Author: Artaev at Law

Dan Artaev is an expert attorney, specializing in business law issues that affect modern high-tech businesses. Dan’s international background, as well as 10+ years of experience in private business litigation, contract law, and as a government labor lawyer are especially valuable to his clients. Dan is also a proud husband, dad, and cat owner with many hobbies, including triathlon training.

e-mail: dan@artaevatlaw.com

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Carriers Transportation Law

Are False Online Reviews of Trucking Companies Protected by the First Amendment?

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In today’s digital age, online reviews can make or break a trucking company. Unfortunately, some brokers and other parties resort to posting false and defamatory reviews on platforms like Carrier411 and GoHighway as leverage to resolve run-of-the-mill business disputes or to “punish” perceived bad behavior. When confronted about the damage the false statements are doing to a carrier’s business, the posting broker will often hide behind a claim of First Amendment protection.

So how does the fundamental freedom of speech intersect with online postings? Many falsely believe that any statement made online is shielded by the First Amendment’s guarantee of free speech. This is simply not true. While the First Amendment does protect a wide range of expression, it does not provide blanket protection for false and defamatory statements of fact.

One Crucial Distinction: Fact vs. Opinion

One key distinction lies between statements of fact and statements of opinion. While opinions are generally protected, even if they are negative, false statements of fact are not. For example, saying “I didn’t like their service” is an opinion. Saying “They were two hours late for the delivery” is a statement of fact (that can be proven or disproven with objective evidence, like GPS records).

Defamation and the First Amendment

Business defamation occurs when someone makes a false statement of fact that harms the reputation of a company. To prove defamation, a trucking company generally must show:

  • Falsity: The statement made was demonstrably false.
  • Identification: The statement clearly identified the trucking company.
  • Publication: The statement was communicated to a third party (e.g., posted online).
  • Damages: The false statement caused harm to the company’s reputation or business. Actual money damages are always helpful (such as documented loss of loads), but most states also recognize the intangible value of business reputation.
  • Fault: The person making the statement knew it was false or acted with reckless disregard for the truth.

False Reviews: Not Protected Speech

False reviews that make objectively untrue claims about a trucking company’s performance, safety record, or business practices can constitute defamation. These statements are not protected by the First Amendment simply because they are published online. If a review makes a factual assertion that can be proven true or false with evidence (e.g., “The company’s trucks are unsafe” or “They consistently fail to deliver on time”), and that assertion is false, it can form the basis of a defamation claim.

Over 100 years ago, in Schenk v. United States, Justice Holmes explained the limit of the First Amendment: “[t]he most stringent protection of free speech would not protect a man in falsely shouting fire in a theatre and causing a panic.” In other words, the First Amendment does not protect speech that is deliberately false and harmful to others. Whether shouting “fire” in a theater in the early 20th century or falsely accusing someone of “double brokering” in 2025, the outcome is the same.

Additionally, some savvy posters (or their lawyers) raise the stakes by referencing something called anti-SLAPP laws when confronted about their false review. State anti-SLAPP laws allow a court to dismiss a defamation case when it is brought for an improper purpose (such as extortion or to suppress speech). A court can also impose sanctions. However, anti-SLAPP does not apply to factually supported, valid business defamation cases that become necessary to protect a business’s reputation.

What Can Trucking Companies Do?

If your trucking company is the target of false online reviews, it’s essential to take action. Here are some steps you can consider:

  • Document Everything: Keep records of the false reviews, including screenshots and timestamps. Gather all of the related documents, such as driver records, proofs of delivery, and bills of lading. This is especially critical if you end up in litigation.
  • Contact the Posting Individual or Entity: Reach out to the posting broker or other individual and attempt to secure a removal of the review through an informal business negotiation.
  • Contact a reputation management specialist: Our law firm has partnered with Carrier Defender to support an informal, expedited dispute resolution process for carriers facing false reviews. The Carrier Defender process is administered by experienced industry professionals and backstopped by our legal expertise.
  • Consult with an Attorney: If all else fails, an experienced attorney can help you assess your legal options and take appropriate action to protect your company’s reputation. This might involve sending a formal demand letter to the person who posted the review or, in some cases, filing a lawsuit for defamation. However, be mindful of the fact that litigation is slow, expensive, and no outcome can be guaranteed. Also, note that due to law licensing restrictions, you should contact an attorney licensed in state where the posting broker is located or where your own company is based.

Have more questions? Contact our firm by email or call us today.

© 2025 Artaev at Law PLLC. All rights reserved.

Categories
Carriers Transportation Law

Blackmail, Civil Extortion, and Economic Duress in the Trucking Industry: Legal Remedies for Unlawful Threats

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In the highly competitive and fast-paced trucking industry, maintaining a solid reputation is crucial. Brokers and trucking companies alike rely heavily on positive reviews and industry reputation to secure business and ensure steady operations. Previously, I have written about when such negative reviews rise to the levels of defamation and potential legal remedies available to protect a business’s good will.

Unfortunately, some unscrupulous persons or companies may exploit this vulnerability by threatening to post false negative reviews online to coerce carriers into unfair agreements or payments. Some carriers even report being openly extorted – with brokers demanding cash payments in exchange for removing a false FreightGuard report. At Artaev at Law PLLC, we understand the devastating impact such threats can have on your business and we stand by to help protect your company’s rights. This article explores the legal remedies available, including the differences between blackmail, civil extortion, and economic duress.

Blackmail

Blackmail, also known as extortion in certain contexts, is a crime both under state and federal law. The federal Hobbs Act prohibits extortion affecting interstate or foreign commerce – a designation especially applicable in the cross-border trucking industry.

The crime involves coercing someone to take action or refrain from action by threatening to reveal damaging or incriminating information. In the trucking industry, a broker may threaten to post false negative reviews unless a trucking company complies with unreasonable demands.

Key Elements of Blackmail:

  1. Threat: The broker makes a threat to post false negative reviews.
  2. Demand: The broker demands money, services, or other benefits from the trucking company.
  3. Intent: The broker’s intent is to coerce the trucking company into compliance.

While blackmail is primarily addressed under criminal statutes, it may also intersect with civil remedies, particularly when economic harm is involved.

Legal Recourse:

If you suspect you are a victim of blackmail or extortion, you should consider filing a police report with your local police department. Your state attorney general’s office may also have resources and direct you to the appropriate agency to lodge your complaint. Be ready to provide evidence of your claims, including any correspondence such as emails or text messages that show the illegal conduct.

Civil Extortion

Civil extortion is a tort that provides a legal remedy for victims of coercive threats used to obtain money, property, or other benefits. In the context of the trucking industry, a broker’s threat to post false negative reviews to extract financial or other concessions from a trucking company can be actionable as civil extortion.

