise en droit—mention droit international” from the University of Aix en Provence as well as a doctor’s degree from Tübingen University. He was admitted to the bar in 2001, joined SchulteRiesenkampff in 2003 and became a partner of the firm in 2006. His book Virtuelle Welten werden real was published by Telepolis in 2007. Andreas is a frequent speaker on topics of interest for the gaming industry in Germany as well as internationally. A gaming enthusiast since the early days of home computers, Andreas has done work in the gaming space since 1991. Today, Andreas is counsel to some of the leading developers and publishers of computer games and virtual worlds. He is especially known for his expertise with respect to online-gaming. Andreas can be reached at: andreas.lober@casualconnect.org.
Casual Connect Winter 2009
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