Car racing games have long attracted avid gamers. There’s the Gran Turismo series, the appeal of which wasn’t just the number of cars and tracks available, but also the ability to simulate a racing season and race against other players online. The cars could be heavily tuned, and for the most part different models had their own handling quirks and personalities.
UPDATE: On February 24, the Colorado Senate passed House Bill 1047 with no amendments, and on March 13, 2015, Colorado Governor John Hickenlooper signed this bill into law.
Colorado House Bill 1047 would make internet sweepstakes cafés illegal under Colorado law. The law declares that internet sweepstakes cafés and similar establishments in which simulated gambling devices are used to award prizes to customers do not comply with existing constitutional and statutory requirements for the conduct of licensed gambling activity in Colorado and, therefore, the operation of these businesses is contrary to public policy. In the legislative declaration, it describe internet sweepstakes cafés as business locations that make available electronic machines, systems, and devices enable gambling through pretextual sweepstakes relationships predicated on the sale of internet services, telephone cards, and other products. After moving quickly through the House, H.B. 1047 was introduced in the Senate on February 17. It remains to be seen whether it will be passed by the Senate and, ultimately, signed by the Governor. This bill would be effective immediately upon being signed by the Governor.
2013 was an incredibly active year for social media legal issues. Below are selected highlights on some of the more interesting legal issues that impacted social media, along with links to reference material relating to the topics.
1. Virtual Currency/Bitcoin
FinCEN Virtual Currency Guidance and Enforcements – FinCEN published legal guidance on virtual currency making clear that existing regulations regarding money transmitter and anti-money laundering laws apply to certain virtual currency activities. Shortly after issuance of the guidelines,
a wave of enforcements shut down non-complying entities. [BLOG]
Congressional Hearings on Virtual Currency – Congressional hearings were surprisingly more friendly and receptive of Bitcoin and other virtual currencies.
2. Privacy – Guidance and Enforcements
COPPA – The FTC issued new guidance
and FAQs for children’s online protection due to evolving technology and changes in the way children use and access the Internet, mobile devices and social media.
CA Privacy Law
– California passed new privacy laws.
3. Intellectual Property/Patents
Patents – The number of social media patent filings continued to increase. The America Invents Act (AIA) fully kicked in, providing a greater ability to challenge patents believed to be invalid without going through district court litigation. The Fast Track
process to get patents issued more rapidly (often in less than a year)
continued.
Ownership of Social Media Accounts and Followers – Despite a number of cases (including ones involving LinkedIn and Twitter) relating to ownership of social media accounts, the law remained murky and fact specific.
This uncertainty can be avoided by proper attention to social media policies before issues arise.
4. Employment Law and Social Media
National Labor Relations Board (NLRB) – The NLRB continued to issue surprising guidance and decisions on social media usage. In many cases, some or all provisions of employers’ policies governing the use of social media by employees were found to be unlawful. [BLOG] The NLRB affirmed that workers have the right to discuss work conditions freely without fear of retribution,
whether the discussion takes place in the office or on Facebook. But later in the year it actually found some uses of social media for employment (firing) decisions to be okay.
Employer Access to Social Media User Names and Passwords – By year end, 36 states had passed or initiated legislation prohibiting employers from requesting personal social media account information or passwords in connection with employment decisions.
National Conference of State Legislatures Report – Some states have similar legislation to protect students in public colleges and universities.
5. Online Gaming
First mover states
forged forward with online gambling.
· Nevada – Legalized online poker and granted its first licenses for interactive gaming.
· New Jersey – In February, passed legislation (signed into law by Governor Chris Christie) allowing on-line wagering. Subject to certain limitations, licensed operators are permitted to offer online versions of a wide variety of games currently permitted in Atlantic City casinos (e.g., roulette, craps, black jack, and slots).
· Delaware – On October 31, launched what Delaware officials call a “full suite” of internet gambling.
Zynga – In September,
Zynga withdrew its bid for a gambling license in Nevada
Federal Gambling Legislation
– The prospects for a federal law for online gambling remain elusive.
6.
Mobile Health Applications
FDA Guidance
– The Food and Drug Administration (FDA) issued guidance that focused on applications that present a greater risk to patients if they do not work as intended or that cause smartphones or other mobile platforms to impact the functionality or performance of traditional medical devices.