Key Elements of Civil Extortion:

  1. Threat or Coercion: The broker threatens to post false negative reviews.
  2. Intent to Obtain Benefits: The broker aims to obtain money, services, or other benefits through the threat.
  3. Lack of Consent: The trucking company complies with the broker’s demands due to the threat.
  4. Damages: The trucking company suffers actual harm, such as financial losses or damage to reputation from compliance with the illegal demand.

Legal Recourse:

Victims of civil extortion can file a lawsuit seeking compensatory damages for financial losses and emotional distress, punitive damages to punish the broker’s egregious conduct, and injunctive relief to prevent further threats or actions. Evidence showing the threat – like emails or text messages – are critical in the civil context as well. Additionally, actual damages from compliance must be shown – a mere threat of harm is not sufficient to sustain a civil action for extortion.

Economic Duress

Economic duress occurs when one party uses wrongful threats or pressure to force another party into a contractual agreement. In the trucking industry, a broker’s threat to post false negative reviews to coerce a trucking company into accepting unfavorable contract terms can constitute economic duress. For example, if broker threatens to “FreightGuard” a carrier unless the carrier agrees to a rate reduction, additional routing, or other costly or unfavorable modifications, economic duress may have occurred.

A party seeking to void a contract may affirmatively claim economic duress, but it is more likely to show up as a defense. Where a party seeks to enforce a contract with terms obtained by duress, the defending party can assert economic duress as an affirmative defense.

Key Elements of Economic Duress:

  1. Wrongful Threat: The broker threatens to post false negative reviews.
  2. Lack of Reasonable Alternatives: The trucking company has no reasonable alternative but to comply with the broker’s demands.
  3. Induced Agreement: The threat induces the trucking company to enter into a contract or agreement.
  4. Resulting Harm: The trucking company suffers harm as a result of the coerced agreement.

Legal Recourse:

Trucking companies can seek to void contracts entered into under economic duress, as these agreements are not considered the result of free and voluntary consent. Additionally, they may pursue damages for any financial losses incurred due to the coerced agreement.

Conclusion

Threats to post false negative reviews can severely impact a trucking company’s reputation and business operations. Understanding the legal remedies available—blackmail, civil extortion, and economic duress—empowers trucking companies to take action against unscrupulous brokers. At Artaev at Law PLLC, we are committed to protecting your business interests and ensuring that you are not victimized by unlawful threats. If you find yourself facing such a situation, we are here to help you navigate the legal landscape and protect your rights.


Have more questions? Contact our firm by email or call us today to set up your free initial consultation.

© 2024 Artaev at Law PLLC. All rights reserved.

Categories
Uncategorized

Is a Bad Review Defamation? Protecting Your Business Reputation Online.

Following my previous article about online defamation, business owners frequently ask me whether they can “sue” Facebook or Yelp or Google, etc., to get a negative review removed. Or whether they can “sue” the poster for “reputation damages.” This is especially common in the trucking industry, where Carrier411 hosts a platform that allows brokers and customers to review carriers. Often times, a dispute or a misunderstanding between a carrier and a customer leads to a “report” or a bad review on Carrier411 that causes frustration and may even result in lost business.

A negative review by itself is not always defamation. To win on a defamation claim in court, you need to prove: (1) a false and defamatory statement about the plaintiff; (2) unprivileged publication to a third party; (3) fault amounting to at least negligence; and (4) actionability per se or the existence of special harm.

What does this all mean for the business owner faced with a negative review?

  • First, a successful defamation claim requires a false and defamatory statement. This is the most commonly misunderstood element, but it is absolutely critical. A negative review – even if the business owner has a different side of the story, or does not agree with it – is not actionable unless it is actually false. A statement of opinion – even if negative – is not a false statement of fact because there is no such thing as a false opinion. That is an important difference, especially in the age of social media. A person may go on your restaurant website and freely post something like “I hate the atmosphere and I did not like the food here at all.” That is not defamation, even though it is a negative review. Rather, it is a statement of opinion. A good test is to ask: how am I going to prove that the statement is false? What types of evidence will I introduce to refute the “facts” that were posted? There is no evidence that you can introduce to refute a statement of opinion – in other words, the customer’s perception of atmosphere and the food is their own. If they did not like it, then it is their opinion, and they are entitled to it. Also, the statement must be defamatory, that is injurious to your business reputation. A statement that is false, but is not negative or otherwise critical of your business is not actionable. For example, if a review says “This restaurant is located in midtown Detroit,” when in fact the restaurant is downtown, the statement is false, but not defamatory.
  • Second, there must be unprivileged publication. “Publication” just means dissemination to others – meaning third parties. Of course, if something is posted online, it is published. “Unprivileged” means that the statement is not made in the context of a protected communication, such as a legal filing with the court, a police report, or some other type of special protected communication.
  • Third, the false statement must be made with at least negligence. That simply means that the person making the statement either knows that it is false or does not bother to try to find out before publishing. Even if a person publishes a false statement about your business, they may not be liable if they consider it true based on a reasonable inquiry.
  • Fourth, there must be an element of damages. In business cases, this element is usually satisfied automatically, as damages to business reputation are considered actionable per se. However, actual damages are still critical and must be proven – otherwise you may end up recovering only nominal damages. While punitive and exemplary damages, as well as attorney fees, are available under MCL 600.2911, there are no guarantees that they will be awarded. A case is always more persuasive if there are actual damages that are proximately caused by the negative post, review, or other published statement.

Even if you can prove the four elements, there are practical factors to consider before filing a lawsuit. Are you prepared to bear significant litigation costs – thousands or even tens of thousands of dollars? Are you prepared to invest time away from your business to prove your case? Never treat litigation as an investment opportunity because no business owner makes money paying their attorney and spending time in court.

The good news is that there are other options besides litigation that you can discuss with your attorney. Often times, an informal discussion with a dissatisfied customer can solve the issue. A cease-and-desist letter can be effective as well. If the potential damages are significant, pre-suit mediation may be the most cost effective option to resolve the dispute.

One final note – in Michigan, defamation claims must be brought within a year of the event. Other states may have different deadlines, but if you think you may have a claim, talk to an attorney sooner rather than later.

Dan Artaev is an experienced business attorney who advises a number of domestic and international businesses on various topics, including defamation. Email us or call us to set up your free initial consultation.

