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International Skill-Based Real-Money Gaming: Is It Legal?

Previously, I wrote about the legality of skill-based real-money gaming in the United States. But the U.S. is not the only country where skill-based games are popular – real money competition is huge all over the world. For example, in India, skill-based gaming is not only a popular source of entertainment, but is also becoming a way to make a living. According to Ronaldo Landers, the CEO of the All India Gaming Federation, smartphone gaming has been the most significant contributor to the growth of real-money skill game business in India. That market alone is expected to gross close to $1 billion in revenue by 2025. Market studies currently estimate 350 million gamers in India and have reported a 21% increase in transaction-based gaming, with consistent growth expected in the near term.

Despite the worldwide popularity of skill-based gaming, legal compliance remains a challenge. The law is obviously different in each country and whether skill-based money games are legal depends on where you are. Sometimes there is no uniform national approach – both the United States and India regulate gaming on a regionalized state level. In India, each state has the power to make its own betting and gambling laws, which has led to a patchwork of legislation and judicial decisions. For example, Andhra Pradesh and Telangana have banned all real-money games (whether gambling or skill based), Tamil Nadu permits skill games only, and Kerala has expressly banned real-money online rummy. The lack of national principles and regulations has even resulted in conflicting judicial decisions about whether poker is a skill-based or chance-based gambling game. The Gujarat and Bombay High Courts have determined that poker is a game of chance – while at the same time the Karnataka High Court has reached the opposite conclusion. To add to the confusion, the Supreme Court of India has opined that rummy is a skill game except if played for real-money stakes or if operators make a profit.

In Europe, gambling is generally governed on a national level. This means that each country has their own set of laws that define and regulate gambling. Skill-based games that fall outside the definition of gambling are permitted. For example, one popular skill-game platform active in the European Union only offers real money cash gaming in Austria, Belgium, Cyprus, Czech Republic, Denmark, Germany, Luxembourg, Monaco, Netherlands, Romania, Spain, and Sweden. However, players located in France, Portugal, Italy, etc., are restricted to play for virtual “play” money only. All countries either regulate or outright prohibit gambling, so the question comes down to whether a particular skill-based game falls within that country’s definition of “gambling.” That question can only be answered by careful application of the particular country’s laws to the specific characteristics of the game.

What about cross-border play? Can a company based in the United States, India, or Germany offer games between players in different countries? It depends on where the players are located. In the United States, federal law does not prohibit skill-based real-money gaming. The most significant legislation – the Unlawful Internet Gambling Enforcement Act of 2006 – restricts financial transactions associated with “betting or wagering” if the “betting or wagering” is illegal where it is initiated or received. The UIGEA does not apply to most skill-based games, which are not a “game subject to chance.” But even if it involved a “bet or wager,” skill-based gaming is not unlawful in the majority of the states in the United States. So long as the bet or wager is legal in the state where it originates and in the state or country where it s received, there is no federal prohibition on the activity.

From a practical perspective, most skill-based gaming companies put the onus on the players to determine whether real-money skill-based gaming is legal in their particular jurisdiction. This is especially the case with non-U.S. based players – the terms and conditions require the end users to do their own due diligence. Of course, before a company can offer its skill-based game on a different country’s Apple App Store, the company will have to comply with that country’s specific terms and requirements. For instance, there may be geo-restriction or geo-location requirements. It is also likely that Apple (or Facebook for advertising purposes) will require a legal opinion about the legality of the game in the host country as well as the other countries where competitors are located.

Cross-border competition can be especially attractive to players looking to compete against friends and family located abroad. Gaming plays an important part in many cultures and increased accessibility through the internet and mobile app gaming presents opportunities for users to enjoy real-money gaming no matter where they are actually located. Whether celebrating the lunar new year through some fun family games or simply challenging your cousin to a $5 game of 8-ball, skill-based money games are a growing, popular market and business opportunity all over the world.

Have more questions? Need an expert legal opinion? Need help getting your app through the Facebook, Apple, or Google review process? Contact Dan Artaev today by emailing dan@artaevatlaw.com or by phone or text at (269) 930-0254.

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.

© 2021 Artaev at Law PLLC. All rights reserved.

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business law gambling law gaming law internet law

Mobile App Real-Money Skill Games: Google Play Says No Thanks.

The skill-based real-money gaming market is red hot in the United States, fueled in large part by the ubiquity of smart phones. We all play games on our phones and real-money gaming provides a quick, fun way to win some money for casual players. The games are not difficult to learn, offer free practice play, and have varied stakes to suit almost any level of risk tolerance. Full-scale casino apps are only available in a handful of states that have legalized full-scale online gambling, and while daily fantasy sports is more widely available, its appeal is limited. On the other hand, real-money skill-based games are available in most states. The preferred medium is the mobile app – as there are an estimated 222 million smart phones in the United States, split about 55% Android and 45% iOS. However, only Apple’s App Store offers skill-based real-money apps. Google’s Play store does not.

On March 1, 2021, Google changed its policies to allow “real-money gambling apps.” This definition expressly refers to licensed gambling products, meaning online casino apps for the few jurisdictions that have legalized online gambling. Google also allows daily fantasy sports apps that meet certain requirements. At the same time, Google expressly excludes any type of real-money skill gaming. Specifically, “we don’t allow content or services that enable or facilitate users’ ability to wager, take, or participate using real money…to obtain a prize of real monetary value. ” Critics have pointed to the fact that this encourages “sideloading,” (downloading the app through a website, as opposed to the official app store) which presents potential security risks and opens the door for true scams. Google’s policy also makes it more difficult for international companies to enter the U.S. skill-based market, as consumers may be even more reluctant to “sideload” an app from a foreign website, even if they would otherwise get the app through the Google Play store. At the same time, Google’s position is explained by the lack of clear regulation for real-money skill-based gaming. Google clearly does not want to police or vet the various iterations of skill-based games or review them for state-specific legality. Instead, it is relying on state licensing to authorize real money gaming. This position excludes most real-money games that are neither licensed nor regulated under most states’ laws.

Apple’s App Store Review Guidelines remain the same. “Apps that offer real money gaming…must have necessary licensing and permission in the location where the app is used, must be geo-restricted to those locations.” For real-money skill-based games that do not need a special license in about 80% of the United States (because they do not depend on “chance” and are not otherwise regulated), this is a green light to make their apps available on the App Store. There are many such games available in the App Store, including hundreds of titles offered through the Skillz.com platform, which is a large California-based, publicly-traded company. For the time being, Apple seems comfortable with hosting real-money skill-based gaming, so long as the developers comply with the geolocation requirements and are only operating in those states where a license is not required.

Developers looking to distribute their games in the United States should look toward iOS for the time being. The legitimacy of “official” app store distribution is especially valuable in the real-money gaming market. Note that Apple still requires “geo-restricting” to those jurisdictions where the app is legal. Federal law does not regulate most skill-based real-money gaming, but the state-level analysis remains unsettled. In fact, even the large industry participants like Skillz, WorldWinner, and others cannot agree on a uniform list of states where their products are legal. In other words, if you are operating unregulated and without a license, you must absolutely consult with a legal expert and determine your risk tolerance before defining your geolocation parameters.

