Out-Law News 3 min. read

Gambling regulator looks to clamp down on unlicensed e-sports betting and gambling of 'in-game' items

The British gambling regulator has warned online platforms that facilitate bets on e-sports or which allow gamers to gamble virtual items they have obtained when gaming that they might require a gambling licence to continue with their operations.

The Gambling Commission said "the lines between some social gaming products and gambling are blurring" and highlighted concerns about unlicensed betting and gaming activities as the popularity of e-sports grows.

The regulator has published a new discussion paper on virtual currencies, e-sports and social gaming (12-page / 141KB PDF) in which it confirmed that it had written to more than 100 unlicensed online gambling websites calling on them to "cease offering facilities for gambling to British customers". It said a "significant number" of those websites were "offering facilities for remote gambling" in the context of e-sports and gaming.

There has been an increase in the number of websites offering e-sport gamers the chance to play against one another for money or prizes, the Gambling Commission said. It said some of those websites "allow participants to bet on themselves to win" and that, as a result, they might be acting as a 'betting intermediary' and require a licence to continue that activity.

"Our preliminary view is that a person who is offering facilities for match ups, by introducing participants who bet against each other about who will win, is providing a service designed to facilitate the making or accepting of bets between others," the Gambling Commission said. "If that is the case then the person offering those facilities may be acting as a betting intermediary and would need a licence."

"We can see, however, that drawing a clear distinction between arrangements that would in our view amount to acting as a betting intermediary and payment to participate in genuine competitive tournaments is not easy. In reaching a view on the question of whether a person is acting as a betting intermediary we would look at a number of factors, including the number of people involved in the competition (the more people participating in the contest tending towards tournament rather than match up)," it said.

The Gambling Commission also addressed the rise in the trade of so-called 'in-game' items which computer gamers can win, trade, sell or use. It said those "digital commodities", or 'skins', can sometimes be "converted into money or money’s worth" and that they therefore serve as "a form of virtual currency" which can be gambled with. The Commission has previously confirmed that offering facilities whereby virtual currencies can be used for gambling qualifies as a regulated activity for which a gambling licence is required.

In its latest discussion paper the regulator said: "In some cases, the inventory of the player’s account can be connected to websites where the user can use the ‘skins’ they have bought or won to bet or stake in casino style games. These types of ‘skins’ have a monetary value derived from the current market price and can be converted into money. Where ‘skins’ are traded or are tradeable and can therefore act as a de facto virtual currency and facilities for gambling with those items are being offered, we consider that a licence is required."

The Gambling Commission also used its discussion paper to reiterate recent changes to its licensing code in confirming that gambling operators that wish to accept payment in digital currencies must satisfy it that they comply with all anti-money laundering and social responsibility requirements. It said that gambling in e-sports presents particular risks that operators need to manage as children and young people will often play those games.

Gambling law expert Guillaume Bellmont of Pinsent Masons, the law firm behind Out-Law.com, said video games publishers and other businesses involved in the e-sports and gaming markets should take the opportunity to respond to the Commission's discussion paper. Responses can be submitted until 30 September. The Commission said it intends to publish a new "position paper" on the issues later this year.

Bellmont said that the Commission's discussion paper is timely as it follows recent controversy surrounding third-party websites allowing for the trade of virtual items obtained through the computer game Counter Strike: Global Offensive (CS:GO).

"As a result of these items being readily transferable into real world money, a practice has built up of players and people watching other players gambling using these skins through different sites," Bellmont said. "These sites tend to lack the protections that tradition gambling websites have and in particular age restrictions do not seem to be well enforced."

Bellmont said that the global computer game industry has in general terms, however, sought to act in compliance with relevant gambling regulations and assess whether new features they add comply with those rules. Game publishers often have little or no control over activities carried out on online platforms that relate to their games as these can be organised by third parties, he said.

"About a month or two ago a class action lawsuit was issued in the US (42-page / 1.61MB PDF) by a parent of a child who had used these websites alleging that Valve, the company behind the game, had been complicit in the setting up an illegal gambling practice," Bellmont said. "Since then Valve has been issuing cease and desist letters to these websites to try and curb their activities. Some of the larger websites, including, CS:GO Lounge, have indicated their intention to apply for gambling licences in a number of jurisdictions."

Bellmont said that e-sports gaming is also attracting the attention of regulators in other countries too. France is about to pass new legislation that will allow e-sports competitions to be run, subject to a number of requirements.

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