© 2024 Artaev at Law PLLC. All rights reserved.-

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Uncategorized

But Your Honor, He Said a Bad Thing About Me on Facebook: Business Defamation Claims in the Age of Social Media

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It is 2024 and every business has an online presence – whether through a website, on Google, or on social media. It is more important than ever for business owners to know what can and cannot be said (i.e. posted) regarding their business online. In other words, can you sue to get that negative review off of Google? Or what about that irate ex-employee that keeps posting false information to your Glassdoor page? Can an overzealous freight broker’s post against a trucker on Carrier411.com lead to a lawsuit?

In a recent Michigan case that involved Carrier411, Penguin Trucking Inc. and E.L. Hollingsworth & Co., faced off in a business defamation case. The two companies were contracted for the same job at different rates by an outside third party. However, by the time the two companies found out about the scam, Penguin Trucking had already had the freight in its possession and was unable to make a deal with E.L. Hollingsworth for them to reconcile and both deliver the freight.

Since Penguin Trucking already held the freight, they decided to enter into a deal directly with the end customer for the delivery. Shortly thereafter, an E.L Hollingsworth employee posted a scathing report on Carrier411.com, a trucking monitoring service website. The employee wrote that Penguin Trucking “held [the] load hostage,” attempted “in-transit agreement modification,” and accused them of “unethical or deceptive business practices.” In any industry, potential customers are reluctant to do business with companies that have negative reports written about them, like those written on Carrier411.com. In the trucking business, Carrier411 reviews are especially crippling and can even destroy a smaller or startup business. Penguin Trucking experienced these adverse effects first-hand when it lost out on a contract with a shipper based on the FreightGuard. In litigation, Penguin Trucking proved not only that the online statements were false, but that the loss of the shipper contract was directly linked to the Carrier411.com review. Penguin Trucking was awarded $612,400 in damages for this lawsuit.

Michigan’s laws are clear about what constitutes defamation and what does not. Most other states have similar laws that protect against false statements that damage a business’s reputation. There are four elements to a defamation claim in Michigan:

  1. A false and defamatory statement concerning the plaintiff;
  2. An unprivileged publication to a third party;
  3. Fault amounting at least to negligence on the part of the publisher; and
  4. Either special per se harm or actual damages proximately caused by the statement.

For a more in-depth look at what each element means and requires, check out my latest article about protecting your online reputation.

If someone is posting intentionally false information about your company on the Internet (including a false FreightGuard report on Carrier411) you have a right to defend your company. An experienced attorney can help with various options short of litigation, such as sending a cease-and-desist letter and negotiating a resolution on your behalf. If litigation does become necessary, we can also provide the necessary support and consultation to take your case before the proper court.

Have more questions? Contact our firm by email or call us today to set up your free initial consultation.

© 2024 Artaev at Law PLLC. All rights reserved.

Categories
sports law

Regulatory Crackdowns Are Reshaping Sports Wagering.

Regulatory uncertainty in emerging gaming markets has proven itself to be a double-edged sword. On one hand, unregulated gaming products that do not squarely fall into the definitions of “gambling” or regulated fantasy sports offer greater accessibility, innovative entertainment, and lower fees to their customers. Such products include skill-based games, play-to-earn video games, peer-to-peer social wagering, and pick’em-style fantasy sports (most prominently championed by Underdog Sports and PrizePicks). On the other hand, pick’em fantasy sports has recently been under fire, as a number of states have either outright banned pick’em fantasy sports or are currently investigating them.

Pick’em As a Popular Alternative to Traditional Fantasy

Pick’em style fantasy sports found success in appealing to the younger, more casual player. Instead of assembling a roster, managing a virtual salary cap, and engaging in time-consuming balancing of performance vs. cost, the pick’em format simply awards points based on correct predictions of a better outcome. For example, the pick’em format will ask participants to pick an over/under point total between two outcomes or which player will score more points. This simpler and more straightforward format has enjoyed rapid success due to its accessibility and entertainment factor. However, state regulators have also cracked down on the format due to its functional resemblance to proposition-style sports bets.

Regulators Have Cracked Down on Pick’em in Late 2023 and Early 2024

As of the date of this article, Arizona, Arkansas, Florida, Kansas, Maine, Michigan, Mississippi, New York, North Carolina, Virginia, and Wyoming have taken the position that pick’em fantasy sports offerings are illegal under state law. Wyoming (which legalized online sports betting in 2021) targeted leading pick’em operators PrizePicks and Underdog in July 2023 with cease-and-desist letters. High-profile regulatory actions followed in Florida, New York, and Michigan. Florida takes the position that fantasy sports have not been and are not allowed in the state. Michigan and New York have amended their daily fantasy sports administrative rules to prohibit “any contests that have the effect of mimicking betting on sports or that involve ‘prop bets’ or the effect of mimicking proposition selection.”

Other states joined the effort. California is currently in the process of investigating and opining on the legality of DFS in the state. Kansas became the latest state to issue cease-and-desist letters to at least six fantasy sports operators. Notably, despite having a well-articulated and public position on the legality of its offering, Underdog voluntarily left Kansas in September of 2023. PrizePicks continues to operate in Kansas.

After Florida targeted the three market leaders – Underdog, PrizePicks, and Betr – with cease-and-desist letters in September 2023, it appeared that the companies were eager to fight for and defend the legality of their offerings. This no longer seems to be the case and at least one operator (PrizePicks) just settled the New York State Gaming Commission’s allegations of illegal fantasy sports operations by agreeing to pay a fine of nearly $15 million and ceasing operations in New York.

While the settlement is limited to PrizePicks, its a potential blow to all the other pick’em operators, whose legal position has been that their products either operate within the boundaries of permissible fantasy sports or are not otherwise regulated by state law. As a side note, New York is unique in that the settlement with PrizePicks acknowledges the general legality of fantasy sports in New York pursuant to license. PrizePicks’ “wrongdoing” was ostensibly operating fantasy sports without a license (not that their pick’em product was per se illegal).

Novel Game Markets Remain Uncertain and Subject to Rapid Adverse Regulator Actions

In any case, the cascade of regulatory actions (and the speed with which investigations turned into cease-and-desist letters and subpoenas) highlights the uncertainty related to novel gaming products. For instance, PrizePicks operated in New York since 2019 under a “good-faith belief” (and presumably in reliance upon legal advice) that it did not need to obtain any sort of fantasy sports or other license from the state. PrizePicks likely relied on the common-sense conclusion that its offering was a game of skill and therefore unregulated under New York law. Yet PrizePicks had to essentially pay back all the revenue it made in New York and agree to exit the state.

Out of all the real-money gaming offerings in the market, skill-based real-money gaming still appears to be most accepted model. Skill-based real-money gaming involves players paying an entry fee and competing for a prize, with the outcome determined by the relative skill of the players as opposed to chance. Peer-to-peer social wagering leverages the skill-based aspect of predicting sports outcomes, but involves direct bettor-to-bettor competition as opposed to bets against the house.