Have more questions? Do you need help getting your app through the review process? Contact Dan Artaev today by emailing dan@artaevatlaw.com or by phone or text at (269) 930-0254.

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.

© 2021 Artaev at Law PLLC. All rights reserved.

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business law esports gambling law gaming law internet law

Real-Money Skill Gaming in the U.S: Is Your Game More Fantasy Sports or Pure Contest?

In 2021, there are many opportunities to play games for real money online, even if your particular state does not offer full-scale online casino operations. Daily Fantasy Sports (or “DFS”) is one hugely popular entertainment option. Real-money pure-skill contests are another. Video game tournaments, leaderboards, and prize pools are also available, as well as countless other options. Entrepreneurs all over the world want to enter the red-hot United States gaming market, but need to understand the legal nuances in order to effectively distribute their product and avoid legal issues with regulators, banks, and app platforms like the Apple App Store.

With skill-based games, it is important whether your game is more like fantasy sports or whether it a pure-skill contest. This distinction is critical because it determines where your game is legal (and whether you need a license) – and also affects your tax obligations to the IRS.

The following chart illustrates the three categories of games and the applicable regulations:

Description/type of gameCategoryRegulations
Players determine the amount of the wager and may apply certain level of skill to increase odds of winning (like hit or stay in blackjack), but odds always against the player. Winner is determined primarily by chance or chance is the dominant factor in determining outcome. Game is similar to a casino game like slots, blackjack, keno, or bingo. Game is a poker-like game. Game features a random mechanism, like a shuffled deck of cards, roll of the dice, or a spinning wheel. Bet is on the result of a single athletic competition, event, or performance of a single player.GamblingHighly regulated, illegal and criminalized activity (without a license)in all 50 states. Federal law also applies, including the monetary transaction restrictions through the Unlawful Internet Gambling Enforcement Act (“UIGEA”).
Players pay an entry fee, and then use research, data analysis, or other skill to build a team or portfolio to compete against other player-chosen teams or portfolios. Points or scores assigned based on real-life performance. Player does not control the performance of the players, stocks, currencies, or other portfolio components. Real-world events determine outcome. Similar to fantasy sports or a fantasy league. Prize pool must be known and fixed ahead of time.FantasyFantasy sports are expressly excluded from the scope of the UIGEA. Fantasy sports and leagues are permitted in about 80% of the states, but license and revenue tax is required in some. IRS views fantasy wagers as gambling bets and no different than sportsbook betting for tax purposes. Potential exposure to excise tax for providers.
Players pay an entry fee into a sports tournament or skill contest for the chance to win a prize (whether cash or otherwise) based on their own participation. Players determine the outcome through pure skill, such as strength, speed, agility, mental knowledge, mental quickness, or other physical or mental factor. Chance has minimal or no role in the outcome. Head-to-head games of timed solitaire, chess, checkers, blockbuster, Tetris-like puzzle games. Trivia contests. Most video game tournaments. Golf or tennis tournaments, hole-in-one contests.Pure Skill ContestUnregulated and not considered gambling in about 80% of the states. Regulated pursuant to license or outright prohibited in the remaining states. Not regulated under federal law. The IRS does not consider entry fees or skill wagers to be gambling bets.
Copyright 2021 Artaev at Law PLLC. All Rights Reserved. May not be reproduced without the express written permission of the author.

As a gaming company providing a new product, you obviously want to steer clear of classification as a gambling game. Unless you are a licensed casino (or working in partnership with a licensed casino) in one of the few states that have legalized online gambling, real-money gambling games are illegal. Not only do you risk fines and prosecution from state and federal law enforcement, but you will not be able to pass Apple or Google’s app vetting process, advertise on Facebook, or use a mainstream payment processor like PayPal.

Skill-based real money games are those where the outcome is not determined by chance. These games fall either into the “fantasy sports” or “pure skill contest” categories. In either category, the argument is that where chance is not a dominant factor, the game is skill-based and falls outside the definition of regulated “gambling.” Many real-money skill-based gaming platforms have adopted this “if it is not prohibited, then it is legal” approach to offer their products in about 80% of the United States. But there is a difference between the so-called “fantasy sports” and “pure skill contest” categories. The first difference is regulatory – state law treats “fantasy sports” and “pure skill contests” differently.

To fully understand the difference, it is important to know that the “it’s not gambling” argument is not new. In the early 21st century, it was widely used by online poker providers and then daily fantasy sports operators. Recall that between the early 2000s and 2011, Texas Hold’em became huge in the U.S., helped by online pioneers like PokerStars and PartyPoker that allowed anyone to play online poker from anywhere. ESPN was airing the World Series of Poker as part of its routine sports coverage. The 2006 James Bond franchise reboot Casino Royale even focused on high-stakes no-limit hold’em (as opposed to Baccarat in Ian Fleming’s original book treatment).

The primary argument for legality was that poker is a game of skill, not chance, and therefore not gambling. Advocates pointed to the fact that skilled poker players were consistently able to beat their opponents, even though the game did involve the element of chance with a random shuffle of a card deck. In response to growing concern about unregulated real-money poker, a number of courts concluded that chance played a significant role in the outcome and Texas Hold’em is indeed gambling. The federal government took further regulatory action by enacting the Unlawful Internet Gambling Enforcement Act (“UIGEA”). The UIGEA essentially killed off any off-shore poker and other grey-market online gambling operations by targeting U.S. banks and payment providers and prohibiting them from facilitating wagering transactions. Those providers that continued to offer U.S. players real money poker games were shut down through federal law enforcement action on so-called “Black Friday,” April 15, 2011, and their executives charged with a number of felonies, including money laundering and fraud.

Daily Fantasy Sports emerged as an entertainment alternative around 2007 and relied on the same “it’s not gambling” argument as poker. Players would stake real money for a chance to play in a fantasy sports contest, where they would set a daily lineup of their own fantasy team and compete against others for the highest score. The highest score or scores would be awarded cash prizes. DFS relied on the definition of “bet or wager” in the UIGEA that expressly excluded fantasy sports contests. But, just because DFS is not illegal under the federal UIGEA (and MasterCard or Discover can process the associated wagering transaction) does not mean it is automatically legal. Some states concluded outright that DFS is “gambling” and is illegal. Others enacted legislation that DFS is not gambling. And some have done nothing at all. Thus, DFS offerings vary state-by-state: as of the date of this article, DraftKings and FanDuel both offer DFS in 41 of the 50 states. But DFS law is far from settled and remains in a state of flux; for example, in New York, DFS was authorized by the state legislature, but a lawsuit challenging the constitutionality of the law is pending on appeal. Texas is another example – in 2016, the Texas attorney general issued an opinion that DFS is illegal gambling, but both FanDuel and DraftKings continue to offer DFS in Texas pending the final outcome of various lawsuits.

