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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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business law gambling law gaming law internet law

How to Advertise Real-Money Skill Games on Facebook in 2022: A Legal Opinion is Necessary.

Photo by Pixabay on Pexels.com

In August 2022, Facebook updated its real-money gaming and gambling advertising application process. The updated form streamlined some of the required information and still requires a legal opinion from a law firm. Additionally, Facebook requires details about protective measures like geo-location and KYC and detailed geographic targeting information, including states or territories being targeted. Skill-based gaming that awards real-money prizes is not considered gambling in a majority of the United States – but that conclusion requires a state-by-state legal analysis, as each state’s anti-gambling laws are different. Further, the laws change frequently in response to innovations like fantasy sports, legalization of online gambling, and the latest skill-based gaming tables.

Facebook considers all types of real-money gaming “restricted” content, meaning that Facebook must expressly approve your ad before it runs. Whether it is full-scale online casino gambling, poker, fantasy sports, or pure skill prize contests, the requirements are the same:

  • Ads that promote online gambling, and gaming where anything of monetary value (including cash or digital/virtual currencies, e.g. bitcoin) is required to play and anything of monetary value forms part of the prize, are only allowed with our prior written permission. This includes games where purchases are required to continue game play and/or provide advantage in winning prizes, in cases where the prize is of monetary value. Authorized advertisers must follow all applicable laws, including targeting their ads in accordance with legal requirements. At a minimum, ads may not be targeted to people under 18 years of age.

Clicking on “Apply for Permission” takes you to the recently updated Online Real Money Gaming Onboarding Application Form. Advertisers are asked to submit their ID numbers, ad account numbers, the name of their business, and to select whether they are an “operator,” “aggregator/affiliate,” or an “agent/intermediary.”

Facebook then asks the applicant to submit the URLs they are seeking to advertise. This is a particularly important part of the review process, as the review team and Facebook’s lawyers will closely look at the website to ensure legal compliance.

Next, the applicant must select the specific “protective measures” that they implement to gate access to their product:

  • Geo-blocking (gating) of the URL
  • Age-gating of the URL
  • Address verification software or process
  • KYC checks
  • Local cell phone number
  • National tax ID number
  • Any other measures, which must be specified

Applicants are then asked to select the country or countries that they targeting. Note that Facebook’s new rules allow only the following 36 countries to be targeted:

  • Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Columbia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, India, Ireland, Italy, Japan, Kenya, Mexico, Netherlands, Nigeria, Norway, Peru, Poland, Portugal, Romania, Serbia, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States.

Selecting a country is not enough. Applicants must then select the specific states or territories they are targeting. For example, selecting the United States requires the applicant to select the states in which they plan to advertise. Selecting some of the European or South American countries requires information about the specific type of gaming or gambling to be promoted.

The next question is “Do you require a gambling license?” If no, the advertiser is required to submit “a reasoned legal memo by a law firm attesting to the legality of the advertised gambling/gaming without a need for a license.” If you need such a legal opinion, contact Artaev at Law, as we have analyzed a number of skill-based games and have been providing “where is it legal” opinions to Facebook (and other platforms) since 2020.

What goes into a legal opinion? At a minimum, the legal opinion will set forth a legal analysis of each state’s applicable laws and regulations (including case law) that support skill-based gaming in that state. The legal opinion should also address the applicable federal statutes and explain why they do not prohibit the game in question. Also, the legal opinion needs to explain the particular game’s mechanisms, why the outcome is not determined by chance, and how the various laws apply or not apply to the game in question.

A lot depends on the specifics of your game – for example, is the game more like fantasy sports or a pure skill contest? Also, even the bigger companies in the skill-based gaming industry disagree on the states where their games are permitted. Many states are currently addressing unlicensed skill-based gaming and regulations are constantly changing. For example, Michigan recently passed comprehensive online casino legislation and in the course of enacting the sweeping gambling laws, Michigan also included licensing requirements for skill-based real-money games.

Facebook remains a powerful advertising medium. Access to that medium is not free nor easy, especially if you are advertising a “restricted” product like skill-based real-money gaming. Ultimately, Facebook and its legal teams determine what ads meet its advertising policies. To minimize the review time and increase your chances of an approval, contact the experienced gaming attorneys at Artaev at Law PLLC.

Have more questions? Do you need help getting your app through the Facebook review process? Contact Dan Artaev today by emailing dan@artaevatlaw.com.

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.