While legally untested, the peer-to-peer model also appears to be more palatable to regulators, as Underdog Fantasy revised its player vs. house pick’em model to function as a peer-to-peer skill contest in Alabama, Mississippi, Tennessee, and Wyoming in response to collaboration with regulators in those states. Play-to-earn is a concept most associated with Web3.0 and video games where in-game assets have tangible out-of-game value. Interest in play-to-earn is surging, as the crypto markets recover and Bitcoin exceeds the $50,000 barrier.

As more states legalize gambling and especially sports betting, regulators are taking a closer look at potential competitors. Licensed heavyweights like DraftKings and FanDuel (and their lobbyists) are allegedly involved in bringing regulators’ attention to potential competitors, especially if those competitors are operating at higher margins due to lower regulatory costs.

A Detailed Legal Opinion is More Important Than Ever

The current regulatory environment in the United States highlights the importance of hiring experienced and knowledgable counsel as part of your team. What was permissible or at least tolerated by regulators a year ago may not be acceptable now. Further, more states are taking a position against unlicensed sports betting or fantasy products, even if those offerings are firmly grounded in sound legal arguments. Careful consideration, a legal opinion, and a detailed analysis are more important than ever to a successful launch, especially as payment processors, vendors, investors, and other third parties are going to be engaged in a lot more legal scrutiny.


The qualified and specialized attorneys at Artaev at Law PLLC know gaming law – email or call us to set up your initial consultation.

Disclaimer: This guide is for general informational and promotional purposes only. Nothing herein constitutes legal, tax, or investment advice. Every situation is different and has its own unique set of challenges. Do not take any action or sign any contract until you have obtained specific guidance from a qualified professional.

© 2024 Artaev at Law PLLC. All rights reserved.

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Uncategorized

Skill-Based Gaming 2024: Demand For Innovation Amid Regulatory Uncertainty.

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Since the firm’s inception in 2020, Artaev at Law has worked extensively with companies offering real-money skill-based gaming in the U.S. and internationally. In 2024, the market continues to grow, transform, and gain both appeal and legitimacy as an entertainment alternative. Recently, FanDuel joined the competition with its FanDuel Faceoff app. Its entry into the space is notable because it is marks a gambling industry heavyweight’s entry into the niche space of skill-based real money gaming. FanDuel’s roots are in fantasy sports and the brand is currently well-positioned in the online gambling market, along with DraftKings and well-known casino brands like Caesars and MGM. In contrast, the skill-based real-money gaming market has historically been dominated by specialized developers like AviaGames (Pocket7), Papaya Games, and Game Taco (formerly known as Worldwinner). Many independent studios also used Skillz branding and platform for their own take on the “casual” and “social” gaming categories.

4 Takeaways for the Industry

So why do FanDuel and its Faceoff app matter to skill-based real-money gaming? A major gaming market player’s entry into the skill-based sector is a bellwether and indicative of broader market trends:

  1. Skill-based real-money gaming is alive and well. The market is far from saturated and is still ripe for innovative offerings that may appeal to different demographics. For example, sports-based and party-style games may draw younger male customers, as opposed to the traditional solitaire/bingo offerings that have historically targeted older, female players.
  2. Skill gaming may expand an existing entertainment brand. FanDuel is already associated with gambling and sports, but not necessarily skill-based word games or Wheel of Fortune. FanDuel Faceoff is another vertical to expand crossover appeal to existing customers, as well as to reach new demographics.
  3. Online gambling markets may be becoming stale and driving demand for alternative gaming entertainment. As more states legalize sports betting and casinos (including the ability to wager online), consumer resources are being spread thin across identical gambling products. Entertainment consumers may be looking for innovation instead of yet another sports book or slot machine. The recent uptick in Pick’em Style fantasy sports (and scrutiny of) offerings by companies like Underdog Sports and Prize Picks shows that consumers are interested in something different. Accordingly, skill-based gaming is an exciting opportunity for gaming (and entertainment) companies to differentiate themselves and cater to demand.
  4. Skill games can compliment and enhance your existing gaming or non-gaming product. Faceoff complements but does not replace FanDuel’s existing fantasy sports, sports betting, and casino gambling products, which are in different apps. Yet the login info is the same across the FanDuel universe. This strategy shows how existing entertainment brands can gamify (or further gamify) their products to expand their verticals. The interest in play-to-earn video games is just one example of the tremendous appeal and potential of game monetization.

Demand for Innovation Runs Into Regulatory Uncertainty

With Super Bowl LVIII and the interest in “novelty prop bets” on everything related to Taylor Swift, it is clear that there is consumer appetite for something new. Some companies, like the aforementioned PrizePicks and Underdog Sports, are offering their own spin on the existing DFS or fantasy sports models. Peer-to-peer marketplaces combine social elements with a decentralized “no-sports-book” mechanism. Even full-scale prediction markets that offer bets on world events and scientific achievement have manifested themselves as lucrative economic opportunities.

What is also clear is that state and federal regulators are still playing catch-up to market-driven innovation. Most gaming models are unlicensed, and rely on either the skill-based or fantasy sports exceptions to anti-gambling laws. Certain states have passed legislation targeting skill-based machines – for example, a few years ago Utah banned so-called “fringe gaming,” – but it is still uncertain whether the ban applies to software downloaded to a smartphone or only stand-alone machines. More recently, states like Michigan and New York have enacted new fantasy sports rules that prohibit player vs. house pick’em bets popularized by Underdog and PrizePicks. Adding to the confusion, each state defines and regulates gambling differently.

Accordingly, the experienced and knowledgable attorneys at Artaev at Law are here to help your skill game venture. Need a legal opinion to get your app approved? Onboarding with a payment processor? Need help navigating terms and conditions or a privacy policy? Contact Artaev at Law PLLC today for your initial consultation.

Disclaimer: This guide is for general informational and promotional purposes only. Nothing herein constitutes legal, tax, or investment advice. Every situation is different and has its own unique set of challenges. Do not take any action or sign any contract until you have obtained specific guidance from a qualified professional.

© 2024 Artaev at Law PLLC. All rights reserved.

Categories
sports law

The Surging Demand for Novelty Prop Betting in the United States: Is This an Opportunity for the Peer-to-Peer Model?

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With Super Bowl weekend in Las Vegas just around the corner, betting activity is reaching one the high points of the year. Nearly 68 million adults plan to bet on this year’s Super Bowl, an increase of 35% over last year, according to the American Gaming Association.

Super Bowl LVIII is generating an unprecedented interest in “novelty wagers” unrelated to the game, but related to Taylor Swift’s expected appearance.