On the other hand, games that are head-to-head contests of pure skill are legal in most states because they fall outside the state’s definition of “gambling.” These games – whether online or in person – allow participants to pay an entry fee and compete for a prize (monetary or otherwise). Even if the game is played on a smartphone, it is no different than paying a fee to play in a money tennis or golf tournament. Or paying an entry fee to participate in an arm wrestling contest at the state fair. In fact, certain states expressly exclude so-called “bona fide contests of strength, skill, or speed” from the definition of gambling, provided that the only persons making the wagers are the participants themselves. But although the analysis seems straightforward, providers of pure-skill contests disagree about where exactly real money games are legal. Various platforms have different lists of “restricted jurisdictions,” demonstrating their different tolerance for risk, and that the law remains unsettled in this area.

The second difference between fantasy and pure skill is tax treatment. Under the Internal Revenue Code, gambling winnings are taxable income, but may be offset by gambling losses. In 2020, the IRS decided that wagers made on DFS constituted a “wagering transaction” (i.e. gambling) under Section 165(d) of the Internal Revenue Code and the Tax Court agreed. This ruling was consistent with another 2020 internal IRS memo that concluded DFS wagers were subject to an excise tax, which is normally applied to wagers made at sportsbooks. The IRS’s analysis and conclusion that DFS is essentially the same as sports gambling has significant legal implications. Not only does it potentially expose DFS providers to millions of dollars in unpaid excise tax liability, but it is also an indicator of how the nature of the game may determine the outcome of “is it gambling” analysis. A game could very well be “gambling” for tax purposes, but at the same time “not gambling” under a state’s definition of “gambling.”

The skill-based gaming market is an attractive, fast-growing industry in the United States. However, it is also plagued by an uncertain legal landscape and inconsistent treatment at the federal and state level. Tax implications are also something to consider when designing your game. Whether you are a start-up or a well-established company looking to introduce a new game product, Artaev at Law can provide you with consulting and legal analysis required to do it right.

Have more questions? Do you need help getting your app through the Apple, Google, or Facebook review process? Contact Dan Artaev today by emailing dan@artaevatlaw.com or by phone or text at (269) 930-0254.

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.

© 2021 Artaev at Law PLLC. All rights reserved.

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business law esports gambling law gaming law intellectual property internet law

The Facts About Real-Money Skill Gaming: Dispelling 5 Common Internet Myths.

Artaev at Law advises companies looking to launch new technologies and tap into the skill-based real-money game market in the United States. In keeping up with the latest legal and regulatory trends, we do a lot of research, and we have seen a lot of misleading and downright false information on the internet. Do not be deceived and get the facts backed up by legal analysis – Artaev at Law is the trusted, experienced, and accurate source to answer your questions and dispel the most common myths about real-money skill gaming.

1. MYTH: Online gambling games are the same as “real-money games of skill.”

FACT: No. Words matter. “Gambling” is term of art used in state laws across the United States to define heavily-regulated casino-type activities, usually with reference to an element of “chance.” Federal laws like the Unlawful Internet Gambling Enforcement Act (“UIGEA”) also regulate and prohibit banking institutions from facilitating unlawful gambling. But paying an entry fee to a cash-prize tournament or wagering on yourself in a head-to-head contest is not the same thing as “gambling.” These real-money games of skill rely on the relative skill of the players to determine the outcome and do not involve any element of chance, so they cannot be considered “gambling,” which has a specific definition under the law. I have even seen other law firm websites make this mistake and misuse the term “gambling” to refer to anything that involves the wagering of real money. There are also a lot of questionable websites that attempt to equate online casinos to video games or pure-skill games in an attempt to confuse and generate clicks and get people to transfer money to off-shore operations. Do not be deceived – and contact a knowledgeable lawyer if you have questions.

2. MYTH: States only regulate “games of chance” and if the real-money game does not involve “chance,” the game is automatically legal everywhere.

FACT: No. There are 50 states in the United States and each one of them has their own laws that regulate gambling. Each state has its own definition of “gambling” and what exactly is and is not allowed depends on the nature of the game offered, as well as specific regulations. Some states specifically allow participants to wager real money on “bona fide contests of skill.” Others prohibit wagering any real money on any game, even if chance is not involved. Note that wagering on the play of others, even if they are involved in a contest of skill, is prohibited as gambling. After all, that is how sportsbooks work – wagering on the competition of others. This is a constantly evolving regulatory area – the major real-money gaming websites themselves disagree where to offer real-money gaming – some offer cash games in 45 states, others in 41, others in 35, etc. Whether your particular game is legal (and where) is a case-by-case analysis that requires an up-to-date legal opinion.

3. MYTH: Real-money games of skill are those shifty-looking slot machines that you see at truck stops or those internet cafes that offer sweepstake games.

FACT: No. Those slot machine looking things are in fact slot machines (with some extra features added to attempt to claim that they involve “skill”) and internet cafes try to disguise game of chance gambling as sweepstakes. Law enforcement in many states have used existing gambling laws to shut down these establishments. Real-money games of skill are in fact played predominantly on mobile devices or computers at home. They are nothing like slot machines or sweepstakes and allow players to compete head-to-head for real cash prizes. There are card based games (like Solitaire that awards points based on speed to completion), bubble shooter games, Tetris clones, knife throwing games, and many others. The head-to-head (or tournament) contests are more akin to entering a pool tournament for a chance to win a cash prize, rather than any sort of randomized game of chance.

4. MYTH: Skill games or are just a different type of gambling video game that Las Vegas using to try to appeal to Millennials who are not interested in the traditional casino games.

FACT: No. Skill-based real-money gaming is not something that involves or depends on land-based casinos. While the regulatory bodies in states like Nevada and New Jersey did adopt regulations to encourage a new type of slot machine that involves an element of skill, there is no indication that these types of machines enjoy any sort of popularity. Like many other forms of entertainment in 2021, skill-based real-money games are based online. Advanced internet and mobile phone technology and accessibility is making these games an especially lucrative business.

5. MYTH: There are no legal implications for organizing or running a real-money video game tournament (FIFA, Tekken, Magic: The Gathering, etc.) because the outcome depends on the skill of the players.

FACT: No. There are two distinct problems with this assumption. One, is that legality depends on the nature of the game being played. Is there an element of chance? This could be determined by not only the nature of the game, but how the match-making or team selection function works. If chance is present, how much, and does it predominate over the skill element? That will determine whether the particular game passes the state-level “gambling” test. Two, there are intellectual property issues. The game studios own copyright and trademark rights in their games and do not endorse third party websites that enable real-money wagering on their games. Studios like Epic Games have publicly announced their view that these websites are misappropriating their intellectual property, and legal action is likely forthcoming.

Skill-based real-money gaming is an exciting and emerging form of entertainment worldwide. But there is a lot of misinformation online. The regulatory landscape is always changing, and Artaev at Law are the experts on the facts, trends, and the law about real-money skill-based (or pure-skill) gaming.


Contact Dan Artaev by email or call or text to set up your initial consultation.

Disclaimer: This guide 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.

© 2021 Artaev at Law PLLC. All rights reserved.

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business law gambling law gaming law internet law

Is Playing Video Games for Real Money Legal? It May Depend on the Game.

Skill-based real-money gaming is a growing industry worldwide. Previously, I wrote about the legality of playing casual games like Solitaire and bingo derivatives for real money. But what about console or PC games like FIFA ‘21, NHL ‘21, Madden ‘21, NBA2K21, and PGA2K21? Shooters like Call of Duty, CS:GO, and Fortnite? Strategy card games like Magic the Gathering? Can those be played for real money as well?