FTC Guidance
– The FTC issued guidance in April focusing on truthful advertising and privacy.
7.
Gamblification/Sweepstakes
Florida prohibited
gaming promotions in a cause-related marketing campaign (where purchase of a good or service benefits a charitable cause).
Internet Sweepstakes Café Conviction in Florida – Lawyer Kelly Mathis was convicted on 103 of 104 counts related to illegal gambling based on his role in Internet Sweepstakes Cafés in Florida. He faces up to 30 years in prison. CA, OH, SC and other states moved quickly to shut down similar operations.
8.
Equity-based crowd funding legalized in the United States
SEC Rules
– In October, the SEC voted unanimously to propose rules under the JOBS Act to loosen the rules and permit companies to offer and sell securities through equity crowd funding.
Note:
Equity crowd funding is much like crowd funding, which has been popularized in the United States through sites such as Kickstarter and Indiegogo. The difference is that instead of individuals supporting campaigns through donations, numerous investors are purchasing small stakes in startups or small businesses.
Critics Emerge
– Critics of equity crowd funding worry that the industry will be rife with Ponzi schemes or that having too many investors will hurt startups’ prospects for future funding.
Pillsbury originally discussed this in a January 2012 client alert and March 2012 Blog Post.
9.
Endorsements
FTC Enforcements on Fake Endorsements – In February, the FTC permanently stopped a fake news website operator that allegedly deceived consumers about acai berry weight loss products. The settlements will yield more than $1.6 million and conclude a sweep against online affiliate marketers and networks. The sites falsely claimed endorsements from ABC, Fox News, CBS, CNN, USA Today and Consumer Reports.
Many companies’ understanding of and compliance with the FTC Endorsement Guidelines remains lacking, yet enforcements continue.
10.
Wearable Computing Lawsuit
Google Glass Liability? – In what may be a foreboding development, a California woman received a traffic ticket for wearing Google Glass while driving. Many states have broad distracted-driving laws or bans on certain monitors that may apply to Google Glass and similar wearable computing devices.
The intersection of social games and gambling is moving forward at a torrid pace. Yet, there are many blurred lines with respect to the legal boundaries for permissible game mechanics used in social games and online gambling offerings. The use of virtual goods and virtual currency further complicates the analysis. Additionally, some companies are pushing the envelope with various forms of prediction markets and online sweepstakes/contest-based business models. Florida recently adopted new rules to close some perceived loopholes. Will this prompt other states to act as well?
Check out our video:
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The NY appeals court reinstated a gambling conviction against a man who ran an illegal Texas Hold’em lounge. Originally, the gambling conviction was dismissed, largely based on the argument that poker was a game of skill, and therefore not illegal gambling. However, the appeals court overturned the dismissal based on NY State law, rather than federal gambling laws, stating the “the question of whether skill or chance predominates poker is inapposite to this appeal.” NY State law is fairly strict when it comes to gambling, which is basically illegal unless it is explicitly authorized by NY law.
Please join us April 24-25 at the Social Casino Summit. Pillsbury will be participating in the Global iGaming Summit and Expo as an exhibiting sponsor
James Gatto will be presenting a session titled, “Clarifying the blurred legal boundaries between various forms of social, virtual currency, prediction, sweepstakes and other forms of gaming – what you can and can’t do,” at 3:30pm PT, Thursday, April 25.
With social casino games monetizing five times better than other social games, whether on Facebook or other online and mobile platforms, the opportunity is the lucrative one, but the market is getting very crowded.
Join the early adopters, established leaders and new comers in the social casino space at this inaugural Social Casino Summit and:
Please join us at GSummit 2013 (SF, April 16-18) for 3 days of workshops, sessions, panels and networking dedicated to understanding how to drive behavior in consumers, employees and stakeholders. Top experts in the fields of gamification, loyalty, CRM, enterprise, human resources and training converge at this one-of-a-kind event to share best practices, startling insights and the science of behavior in a unique, engaging and jam-packed format
· Gamification has become an essential strategy for startups, Fortune 500s and non-profits alike, with investment (and job growth) up over 300% in the last year alone. Come to GSummit (April 16-18) and earn your official gamification design certification, hear detailed practical examples of what works and what doesn’t from the experts themselves, network with the world’s top gamification designers and vendors, and get inspired. As consumer & employee attention has been harder and harder to obtain, you’ll learn how many companies have utilized gamification to create loyal customers & engaged employees. Gamification is becoming a necessary strategy in order to stay competitive and to grow your business–and GSummit is the only place to get this needed, hands-on learning.