But Super Bowl LVIII is not only notable for the matchup between the San Francisco 49ers and the Kansas City Chiefs. This year, there is unprecedented crossover interest due to pop star Taylor Swift’s much-publicized romantic involvement with Chiefs’ tight end Travis Kelce. Ms. Swift’s appearances at the Chiefs’ games throughout the regular season have generated a profound interest in the NFL from a younger female demographic that does not normally consume professional football (but does consume Ms. Swift’s music). In the betting world, this demographic convergence has also created an unprecedented interest in placing non-traditional “novelty bets” on Ms. Swift that are completely unrelated to the actual football game.

Unfortunately, if you want to bet on the outfit that Ms. Swift will wear, the color of her lipstick, or whether she will cry if the Chiefs lose, your options are limited. Due to state licensing rules, traditional physical sports books only allow action directly related to the football game. Online sports books that are available in a handful of states like New Jersey and Michigan likewise do not offer “novelty bets” on either Ms. Swift or anything else not directly related to the game (like the length of the national anthem).

Offshore betting options may be risky (or even illegal) for U.S. customers.

So are there options for customers interested in placing a $5 bet on over/under of how many times Ms. Swift will be shown on TV? The New York Times article cites to foreign websites Betonline.ag (an online gambling website based and licensed in Panama) and Betus.com (based in Costa Rica and licensed in Curacao) as examples of websites willing to take Taylor Swift-related wagers. However, their legality is uncertain at best. It is unclear how (or if) they comply with U.S. law and whether there are limitations or costs associated with payments going to and coming from abroad. As just one potential obstacle, the federal Unlawful Internet Gambling Enforcement Act of 2006 prohibits businesses from accepting payments in connection with unlawful internet gambling. Additionally, the federal Wire Act separately prohibits persons engaged in the business of betting or wagering from using a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.

The emerging peer-to-peer model may offer a solution to limited U.S.-based “novelty bet” options.

One alternative emerging model to the traditional sports book is peer-to-peer social betting or P2P. The P2P model is related to European-style exchange betting and essentially eliminates the centralized sports book in favor of direct, player-to-player wagers. Instead of betting against the house and paying an integrated “vig” or “juice,” players propose or accept various bets from other users in the marketplace. Bets on P2P applications are fully customizable and allow players to use their relative skills (like sports knowledge, data analysis, and mathematics) to compete.

The customization aspect would technically allow for Taylor Swift-esqe novelty wagers that could not be offered by a traditional sports book. Certain topics are generally off-limits as a matter of either state or federal law – betting on elections, the stock market, and price of commodities is either expressly prohibited or already regulated by financial authorities. But entertainment prop bets are just one example of exciting possibilities with customizable peer-to-peer gaming. Another emerging trend is betting on actual skill contests in real-time – whether skateboarding or golf. P2P is no different than engaging with your friends, coworkers, or peers and making wagers in real life, except that the use of the internet (or apps) expands the potential social pool, helps keep track and organize multiple wagers, and ensures prompt wager settlement.

P2P is innovation that offers some of the same availability and skill-based advantages as DFS did when it first came out as a sports book alternative.

Peer-to-peer is a relative newcomer to the wagering markets dominated by licensed sports books and fantasy sports giants like DraftKings and FanDuel. Consequentially, much like fantasy sports around 2015 and 2016, the legality of P2P is being debated. When Daily Fantasy Sports (“DFS”) boomed and became a prevalent skill-based alternative to traditional sports betting, DFS offered many of the same advantages that peer-to-peer operators offer today – wider availability and skill-based gameplay for starters.

Accordingly, peer-to-peer or P2P wagering is an innovative, novel model that relies on the skill-based gaming argument, the social aspect, and the decentralized marketplace approach that removes the operators from the “business of betting or wagering.” Certainly peer-to-peer innovation can offer advantages to customers who are looking for a creative approach to a saturated traditional betting market, lower fees, and more gameplay options. And more “fun.” Betting on Taylor Swift at the Super Bowl without having to engage with an offshore website is just one of the exciting opportunities that might merit a look at a peer-to-peer operator in the United States.

Are you looking to launch your next gaming project? Do you need a legal opinion? The qualified and specialized attorneys of Artaev at Law stand ready to help.

Disclaimer: This article is not intended to be and does not constitute legal advice. It is for informative and promotional purposes only. Do not take any action or refrain from taking any action based on this guide, and always consult with a qualified professional about the circumstances of your particular case. Each set of facts is unique and different circumstances apply to each individual business. The field of peer-to-peer betting and non-sports event wagering is novel and complex. Artaev at Law PLLC and its lawyers do not and cannot endorse the legality of any particular model, as each factual circumstance is unique and the application of the law remains unsettled in this emerging area.

© 2024 Artaev at Law PLLC. All rights reserved.

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Are Skill-Based Real-Money Games Legal in the United States?

The skill-based real-money game sector continues to grow in 2024, and yes, skill games are generally legal under the laws of most states. Risking money on games of skill has always been popular – from Mesopotamia, to Ancient Egypt and the Roman Empire, to your local pool hall. Now, with the ubiquity of the smartphone and internet access, skill-based real-money gaming is a widely available form of entertainment. The setup is familiar – pay an entry fee for a chance to compete for a prize. Top score takes the prize. There is also no shortage to game variety, although skill-based solitaire, bingo, and a blackjack-solitaire hybrid called 21 Blitz account for the vast majority of players.

Designing, distributing, and marketing real-money skill gaming apps continues to be a lucrative business model. But what are the legal and regulatory hurdles to distributing and marketing your product in the United States? There are many nuances, and given that each of the 50 states has its own set of laws related to gaming and gambling, hiring experienced counsel is a must.

IMPORTANT – Real-money games of skill are still illegal in some U.S. states, even though they are not games of chance (such as traditional gambling like blackjack, roulette, or slots). A lot depends on the particulars of your app or game, but it is a mistake to assume that all skill games are automatically legal.

There are three main obstacles to distributing a real-money skill game in the U.S.:

  • Second, the app must comply with state and federal law. Geolocation technology can be used to meet specific location requirements or restrictions. Additionally, Apple requires that any real-money gaming app comply with local laws where the app is offered, have the required licenses (or the aforementioned legal opinion), and be geographically restricted to those locations. Also, offering an app in a jurisdiction where it is illegal risks attention of local authorities or private litigation, which can result in fines, penalties, and closure of your particular game.
  • Third, as skill-based real-money gaming is unlicensed and unregulated, it is important to have robust terms and conditions and a privacy policy in place. These terms function as a contract between the gaming company and its customers, offering important rules and regulations, as well as disclaimers and liability limitations. Further, dispute resolution provisions like an arbitration clause and a class action waiver are important, but must be carefully tailored to be enforceable.