We are not talking the official in-game cash cups or periodic tournament that a few games offer. Rather, head-to-head real money competition that makes any game a chance to win (or lose) cash. There is no shortage of websites and apps offering players this very service. The chance to wager real money on head-to-head video game contests or play in cash-prize leagues and tournaments is certainly attractive. But whenever there is any sort of betting or wagering, legal issues may come up. As a player, you want to make sure you are not breaking the law by wagering $5 on a Sunday Madden round robin. As an entrepreneur and app developer, you need to know what you can and cannot offer to your audience or how to plan for and resolve potential legal issues.

There are two distinct problems areas in the real-money gaming sector. First, is playing video games for real money considered illegal gambling?

Each of the 50 U.S. states has its own set of laws that define “gambling” and that definition determines whether real money playing video games for real money. Do not assume that a platform or app is legal just because it is not traditional, casino-style “gambling.”

You may have heard that if a game’s outcome depends on skill rather than chance, then it is not “gambling” and therefore allowed. This is false. Each of the 50 states have their own regulatory scheme for gambling and gaming, and while some states only regulate games where chance is the dominant factor (in other words, casino-style gambling), not all have the same laws. Certain states define gambling independent of whether chance or skill determines the outcome. They simply make it illegal to wager money in exchange for the possibility of winning money. Other states expressly regulate “games of skill,” either independently or as part of recent internet gambling legislation.

Note that even if a state allows participants to wager real money on a game of skill for a chance to win cash prizes, wagering on the gameplay of others is prohibited. Wagering on the play of others is akin to a sportsbook, which are tightly regulated as gambling across the board.

The gambling vs. game of skill analysis also depends on the particular game at issue. Some games are pure skill with no element of chance – such a game that pits two identical soccer squads against each other. Others have some element of chance, but the skill predominates over the outcome. For example, Fortnite has an element of chance (even presuming you are matched with players of equal skill) because the loot is randomized and the bus approaches the map from different directions, giving an element of luck at least at the start. Then there are games like Magic: The Gathering and Hearthstone or any other game that features cards and a random shuffle mechanism. While better players will certainly win over time, the randomness of the shuffle does affect the outcome. Thus, the specific nature of the game played also determines the legality of the wager on a state-by-state basis. Note that official in-game tournaments always have a “void where prohibited” disclaimer and generally do not require a real-money entry fee to participate to avoid legal issues.

The second problem is intellectual property rights – specifically the game copyrights and trademarks owned by studios like EA and Epic.

Game studios generally do not endorse any websites or apps that allow real-money wagering on their games. In fact, such wagering providers may face copyright or trademark infringement lawsuits from the game developer for misusing their intellectual property.

Many third-party wagering sites use the logos or cover art from the games that they support, but not many have the license or permission to do so. From a trademark perspective, the game studios could have a brand confusion claim, as players may assume that the game makers themselves endorse these wagering sites. The fine print (that nobody reads) disclaiming any endorsement is unlikely to prevent a trademark infringement action. Game developers spend millions of dollars on cultivating their image and will not hesitate to file a lawsuit to protect the integrity of their brand.

The game studios also own the copyright to their games, which means they get to control how their products are used, distributed, and portrayed. At least one studio, Epic Games, has publicly stated that any website or app that facilitates wagering on any of its games (including Fortnite) is violating Epic’s IP rights. Video game publishers – especially those that market to the under-18 crowd – do not want to be associated with anything that could be viewed as gambling (even if it is not gambling under the law). It is likely that there are lawsuits coming to protect the games’ “family-friendly” image and reassure parents that video games are a safe and wholesome hobby. It is also unlikely that any game studio – at least any major game studio – will enter into a licensing deal with a wagering website to specifically support real-money wagering on gameplay.

Plus, some studios themselves offer cash and prize competitions. For example, Fortnite hosts its own real money prize events. Call of Duty has league play. Magic: The Gathering periodically does an Arena tournament that awards a cash prize to the top players. “Official” competitions let the studios control their own IP and not have to share revenue and player base with any third parties. Further, most official competitions do not require a real-money buy-in to participate, making them more “family-friendly.”

There is no doubt that real-money skill gaming is a big draw worldwide, especially with the ubiquity of smartphones and fast cellular connections. Potential legal issues are there as well, and the wrong approach will attract the attention of local law enforcement and civil intellectual property lawyers. To add to the uncertainty, the United States is a dual-sovereign system, with regulations both on the federal level (that mainly affect the banking aspect of wagering) and the state level (that are constantly changing). Tread carefully and hire a lawyer.

Contact Dan Artaev by email or call or text to set up your initial consultation.

Disclaimer: This guide 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.

© 2021 Artaev at Law PLLC. All rights reserved.

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business law esports gaming law

Esports. So Hot Right now: Advice from an Esports Attorney for Players and Teams.

Metro Detroit is uniquely poised to become the next epicenter of a growing industry: Professional competitive video gaming, or simply esports. An emerging and growing form of entertainment, the Michigan esports scene is rooted in its strong high school and collegiate programs. Professional esports actually had its first major metro Detroit debut August 2019, when Little Caesars Arena hosted the League of Legends Championship Series summer finals. Detroit’s storied sports history, as well as its growing reputation as a technological pioneer made it particularly attractive to Riot Games when it decided to bring this event to the Motor City.

The tournament attracted more than 10,000 live fans to the city and the arena, with tens of thousands more watching a stream on Twitch. Metro Detroit is also home to gaming lounges, arcade bars. Since 2019, the pandemic obviously shifted demand away from in-person events, but fans still continue to follow their favorite players remotely. California remains the epicenter (no earthquake pun intended) of the American video game industry, which is still dwarfed by the Asian market. Still, there is a robust esports community in Michigan, which bodes well for Michigan continuing to attract professional events and business in the future.

Despite the industry’s potential, there are no dedicated esports law firms or esports lawyers in Michigan, and Artaev at Law is the only Michigan law firm that specializes in video game law. If you search for “Michigan gaming lawyer,” the results come up for casino gaming lawyers, which is probably not the type of gaming you are looking for.

Why do you need a lawyer in the first place? Professional esports, like professional football, tennis, baseball, etc., is a legal minefield for the unwary. Intellectual property issues are front and center. Contract law and employment law concerns abound. Additionally, esports participants and professionals tend to be younger, often without professional representation, and especially vulnerable to predatory market practices. The unique nature of the industry and legal issues facing participants also requires specialized knowledge base and background from your lawyer.