James Gatto will be speaking on the topic of “Gamblification: Legal Concerns” which is scheduled for 2:10pm, Thursday, April 18.
In late February 2013 the New Jersey Legislature passed legislation allowing on-line wagering, subject to certain limitations. This legislation was signed into law by Governor Chris Christie. Under the new law, licensed operators will be allowed to offer online versions of a wide variety of games currently permitted in Atlantic City casinos. This includes table games like roulette, craps and black jack as well as slot machine games. The new law will not take effect until the State Division of Gaming Enforcement sets a start date, which is expected to be from 3 to 9 months away. A year ago Governor Christie vetoed similar legislation on state constitutional grounds. Supporters of the legislation argued that the constitutionality was not in question as the law requires the computer equipment being used to be located in Atlantic City. According to the new law, by having the computer equipment in Atlantic City, the bets placed using that equipment would be deemed to have been placed in Atlantic City.
The new law purports to avoid running afoul of the 1961 Federal Wire Act by requiring the gamblers to be in New Jersey to place bets and by not allowing sports betting. This results from a 2011 Department of Justice opinion that held that intrastate on-line gambling does not violate the Wire Act unless it involves sports betting. Notwithstanding the in-state gambler requirement, the proposed law would allow out of state bets from other states that have a reciprocal agreement in place with New Jersey.
New Jersey’s new law represents another significant step forward for on-line gambling in virtual casinos. Nevada and Delaware already have enacted legislation to allow on-line gambling. Given the proliferation of state authorized gambling, other states are expected to follow and enact similar legislation and enter into reciprocal agreements to allow interstate gambling between those states. However, most if not all of this legislation will also require operators to be licensed. In Nevada, for example, even though the law that was passed is broader, licenses are only being accepted for online poker. While Nevada has approved a number of licenses, it has not authorized any entity to actually commence online poker operations.
Thank you to everyone who joined us in both New York and Washington, DC for our Social Media Week events – Game On!
Special thank you to all of our panelists: Randy Leibowitz, Mike Scafidi, Tim Ettus, Lou Kerner, Peter Corbett, Jim Gatto, Sean Kane, Lauren Lynch Flick and Tina Kearns (many featured in the picture and video below).
As real money online gambling remains bogged down in the legislative and regulatory morass, social gaming applications have been on a tear. As we have previously reported, major players are leveraging social gaming applications in preparation for the legalization of online gambling. One of the emerging leaders, Caesars Interactive Entertainment recently acquired Playtika and Buffalo Studios. Casino equipment manufacturer IGT acquired Doubledown, a Facebook casino app developer a year ago for a reported $500 million. Social game giant Zynga has announced that it is preparing to enter the online gambling world.
These games typically do not involve real money gambling. Often either the user can play for free or buys chips or credits but can not cash them out. These games leverage what we refer to as “gamblification” to create a simulated experience that leverages the fun aspects of gambling without legally constituting gambling.
While this trend is great for social game companies that are leveraging this phenomena, not everyone is happy about this. In Australia,
Senator Nick Xenophon reportedly intends to introduce legislation to prevent such “gambling apps.” As reported by The Sydney Morning Herald, a virtual poker-machine game that children and teenagers can easily access was the highest-grossing phone and tablet app in Australia, prompting outrage from gambling critics and the established “pokies” industry (as they call it down under).
Such games have escaped gambling classification because even though users pay real money to but credits, they cannot cash out any winnings. Similar models are widely used by many social gaming applications such as Zynga Poker and many other such games.
In most jurisdictions, these types of games are not specifically covered by the gambling laws and are typically legal if certain precautions are taken in the business model. Perhaps Australia will change that. Stay tuned for further developments.
Internet & Social Media Law Blog