Real-money games of skill vs. gambling

You may have heard that real-money games of skill – like darts, pool, puzzles – are not prohibited or regulated in the United States because they are not “gambling.” The reasoning goes that if the outcome depends on skill rather than chance, then it is not regulated under state gambling laws. This is false. Each of the 50 states have their own statutory definitions, laws, and regulations applicable to gambling. The states also differ on how much skill is required to exclude a particular game from the “gambling” category. Most states rely on the “predominance” test, where skill must predominate over the chance element. Other states use the “material element” test, where a game is considered gambling if chance is a “material” element in the outcome. A few states use the “any chance” test – where if there is any chance element present, the game is considered “gambling” and may not be offered without a license.

There is also a distinction between fantasy sports-type games and pure contest games on both the state and federal levels.

Payment Processors and Due Diligence

Payment processors – companies responsible for money-in and money-out of your app – also have their own set of due diligence requirement. Most reputable providers will require the legal opinion, copies of the terms and privacy policy, and even may require an internal anti-money laundering (“AML”) policy. Under federal law, financial institutions and certain high-risk businesses (such as casinos) must have AML policies in place. However, experienced counsel can also help with craft a policy that balances the payment processor’s standards with practical considerations and costs facing any starting-stage business.

Disclaimer: This guide is not intended to be and does not constitute legal advice. It is for informative and promotional purposes only. Do not take any action or refrain from taking any action based on this guide, and always consult with a qualified professional about the circumstances of your particular case. Each set of facts is unique and different circumstances apply to each individual business.

This article was originally published in 2020, but has since been updated to reflect current legal and regulatory developments in the skill-based gaming area.

© 2020 Artaev at Law PLLC. All rights reserved.

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DePIN Networks and Utility Tokens: Legal Considerations for the Physical Applications of Blockchain Technology.

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Imagine creating a product that sells data, such as a mapping or telecommunications service. These are capital-intensive businesses with immense startup costs. Barriers to entry may seem insurmountable – after all, if you wanted to compete with Verizon or AT&T, the cost and availability of cell phone towers alone would be cost-prohibitive. Same with competing against Google Maps or Apple. It is essentially impossible for a startup to compete with companies that are effectively public utilities.

How is DePIN useful and what are some examples?

Enter decentralization. While currently associated with largely speculative financial transactions and niche non-fungible token (NFT) projects, decentralized/permissionless networks have great potential to expand beyond the merely virtual and into the physical space. The Helium communications network and Hivemapper’s mapping data services are just two great examples. Helium crowdsources its network by leasing physical space to install its smaller, lower-powered antennae. Instead of 400-foot massive, high-watt cell towers, the network runs on hundreds or even thousands of densely distributed smaller transmitters. Helium’s own cryptocurrency (HNT) comes in as a rewards system – for installing an antenna, passing proof of service tests, and increased use of the particular location, the landlord earns Helium tokens (HNT) (or associated IOT or MOBILE tokens), which can then be sold or exchanged on the open market. Locations that are used more frequently earn more tokens, incentivizing the optimal location and operation through economics principles.

Hivemapper works in a similar manner, but with road mapping. Hivemapper sells its proprietary dashcams, which users can buy, install, and use to collect data from their vehicles, which is then uploaded in exchange for HONEY tokens. Like HNT, HONEY can be sold or traded on an exchange. The benefit to Hivemapper is that it essentially collects data in exchange for self-created tokens and sells dashcamps on top. Hivemapper does not invest in significant infrastructure, like Google’s mapping cars or their specialized cameras. Hivemapper instead recruits – and decentralizes – the process for collecting road data that would otherwise be cost prohibitive. As an additional efficiency, this results in more up-to-date road data, as it is collected from more sources than a single Google Maps car that drives through a particular route on an infrequent basis.

This application (and benefits) of decentralization and crowdsourcing to data collection and aggregation, as well as other physical applications are significant. For example, a company could use a decentralized token incentive structure to collect environmental or weather data, which then could be sold to private parties for development purposes, aid in agriculture, and otherwise create significant inexpensive, up-to-date data aggregation. Social science applications abound, as a company could incentivize information gathering and consensus-based verification with a properly-designed token system.

DePIN must still comply with existing physical and financial regulations.

While novel, DePINs must still fit into the existing physical and financial regulatory schemes. For example, Helium’s network must comport with FCC standards on communications devices, radio frequencies, transmission power, and other administrative matters. Further, the fact that companies like Hivemapper and Helium essentially create their own currency, must also fit into existing securities and money transmission laws, both on a federal and state-by-state level. Companies cannot simply raise funds through initial coin offerings and bypass normal securities regulations. If selling tokens, companies must engage in Security Token Offerings (or STOs), which are conducted similar to private placements and disclosed on Form D with the Securities and Exchange Commission. Otherwise, companies may structure their tokens as “utility” tokens, which means that consumption (and not investment or speculation) must be the primary motivation for the purchase. For instance, if users who earned the HONEY token could consume that token and use it to pay for a Hivemapper premium subscription (giving themselves access to premium map and road condition content for example), the HONEY token would likely be classified as a “utility” token and not fall into the “investment contract” designation under the Howey test.

How do utility tokens fit into the DePIN economy?

A “utility” token with non-investment or consumptive utility is essential to a DePIN ecosystem. However, this is also problematic, as essentially the company must not only pay out a token like HNT in exchange for data and bandwidth, but also accept HNT as payment for tangible services. From a company perspective, the tangible services cost fiat dollars – capital and labor cannot be purchased for a manufactured token. Further, the price of a token like HNT is hardly stable. HNT currently trades at about $6.60 to HNT. In November 2021, HNT traded for over $50 per HNT. Unstable token prices limit the consumptive use of cryptocurrencies and tokens, making them more suitable for long-term holding or short-term speculation. Further, it is tempting for a startup to simply issue tokens to raise capital – under the guise of a future consumptive use or simply the “this will go up in value as we expand” argument. This reality defeats the non-investment utility argument and renders tokens susceptible to classification as unregistered securities.

Companies have attempted to address these issues through use of associated tokens (IOT and MOBILE are directly earned by Helium network or hotspot hosts, the burn-and-mint protocol, use of “data credits” or “map credits,” and various fees. For example, Filecoin, a decentralized file handling platform, collects base fees for storage deals, batch fees for adding storage capacity, overestimation fees that related to optimized gas usage (gas being the cost of transacting the cryptocurrency), and penalty fees collected from those who do not provide storage as promised. Those who want to store data using Filecoin pay fees in FIL. FIL is also the reward paid out to those who provide storage or retrieval services on the Filecoin network.