Get someone who knows both the law and video games. The classic “Legend of Zelda” line rings true: It’s dangerous to go alone! Take this (advice):

  • Before signing ANY contract with ANY team, sponsor, representative, etc., consult with an attorney. It is a worthwhile investment in your future and you must understand all of the rights, costs, and benefits that you are agreeing to. Obtaining a professional consultation before you enter an agreement is far cheaper than trying to get out of a contract after the fact or worse, having to defend against a lawsuit for breaching that contract.
  • An esports attorney can act as your agent and advise you regarding things like your rights and obligations, contract termination, payments, taxes, and other legal aspects. An esports attorney can help you protect your career, revenue stream, and potential winnings, while you can completely focus on the gaming and building your brand.
  • Do not assume that because you are part of a school team that you are automatically protected. Professional esports is all about money and like any other industry, it is a business first. Treat your involvement just like you would any other serious business transaction.
  • Merchandising and general intellectual property are big money, but often overlooked. As a pro gamer, you will likely receive a salary, but you also stand to make a lot of money through sponsorship. For example, if Mountain Dew calls you up and offers big money to drink their products during your live stream, who owns those rights? Who gets the money?
  • Like with any business, the more it grows the more trouble it attracts. Did you create a signature kill shot or a unique move that gained you 1,000 new followers on Twitch? What rights do own to that creation? What about your unique online persona? What happens to your creations after you sign a professional contract or a sponsorship deal?
  • Another question that will come up sooner rather later is how to deal with the social media aspects – especially the negative trolls. Can you send “cease-and-desist” letters? What legal options do you have when someone defames you online?

Video games are big business and are a growing sector of the entertainment world. The $1 billion (plus) global industry is continuing to expand worldwide, including to Metro Detroit. The emerging market means there are more players, more teams, more brands, and more potential pitfalls than ever before.

Have more questions? Contact Michigan’s video game lawyer Dan Artaev at dan@artaevatlaw.com or 269-930-0254 with any questions and professional representation in the esports or video game industry.

© 2021 Artaev at Law PLLC. All rights reserved.

Categories
esports gaming law intellectual property

FAQ: Can Playing Music on Twitch Get Me Sued?

Yes it can. As the popularity of internet streaming soars, content creators are encountering unique legal issues related to the media that they use. In June 2020, Twitch received thousands of so-called “takedown notices” under the Digital Millennium Copyright Act (“DMCA”) related to multiple archived clips that contain copyrighted music. The Recording Industry Association of America (“RIAA”) owns the copyrights to many popular songs and is responsible for this DMCA blitz. This situation has prompted many questions from the streamer community, and so I have created this FAQ in response. If you have more specific questions regarding your situation, please reach out directly to set up a personalized consultation.

Q: What exactly is the issue with playing music that I paid for?

A: The issue is copyright law and the fact that that most streamers don’t have the right license. When you purchase a CD, download a song from iTunes, or subscribe to Spotify, you are only buying a personal use license for the songs. Remember how making bootleg CDs is “piracy” and illegal? That’s because your “ownership” of a song does not include the right to reproduce it. It also does not include the right to play the music for the public. When you hear music a gym, restaurant, or retail store, they have obtained special “public performance” licenses, which are more expensive.

Q: Are they really going to sue me? Even if I’m not making any money?

A: They might. Under U.S. copyright law, the copyright owner may sue to get an injunction (an order to stop doing something from the court), and in addition to actual damages, get statutory damages, as well as costs and their attorney fees. Under the law, infringement is still infringement even without profit or monetary gain. If a court finds that the infringement was willful, statutory damages can be up to $150,000.00. Also, under the Twitch terms of service, three DMCA notices against your account is grounds for a permanent ban from the platform.

Q: Why is Twitch so concerned with what I am doing?

A: Because they may be liable as the host of the copyrighted content. Under the DMCA, Twitch can avoid liability as the host if they act in response to a “takedown notice.” That is why they have been actively mandating mass clip deletions in response to the DMCA notices they have received. It is generally easier for a copyright holder to target the host like Twitch or YouTube than the streamer. The host has incentive to act in order to take advantage of the “safe harbor” under the DMCA, and if the host doesn’t act, the host has money to pay any adverse judgment obtained by the owner of the copyright.

Q: Isn’t my playing music “fair use”?

A: Probably not. The “fair use” exception to copyright infringement generally protects reproduction for criticism, comment, educational use, news reporting, scholarship, or research. When music is played to accompany a streamer’s gameplay, the music is not being used for any of these purposes. Whether or not something is “fair use” is a fact-specific inquiry, but generally playing a soundtrack to your gameplay is not going to be considered fair use.

Q: Isn’t the video game itself also protected under copyright law? Do I need a special license to stream the game itself?

A: The game content itself is protected by copyright, but streaming it probably qualifies as “fair use” and is protected from infringement actions. Most streamers commentate or critique their gameplay or the gameplay of others, so arguably the use of copyrighted content meets the factors listed in 17 USC 107. Essentially, sharing copyrighted content is the base of the entire streaming industry.

However, as Wisconsin attorney Matthew Harding pointed out to me, the issue is far from settled. On one hand, Amazon’s multi-billion dollar acquisition of Twitch, as well as eight-figure exclusive streaming contracts with top-tier talent, indicate that the industry is confident in its fair use argument against any game companies that would target the game itself. On the other hand, there are prominent industry figures that believe streaming video game content is not fair use and could be targeted via DMCA take-down notice, much like unlicensed music. Mr. Harding also observed that any company that targets streamers of its games with copyright infringement lawsuits or takedown notices will face significant backlash from the community, but the bottom line is that the publisher still owns the copyright and is entitled to enforce the exclusive rights that are attached to that copyright by law.

Q: I’m confused. I have seen rhythm and music game streamers get taken down – why are they not protected by “fair use”?

A: As stated in the response to the previous question, the “fair use” issue is not settled. In fact, each “fair use” situation is fact specific, but it is likely that these rhythm or music game players are not using the copyrighted work for commentary or criticism purposes. It is not enough to simply broadcast yourself playing the game. Running commentary or criticism is needed to make a plausible “fair use” argument.

Q: As a streamer, what can I do?

A: Twitch is actively working to give its streamers options. Recently, it has launched Soundtrack – a product that allows streamers to run a separate music channel during the broadcast. The artists and labels available are limited, but gives indie artists more potential exposure. Of course, the RIAA is fighting Twitch on this product too, claiming that Twitch needs synchronization and mechanical licenses for its Soundtrack tool. The fight continues.

Also, there is a number of websites that sell royalty-free licenses. For example, Tunepocket offers memberships that give streamers access to a range of music and sound effects specifically for public performance.

Q: I am a podcaster. Can I play music during my podcast?

A: Unless you hold the copyright to the music (i.e. it’s original) or have the right license, no. You face the same issue as streamers do when they play music in the background of their game streams. Music you buy on iTunes or stream through Spotify is not licensed for public performance like your podcast.

Dan Artaev is an experienced attorney who is an avid gamer and who has advised gaming companies regarding various legal issues, including intellectual property rights. Have more questions? Contact Dan by email at dan@artaevatlaw.com or by phone or text at (269) 930-0254.

© 2021 Artaev at Law PLLC. All rights reserved.

Categories
gaming law intellectual property

So You’ve Designed a Board Game. Do You Need a Patent, Copyright, or Trademark?

Board games are still big business. Even before the pandemic limited entertainment options, the board game industry already accounted for $1.8 billion of sales in 2013 – or almost 10% of the entire toy market in the United States. In the first half of 2020’s lockdown, Hasbro reported a 4% increase in gaming revenue over the same six month period in 2019. The global board game market is projected to grow to over $20 billion by 2025, and the ubiquity of online retail has made board games a truly global industry. And, digitization of board games (making them available on smartphones and tablets) has only increased the popularity and accessibility of these products for mainstream consumers.

Although the board game market is not as big as video games, board games have significantly lower development costs and can be designed without specialized knowledge like graphic design, coding, etc. Like writing a book, anyone can do it, so long as they come up with a good concept, it is entertaining, and the execution works. For example, one of the most popular games that has made millions of dollars is Cards Against Humanity. An R-rated version of Apples of Apples, the design and concept is extraordinarily simple – it consists of questions or concepts on black cards, and words or sentences to create an absurd/funny/offensive response on the white cards. Yet the concept was so well-executed and entertaining that it became an instant hit.

The relative simplicity of board game design however poses a host of unique legal issues. As a developer, you may have already been threatened with legal action, or worse, have had to defend yourself from a lawsuit. Or, perhaps you are considering legal action against a blatant copy of your original idea. Protecting your concepts and business requires an understanding of the three primary forms of intellectual property protections: copyright, trademark, and patent law. So what do you need? As always, the answer is “it depends.”

Copyright

Intuitively, board games should enjoy some sort of copyright protection. After all, they consist of booklets, printed boards, and other materials not dissimilar from literary works. As a general rule, the rules, boards, artwork, and other aesthetic or literary elements to a game are copyrightable and protected as such. These protected elements are referred to as the “theme” of the game. Distinct from the “theme” of the game are the game mechanics, which cannot be copyrighted. “Game mechanics” is the actual gameplay – which can be as simple as roll the dice and move a token. The United States Copyright Act codifies this concept and expressly states that copyright protection does not extend to “any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” 17 USC 102(b). As an example, the “Monopoly” name, mascot, property names, and token designs would all likely be protected under copyright law. However, the game play concept itself – that is moving around the board, buying up properties, and charging rent to other players who land there – is not. There is no bright line rule however, especially given the increased complexity of board games and card games, and each situation will be driven by its own unique factors.

Trademark

Trademark protection exists chiefly to prevent customer confusion and to protect the integrity of a brand. In the board game context, trademark will primarily protect the name of the game, but can also protect unique “trade dress” elements that constitute unique game board designs, cards, and tokens. For example, in addition to owning the trademark for “Monopoly,” Hasbro also registered recognizable designs from the game, including the railroad symbol, the “jail” and “go to jail” images, and the layout of the “Monopoly” game money. As an aside, the actual status of the “Monopoly” trademark is unsettled, as following years of legal proceedings, a 1983 appellate court case decided that “Monopoly” had become a generic terms and no longer was associated with the source publisher, Parker Brothers. Congress responded to the ruling by amending the Lanham Act to clarify that purchaser motivation is not the test and that a mark can only be deemed generic when its “primary significance” to the general public is the generic description of particular goods or services.

Patent

Patents are most often associated with scientific discoveries and mechanical devices. In the board game context, a patent may be available to protect a game’s unique mechanics. Again, we are not talking about general methods of play here, but rather something truly unique. A so-called utility patent could be available if the mechanics meet the unique and non-obvious test. However, patent protection is fairly expensive to obtain and to police, so while patent protection may be available, it may not be practical. Also, any sort of public disclosure, such as playtesting, may defeat patent claims. “Monopoly” was actually patented in 1935 by Parker Brothers, with the description including the rules, the “apparatus of a board game consisting of a continuous path around the board,” and other claims, including the Chance and Community Chest cards. The patent has little value however, as it expires in 20 years, and is so specific that it likely limits the protective scope of the patent itself.

Other Intellectual Property Concerns

The most two common questions designers ask are: (1) I am making a game; how can I prevent someone from copying it? and (2) I am making a game that is similar to X; how do I avoid getting in trouble for copying? While you may have taken steps to protect your intellectual property, the fact is that board games are especially vulnerable to knockoffs and plagiarism. The low development cost and lack of “trade secret” type secret components make it simple for an unscrupulous developer to simply take a game, rebrand it, and release it as their own. International law may even become an issue if an overseas company takes and repurposes your idea. By hiring an attorney as part of your team, you can ensure that you have taken the right steps to obtain copyright protection for your rules, art, etc., and that you have properly registered your trademarks. An attorney can also ensure that any contractors – such as artists – properly assign all rights back to the game developer through “work for hire” agreements. Licensing agreements with any publisher must also delineate the rights and responsibilities of all parties. Royalties and assignments must be fair, clear, and definite. If you have a co-designer or a business partner, you must absolutely have a business agreement before your idea starts making money, so there are no surprises or hard feelings. If there are copyright concerns or knockoffs, a DMCA takedown notice or demand letter is often an effective tool to dissuade would-be thieves. Conversely, if you are receive a takedown notice or demand from another designer, you need to have an effective and prepared attorney ready to respond.

Contact Artaev at Law PLLC to set up your initial consultation. We are Michigan’s gaming law firm and we specialize in the unique concerns that you may encounter as a game designer.

Disclaimer: This guide is for general informational and promotional purposes only. Nothing herein constitutes legal 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.


© 2021 Artaev at Law PLLC. All rights reserved.

Categories
business law esports gaming law intellectual property internet law

Your Twitch Channel is Worth How Much? Protect Your Right of Publicity in the 21st Century.

Did you know that celebrities, professional athletes, actors, and other famous people have a valuable property right in their very persona? That property right is called the “right of publicity” and extends to gaming, particularly as streaming platforms like Twitch allow gamers to develop their own brand and following. There is no question that internet personalities like Ninja, Dr. Disrespect, Summit1G, Shroud, and others have their own brands – unique styles that have helped them gain millions of fans. That branding naturally translates into lucrative sponsorships and 6, 7, and even 8-figure exclusive streaming deals that are similar to those enjoyed by celebrities in movies, music, and sports.

However, you don’t have to have millions of followers to develop a brand that has value and should be protected. As a streamer, eSports professional, tournament organizer, or commentator, you may have developed a persona, a unique style, catchphrases, signature moves, and other aspects that may make you especially attractive to your audience. That unique brand is called your “right of publicity.” And protecting that right is protecting your brand – so it is not only critical to protect it from misappropriation (just as you would with a trademarked logo), it is also critical to ensure that you do not unwittingly sign a contract that transfers that valuable right without you receiving appropriate compensation.

The first step to protecting yourself is to educate yourself. Read on.

The International Trademark Association defines the “right of publicity” as:

An intellectual property right that protects against the misappropriation of a person’s name, likeness, or other indicia of personal identity – such as nickname, pseudonym, voice, signature, likeness, or photograph – for commercial benefit.

http://www.inta.org/topics/right-of-publicity/

Unlike patents, copyrights, and trademarks, the “right of publicity” is not found in any federal statute. Rather, it is a matter of state law and thus varies from state to state. What is more confusing is that some states (like California) have specific laws that expressly protect certain aspects of a person’s identity and set out a statutory process to enforce that right. Other states (like Michigan) do not have statutes that protect the “right of publicity” but recognize that right through the common law (meaning there are court cases that can be cited to support a claim). However, even where a state like California protects only certain aspects of a person’s identity under state law, a person can still raise common law claims to other aspects – in other words, California statutory scheme is not exclusive of the common law. For example, a celebrity’s distinctive voice is expressly protected under California law, but an imitation of that same voice is not. However, a celebrity may still file suit against an unauthorized imitator under the common law even in states where there is a statute. Confused? The main point is regardless of which state you are in, you have rights and remedies to protect your persona from misuse and misappropriation.