What are specific legal challenges facing DePIN projects?

While innovative, DePIN businesses face an uncertain regulatory landscape, particularly in the United States. At a minimum, a business considering DePIN should consider the following:

  1. Physical regulatory considerations – are there zoning laws, telecommunications regulations, licensing requirements, or other physical considerations that affect my business?
  2. Legal liability – what are my obligations to the persons who contribute to my network or project? Are they contractors or employees? Are there any insurance or liability risks that I need to cover through contracts or terms of use?
  3. Financial legality – is my token really a “utility” token for consumptive non-investment use? How is my token created? How is it used? Is that use supportable under the current regulatory framework and the Howey test?

Some commentators predict that DePIN will be the next big thing in crypto and lead to mass adoption of decentralized blockchains in day-to-day business and life. The benefits are easy to see: lower costs, greater accessibility, crowdsourced reliability, security. However, there are also many complex legal regulatory considerations. Contact the experienced attorneys at Artaev at Law PLLC for a consultation about your next big project.

Disclaimer: This article is for general informational and promotional purposes only. Nothing herein constitutes legal, investment, or tax advice. Every situation is different and faces its own unique set of challenges. Do not take any action or sign any contract until you have obtained specific guidance from a qualified professional.

© 2024 Artaev at Law PLLC. All rights reserved.

Are Cryptocurrency Games of Skill Legal in the United States?

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Real-money games of skill are unregulated and thus legal in the majority of the United States. While there are specific best practices for launching your project, games where skill is the predominant or material factor in deciding the winner are generally not considered prohibited gambling. With the rebound of cryptocurrency markets in 2024 and a renewed interest in NFTs, is it possible to launch a skill-based game that uses cryptocurrency as opposed to fiat?

The answer is yes, but there are several caveats, warnings, and areas to be aware of. Cryptocurrency is subject to a patchwork of state-by-state regulations, as well as overlapping oversight from federal regulatory bodies including the Securities and Exchange Commission (“SEC”) and the Commodities Futures Trading Commission (“CFTC”). However, the first consideration is whether the game is regulated as “gambling” under any state or federal laws.

Games of skill vs. games of chance

First, in any real-money game of skill, the initial and primary consideration is the effect of skill vs. chance. It does not matter whether the players are competing for fiat dollars, cryptocurrency, or gold bars. State anti-gambling laws generally require the wager and receipt of “something of value” – the definition is purposefully broad to ensure anti-gambling regulations cannot simply be evaded by substituting cash for gold, tokens, or something else of value. Clearly, cryptocurrency is something of value and therefore falls within the same regulatory framework as cash games.

In-game currencies and securities regulation

Second, cryptocurrency-based games are subject to some unique considerations and developing laws.

The Securities and Exchange Commission has taken a particular interest in cryptocurrency-based projects in the United States. Initial coin offerings (or ICOs) have been on the SEC’s radar since at least 2017. ICOs were essentially a way for companies to raise funds by selling self-created crypto tokens without complying with securities registration requirements. The SEC took (and continues to take) the position that where a crypto asset (whether it is token or an NFT) meets the definition of “investment contract,” the asset is a security and is subject to the regulatory and registration requirements of the Securities Act of 1933. Companies that sell unregistered securities face stiff penalties and injunctions from the government, as well as “disgorgement,” which is just another way of returning funds to the buyers.

If your cryptocurrency skill-based game uses a widely circulating coin like BTC or ETH or SOL, then you are in a better position because the SEC generally targets the issuers (not the users) of a particular crypto asset. However, if you are planning to launch your own in-game token for players to use as an entry fee and to receive as a prize, you need to ensure that the token has sufficient non-investment utility. In other words, a company may use its own in-game currency if the in-game currency is considered a “utility token” – meaning there must be a use outside speculation and expectation to profit from the efforts of others. If there is true “utility,” the token will not be considered a “security” under the Howey test. Such an analysis is complex, multi-faceted, and requires a legal opinion from qualified counsel.

Patchwork of state-level regulations

Certain states have also enacted various laws targeting the sale and exchange of virtual assets. Some have taken a light approach – for example, Michigan has updated its criminal code to include the definitions of cryptocurrency and Distributed Ledger Technology to ensure that the criminal statutes applicable to fraud, theft, and forgery include the new technological representations of value. See MCL 750.157m(c), (f). Other states, like New York, Florida, and Minnesota, have enacted licensing schemes with respect to virtual currency business activities and updated their money transmission laws.

Moreover, states have their own sets of securities laws. Those are not necessarily preempted or superseded by federal law. In other words, even if a crypto asset is a utility token under the Howey test and is not considered a security under federal law, a state regulator may come in and enforce state-level “blue sky” laws. As just one example, the state attorneys general of Alabama, Kentucky, New Jersey, and Texas recently coordinated an unregistered sale of securities enforcement action against Slotie.com, which was selling gamified NFTs that represented virtual plots of land in a Las Vegas-style gambling metaverse.

Gaming in 2024 is full of innovative possibilities, especially as the crypto markets rebound, government regulation across the world matures, and public interest in alternative assets increases. However, there are many legal considerations to evaluate. The qualified and specialized attorneys of Artaev at Law stand ready to help with your next project.

Disclaimer: This article is not intended to be and does not constitute legal advice. It is for informative and promotional purposes only. Do not take any action or refrain from taking any action based on this guide, and always consult with a qualified professional about the circumstances of your particular case. Each set of facts is unique and different circumstances apply to each individual business.

© 2024 Artaev at Law PLLC. All rights reserved.

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Skill-Based Gaming: What is a Legal Opinion? Why Do I Need One?

The rapid technological advancement (think blockchain and AI) that has occurred just over the past several years has shaken up many industries – and the gaming market is no exception. A sector once dominated by simple, coin-operated arcade machines has now evolved into a sprawling ecosystem of online platforms, mobile applications, and sophisticated consoles. One of the most exciting niche areas that have emerged within this landscape is skill-based real-money gaming. However, navigating this promising landscape requires a firm grasp of its legal complexities. Qualified legal opinions—official research memos penned and signed by an attorney—serve as an essential element in running a successful business operation.

Skill-Based Real-Money Gaming: The New(est) Frontier

In skill-based real-money gaming, players compete against each other, with the winner walking away with real money. It adds an enticing layer of competitiveness and reward to traditional gaming, elevating the stakes and making every play matter. However, the intersection of gaming and real-money transactions naturally introduces regulatory complexities. For instance, questions surrounding the legality of certain games under federal and state gambling laws, the liability of game developers, intellectual property rights, data protection, user agreements, and various other aspects of the law come into play. This is where qualified legal opinions become incredibly beneficial. Needless to say that a knowledgable and experienced gaming attorney can help with other aspects of your new venture – such as terms and conditions for your application.

The Power of Legal Opinions

A qualified legal opinion is an official research memo, thoroughly prepared and signed by a licensed attorney. These documents provide in-depth analysis and interpretation of legal matters, including regulatory compliance with various federal and state laws. They are effectively the attorney’s professional interpretation of the law regarding a particular matter. When dealing with vendors, suppliers, and potential investors in the skill-based real-money gaming industry, legal opinions are increasingly required. Additionally:

1. Risk Management: A legal opinion can help identify and mitigate potential legal risks before they turn into costly litigation. This proactive approach can save companies significant time, resources, and potential reputational damage.

2. Regulatory Compliance: Compliance with local, national, and international gaming regulations is critical. Qualified legal opinions can assist in deciphering these often complex rules and ensuring that your business is operating within legal bounds.

3. Contractual Relationships: Legal opinions offer assurances to potential partners and can also provide valuable insights into the contractual relationships with vendors and suppliers, offering clarity on obligations, rights, and potential areas of dispute.

4. Investor Confidence: For potential investors, a legal opinion represents an added layer of security. It assures them that the business they are considering investing in is legally sound and has taken steps to identify and mitigate potential legal risks.

Moving Forward with Confidence

Navigating the complex landscape of skill-based real-money gaming requires not just a vision but also a deep understanding of the applicable legal landscape. As such, obtaining a qualified legal opinion can be an essential step in successfully steering your business in this dynamic industry. At Artaev at Law PLLC, we are gaming law experts. We are committed to providing our clients with comprehensive and clear legal opinions to guide their decisions in the gaming industry. Our experienced attorneys have extensive knowledge of the regulatory and legal aspects of the gaming industry, allowing us to provide tailored advice to help you succeed. Remember, a legal opinion does not simply outline the law—it provides a roadmap for success.

Contact Artaev at Law PLLC today to set up your initial consultation.

The qualified and specialized attorneys at Artaev at Law PLLC know gaming law – email or call us to set up your initial consultation.

Disclaimer: This guide is for general informational and promotional purposes only. Nothing herein constitutes legal, tax, or investment advice. Every situation is different and has its own unique set of challenges. Do not take any action or sign any contract until you have obtained specific guidance from a qualified professional.

© 2023 Artaev at Law PLLC. All rights reserved.

How to Advertise Real-Money Gaming on Meta in 2023: A Legal Opinion is Still Required.

Meta (formerly known as Facebook) remains an attractive forum for real-money gaming companies looking to advertise their skill-based gaming apps, esports, and fantasy sports offerings. However, Meta has a strict policy that requires an application and approval before any “online gaming” ads can run. The application form is convoluted and complex, and unless you have a gambling license from a state regulator, you will need to obtain a legal opinion from an experienced gaming attorney.

Artaev at Law PLLC has provided consulting, review, and legal opinions to gaming companies since 2020. We also have experience with the Meta/Facebook onboarding and application process. Before Meta’s overhaul of the process in August 2022, the application was much simpler than it is today. The advertiser disclosed their geographic target, acknowledged the requirement for geofencing and age compliance, and submitted a legal opinion that qualified their offering as a game of skill or other type of competition that does not require a gambling license. Now, the application process requires not only a selection of the proper jurisdictions from a drop down menu, it also requires the advertiser to choose which “category” is most appropriate for their game.

For example, when choosing the United States, Meta prompts the applicant to choose the states where the game will be offered. Clicking on a state gives a choice of the types of games that Meta considers available or “allows” in that state. This sublist is inconsistent and does not provide any context as to what types of games fall into each category. For example, selecting Texas gives the advertiser a single option to choose “sweepstakes.” But Texas courts have applied the “predominant factor test” to permit real-money games where skill predominates over chance in deciding the winner. The Texas legislature’s definition of “gambling” also contains an express exemption for “bona fide contest[s] for the determination of skill.” TX Penal Code 47.01. So, while Texas state law permits skill-based games that pass the predominant factor test, Meta’s drop down menu only allows “sweepstakes.”

Gaming companies must also select the protective measures that they implement to ensure compliance with their territorial restrictions and 18+ age policies. KYC checks may also be appropriate depending on the jurisdiction, but again, this is a requirement that varies by country and region. Smaller or startup companies often struggle with navigating the various requirements, but there are qualified third party administrator solutions that offer the necessary services for gaming industry participants.

Finally, unless your company has a gambling license from a state regulator, Meta requires a legal opinion from an experienced and qualified attorney regarding the legality of the game under a particular jurisdiction’s laws. For example, if a company is offering a mobile app game of skill in the United States, the legal opinion will need to address not only the application of federal anti-gambling laws (such as the Unlawful Internet Gambling Enforcement Act and the Wire Act), but also the individual states. Each state has its own definition of “gambling,” various exceptions, and judicially-crafted test (such as the predominance or the material element test) that must be applied to the game in question. Also, the laws can change from time to time and must be addressed, such as when Virginia adopted specific legislation regarding certain physical games of skill in 2022.

Once the application and the opinion are submitted, Meta’s initial process is to check the submission for completeness (do not forget screenshots of your landing page!) and send it off for outside counsel review. The review can take as little as 2 weeks or as long as 3 months, depending on the game and the volume of submissions. Before the August 2022 reforms, if the application was rejected, there would be a specific reason and explanation. This allowed advertisers to go back to fix and resubmit their application. Currently, Meta does not give a reason for rejecting a submission. The default message is that advertising of the particular game or app is “not supported.” This is particularly frustrating when an advertiser has waited for weeks or months, just to find out their game is “not supported.” There is no clear appeal process either, and the advertiser is left to guess at how to best resubmit their application – or whether to simply try running ads without prior authorization (which risks Meta disabling the ad account and page).

Advertising on Meta can be a powerful boost to your game’s audience, but it is also a complex process that requires a legal opinion from an experienced attorney. There are many aspects to navigating the various laws in play, as well as KYC, age-gating, and geolocation requirements that are more and more prevalent across the industry. Contact Artaev at Law PLLC today to set up your initial consultation.

The qualified and specialized attorneys at Artaev at Law PLLC know gaming law – email or call us to set up your initial consultation.

Disclaimer: This guide is for general informational and promotional purposes only. Nothing herein constitutes legal, tax, or investment advice. Every situation is different and has its own unique set of challenges. Do not take any action or sign any contract until you have obtained specific guidance from a qualified professional.

© 2023 Artaev at Law PLLC. All rights reserved.

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