So what do you need to prove for a right of publicity claim? Generally, the plaintiff needs to show (1) the use of “identity”; (2) the appropriation of the plaintiff’s “identity” to the defendant’s advantage, whether commercial or otherwise; (3) lack of consent; and (4) resulting injury. The term “identity” is defined broadly and essentially protects any unique personal aspects, such as tone of voice, manner of dress, catchphrases, color schemes, and many other categories. Recently, I wrote about Detroit’s Eastern Market Brewing Co. dealing with a cease-and-desist from Barry Sanders after the brewery released Same Old Lager (a play on the phrase “same old Lions” that describes the teams consistently underwhelming performance and leadership turmoil). The problem was not the slogan or the riffing on the Lions – rather, it was the brewery’s can design featuring a pixilated football player wearing the Lions’ silver uniform with Sanders’ number 20. According to Sanders’ legal team, the brewery misappropriated his “identity” and thereby implied an endorsement or connection that did not exist. In response, the brewery changed the can design to replace the football player with the brewery’s own mascot and Same Old Lager is available once again.

What about parodies and fair use? The right of publicity is not absolute and cannot suppress the right to free speech protected by the First Amendment. Parody, commentary, news, and other so-called “fair uses” are protected from right of publicity claims. Because each situation is different, there is no bright line test, and judges are essentially called on to serve as art critics to determine what merits protection. As a guideline, the courts rely on the “transformative use test” to determine whether the derivative work sufficiently “transforms” the original to acquire its own independent economic value. For example, a t-shirt with a charcoal drawing of the Three Stooges failed the transformative test because the primary value of the t-shirt came from the identity of the Three Stooges. The defendant t-shirt maker misappropriated the economic value associated with their identity, and the fact that the image was a charcoal drawing (as opposed to a photograph) was an insufficient creative element to predominate the work. See Comedy III Productions Inc. v. Gary Saderup Inc., 25 Cal. 4th 387, 58 USPQ2d 1823 (Cal. 2001). In contrast, a comic book series featuring characters based on Johnny and Edgar Winter as half-human/half-worm villains was sufficiently transformative to defeat the musicians’ right of publicity claim. Despite the similarity in names and depiction with long white hair and pale complexion, the court noted that the primary economic value of the comic book was in the “fanciful, creative characters” and not the actual identity of the Winter brothers. See Winter v. DC Comics, 30 Cal. 4th 881, 66 USPQ2d 1954 (Cal. 2003) (66 PTCJ 210, 6/13/03).

As video games have become more sophisticated, they have also become targets of right of publicity claims. In a recent case, Arizona State’s quarterback prevailed against Electronic Arts when their NCAA football game omitted the quarterback’s name, but used his number, position, height, weight, and other characteristics. Other football game cases against Electronic Arts established amateur and retired athletes’ rights to their likeness, even where the publisher changed the jersey numbers and physical likeness. There are many unsettled questions with regard to the law of publicity, especially as new kinds of celebrities and mediums are examined, and the law is constantly evolving.

What does this mean for streamers, eSports professionals, and tournament organizers? Initially, that means you have a protected and valuable right in your identity. For example, there is little doubt that Ninja (probably the most famous Fortnite player and streamer) has a protected right in his image. That includes not only his name and likeness, but his distinctive hairdo, characteristics of his gameplay, and other aspects. Also, be careful what you sign. The right of publicity, like other intellectual property rights, is assignable and can easily be transferred as a part of a contract. For example, many professional eSports contracts require the player to transfer all rights of publicity to the team organization. As an up-and-coming player you may not necessarily care or gloss over that part, but what happens if you develop an independent celebrity? What if you come up with a move, look, style, catchphrase that goes viral? The team would own it, and even if you left, it is possible that the team could successfully enforce that right to your own creation against you. As one of the more bizarre examples, Twitch suspended Dragonforce guitarist Herman Li for playing his “own” music. While details are murky and Li is back on Twitch, the likely reason is that Li assigned his rights to a label, and the label holds the right to demand a proper license from a streamer for the music’s reproduction. Music streaming licenses are a whole different issue – read my FAQ on playing music on Twitch to learn more.

Now that you are educated, the second step to protecting yourself is is retaining the right counsel who knows gaming. Intellectual property rights and licenses are paramount in the digital age. It is more important than ever to consult with a knowledgeable attorney before signing that team contract or sponsorship deal. And, when marketing a new product, attorney review is likewise essential to avoid legal issues that derail your launch. Remember, sharing your marketing idea, new product, or other money-making scheme with your attorney is confidential and is protected by attorney-client privilege. At the same time, failing to consult an attorney at the start can cost you much more later on in responding to cease-and-desist letters and even dealing with a lawsuit. Finally, if you suspect your persona or brand is being misused by someone else, talk to an attorney who can advise you of your rights, and if there is a violation, send a takedown demand or a cease-and-desist letter.

On a final note, the same principles apply to Instagram influencers, podcasters, Twitter accounts, and essentially anyone else who has built an online brand through an online presence. Protect yourself and your labors by doing it right.

Need an attorney who knows gaming law? Contact Dan Artaev by email or by call or text to set up your consultation.

Disclaimer: This article is not intended to be and does not constitute legal advice. Do not take any action or refrain from taking any action based on this article, and always consult with a qualified professional about the circumstances of your particular case.

© 2020 Artaev at Law PLLC. All rights reserved.

Categories
gambling law gaming law

Fun Facts About the History of the World’s Oldest Hobby: Gambling.

For a change of pace, here is some short and fun reading about everyone’s favorite hobby – gambling. Whenever I do a gambling-related legal project or research, it amazes me how much time and effort has been spent by lawmakers across the United States regulating and restricting gambling in all its forms. And, it is equally amazing how much time and effort has been spent by people to evade those restrictions by designing every sort of workaround imaginable. The battle continues in the age of the Internet and evolves with each technological advance, with mobile gaming being the latest front.

The history of gaming and gambling is fascinating. For as long as people have been playing games, they have bet money on them. According to “The History of Backgammon” by Oswald Jacoby, the world’s original dice game (with dice carved from actual bones) was played as early as 3000 B.C. in southern Mesopotamia (modern day Iraq). Backgammon boards were found in King Tut’s tomb that date back to 1500 B.C., and evidence exists that Ancient Egyptians played for money and even designed an elaborate mechanical dice box to protect against cheaters. Real-money gaming was huge in the Roman Empire, both among royalty and ordinary Romans. Nero (among his other excesses) is said to have played a version of backgammon for an equivalent of $15,000 per point and Emperor Commodius turned the imperial palace into a grandiose casino. Wall paintings in Pompeii depict scenes of ordinary Romans playing in inns, arguing over a backgammon board, and being promptly thrown out by the innkeeper. Suddenly naming one of Las Vegas’s most popular casinos “Caesar’s Palace” makes sense.

Backgammon and gambling in general were so historically popular and addictive, that during the Third Crusade in 1190, Richard the First and his allies issued a joint proclamation that prohibited playing any game for money for any person “beneath the degree of a knight.” Knights and clergymen were permitted to gamble, but were restricted to losing no more than 20 shillings per day, with strict penalties for exceeding the limit, including being flogged naked through the army for 3 days. Sports betting dates back at least to Ancient Greece, where betting on the original Olympics was widespread.

Today, there are so many iterations, versions, and types games that people wager on, it is no wonder that each of the 50 United States has an extensive statutory scheme addressing gambling. Courts all over the U.S. have thousands of pages of options dating back more than a hundred years dedicated to analyzing various devices to determine whether they are prohibited “gambling devices.” Did you know that pinball machines were originally restricted as gambling devices and there remain detailed regulations in each state as to the maximum number of free games that a pinball machine can award? But that’s a topic for another day.

Despite heavy regulation, gambling and betting remain extremely popular across the world. The modern global casino industry is estimated to be worth in excess of $100 billion, with steady and continued growth expected. The sports betting market, which is tracked separately, is valued at approximately $85 billion worldwide. According to analysis by Morgan Stanley, the U.S. sports betting market is projected to grow from $833 million in 2019 to $7 to $8 billion by 2025. Although COVID-19 dropped casino and gambling related revenues by over 10% in the United States in 2020, the market is still expected to recover and grow robustly in the foreseeable future. Indeed, latest data indicates better-than-expected revenues in the gaming industry in 2020, as many people are turning to gaming (both video games and gambling) as entertainment, social interaction, and an escape from the stresses of daily life. Stay tuned.

Dan Artaev is an experienced attorney who has advised domestic and international clients regarding gambling regulations, legislation, and provided other gambling- and gaming-related representation. Contact Dan by email at dan@artaevatlaw.com or by phone or text at (269) 930-0254.

© 2020 Artaev at Law PLLC. All rights reserved.

Categories
business law esports gaming law intellectual property

A Lesson in Licenses and Why You Own Nothing.

In 2019, Fortnite went offline. No one could play, stream, compete, or access their account. This was part of an in-game “event” known as the Fortnite Blackout or The End. Can Epic Games do that? What rights do you even have as a player, team owner, or competitor? It all comes down to the End User License Agreement (EULA) – so leave it to a gaming lawyer to use Fortnite to teach you about the critical role of licensing in the digital age!

By way of background, Fortnite is certainly one of the most –if not the most popular video game in the world. The game, which is available as free download on modern consoles, PCs, and even iPhones, is a hit with kids, teens, adults, professional athletes, celebrities, and even Prince Harry (the Duke of Sussex) who got so addicted that he called for the game to be banned in Britain. True story. It has also evolved into an international eSport phenomenon, with this year’s World Cup Finals winner taking home a cool $3 million check. There are hundreds, if not thousands, of professional gamers and streamers across the world that make this game their career. Epic Games, the game’s owner and creator, is estimated to have earned between $2.4 and $3 billion from the game in 2018 alone. This is particularly impressive given that the game is free to download and play, with all of the revenue coming from in-game cosmetic content, such as different character outfits.

Now imagine if one day all of that was suddenly gone. Epic shuts down the servers and Fortnite no longer exists. Well, this actually happened (at least for about 24 hours)–during the Fortnite Blackout or The End event. The hundreds of hours you spent playing, earning points, and ranking? Gone. Did you spend all of your birthday money on new outfits so you could look like a James Bond villain in the game? Gone. Even worse if you are a professional gamer who made Fortnite a career. Or a team owner who invested hundreds of thousands of dollars into building the next world champion. What can you do? Who can you sue?

The simple answer is NOTHING and NO ONE. Because you have to understand licensing. And the fact that the traditional concepts of ownership–i.e. I pay money for something therefore I own it–do not transfer to the digital world. Did you read the EULA that you have to accept before logging into Fortnite? I didn’t think so. Yet it contains important rights and obligations–especially if you play professionally. The reality is, by playing Fortnite and even paying real money to “buy” in-game characters, weapons, etc., you own nothing. In simple terms, Epic Games grants you a license to play the game at its sole discretion, but Epic Games owns and controls everything and anything within the game, even the content that you paid real money for.

The Fortnite EULA is a license, which is a right to do something, or access something. Think of it like a ticket to go see a football game or a concert, but in this case it is a ticket that gives you access to a video game. In legal terms, what distinguishes a license is the fact that it is a “revocable” right, meaning the licensor (the owner of the license) can terminate the licensee’s rights of access at any time, subject to any conditions of the license. So what terms do you agree to when playing Fortnite?

Epic grants you a “personal, non-exclusive…limited right and license to install and use the Software…for you personal entertainment use.” Also, ” The Software is licensed, not sold, to you under the License. The License does not grant you any title or ownership in the Software. ” Ok, but can Epic just shut down the game? Yes–read on–” You also acknowledge that any character data, game progress, game customization or other data related to your use of the Software or Services may cease to be available to you at any time without notice from Epic….”

What about all the real money you paid for skins, custom characters, etc.? You get that back, right? Nope. Read on–” Epic, in its sole discretion, has the absolute right to manage, modify, substitute, replace, suspend, cancel or eliminate Game Currency or Content, including your ability to access or use Game Currency or Content, without notice or liability to you.” Meaning, you do not really own any “game currency” or the “content” that you bought–in fact, all you are acquiring when you are “purchasing in-game content” is another license to use the currency or the content that you purchase with the currency for as long as Epic wants.

It’s not really so confusing. When you downloaded and played Fortnite, you agreed that Epic owns everything and you own nothing. If you paid any money to Epic for skin or custom parachute, Epic gave you a license to use that particular skin or parachute. You paid for the “experience”–not a tangible item itself. That’s licensing.

Of course, this reality creates a whole host of follow-up questions. What happens to content I create using Fortnite’s creative mode? Does Epic own that too? Short answer is YES. What about streamers who make a living playing Fortnite? Professional gamers? Team owners? Fortnite World Cup sponsors? There is no easy answer there, as each situation is fact-specific and depends on the various terms of the license agreements, any sponsorship agreements, intellectual property law, etc.

The Fortnite Blackout was a lesson in “ownership” in the digital age. Traditional concepts of ownership do not apply or transfer to to the digital realm. Music, video, games, and even photos that you upload or post on social media–are not “yours” in the traditional sense. Rather, there is an increasingly complex web of rights that becomes even more complex when gaming is a business.

So, like any business owner, if you are investing time, money, and effort into a game–with the idea to play professionally, make streaming revenue, or to otherwise make it in the gaming business–engage and consult with an eSports attorney. Understanding your rights and obligations will help you craft an effective business strategy going forward, and plan for contingencies and er…singularities.

Have more questions? Contact Dan Artaev at dan@artaevatlaw.com or 269-930-0254 to set up your free initial consultation.

© 2020 Artaev at Law PLLC. All rights reserved.

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