© 2022 Artaev at Law PLLC. All rights reserved.

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esports gambling law gaming law internet law

The Three Types of Skill-Based Real-Money Games: Room for Innovation, Not Stagnation.

The skill-based real-money gaming market remains a popular and innovative business environment. The draw for players is that they can play games and win real money, but also improve their chances of winning through skill. Unlike gambling or casino-style games, skill-based gaming is not mathematically skewed in favor of “the house.” There are many types of games to choose from – card-based solitaire-like games, bingo, bubble puzzlers, trivia, and even sophisticated physics-based racing games. Best of all, unlike casino gambling and sports betting, skill-based real-money games are legal and available in the majority of U.S. states and internationally as well.

For developers, the upside is obvious. Monetization of gaming has always been profitable and a lucrative business – hence the tightly-regulated casino and sportsbetting markets. Designing a mobile game instantly gives the developer access to customers across the world through a well-established distribution network (i.e. the Apple App Store). When done right, real-money skill games are not required to be licensed or otherwise regulated in a majority of the states. This makes the real-money skill game market very accessible to most developers, including smaller studios with limited budgets and without the lobbying firepower that would otherwise be required to enter the money gaming market.

These factors combine into a highly-competitive market. This makes it difficult to design a profitable game without innovation. For example, the Skillz.com platform (publicly traded as SKLZ on the NYSE) boasts over 30 million players and over 30,000 developers. However, according to Skillz’s August 2021 prospectus filed with the SEC, only three games accounted for 74% of all revenue in 2021. These so-called “big three” are Tether’s “Solitaire Cube” and “21 Blitz,” and Big Run’s “Blackout Bingo.” Predictably, there are number of copycat games that are very similar to these “big three” in design and gameplay. To be successful, developers must innovate. As part of their development and marketing efforts, all companies in this space need to understand the three main types of skill games, each with its own set of regulatory nuances:

Pure-Skill Games

The first category of games is the “pure skill” variety that are similar to the popular Solitaire Cube, 21 Blitz, and Blackout Bingo that account for such a large share of the market. These games pit players in head-to-head contests, multiplayer battles, or tournaments the outcome of which depends solely on the skill of the player. For example, in Solitaire Cube, players are given the same deck and are scored on how well and fast they play Klondike Solitaire using these cards. Players pay an entry fee, with the winner receiving a cash prize.

These “pure skill” games do not involve any other factors than the players’ own skill in determining the outcome. There are limitless possibilities in this genre – anything from knife-throwing games, to cup flipping or “beer pong” style contests, to trivia games fall into this category. Some particularly innovative developers have even developed sophisticated physics-based games (similar to Angry Birds) that take serious dexterity, planning, and logic to master.

Pure-skill games are legal under U.S. federal law, as well as in the majority of U.S. states. Because skill games involve the opportunity to win real money, the Apple App store and various social media advertising platforms require special approval and an application that must be accompanied by a legal opinion from qualified gaming counsel. Payment processors also require special approval, a physical presence in the United States, and have their own set of standards and rules that must be met before your gaming account is approved.

Fantasy Sports or Market Games

The second category of skill games are those that are similar to the daily fantasy sports (“DFS”) contests offered by DraftKings and FanDuel. Generally, participants pay an entry fee and then are given a virtual currency budget to spend on a lineup of sports players to be on their fantasy team. The fantasy team then scores points based on real-world performance and the participants that accumulate the most points can win a cash prize.

Traditional sports and leagues like the NBA, NFL, MLB, and NHL are not the only options. There is at least one fantasy esports platform that lets players put together a lineup of their favorite gaming stars. There are also fantasy stock market games that let players pick a portfolio of real-world shares and win prizes based on how well their portfolio does against other players.

The key distinction between these fantasy games and pure-skill games is that the outcome of a fantasy game is not determined solely by a player’s skill. While it certainly takes knowledge and research to put together the best team, points are awarded based on real-world performance that is outside of the participants’ control. In fantasy sports, a particular player might have a bad game, get injured, or fall victim to bad officiating or adverse weather conditions. In fantasy stocks, a particular stock might enjoy a sudden price spike due to a merger announcement or a new product. Or, a stock might quickly lose value due to an SEC investigation or other unpredictable real world factors. In 2020, the IRS issued two separate memoranda analyzing and addressing this distinction, concluding that DFS involves “wagering” within the meaning of the Internal Revenue Code. At a minimum, the IRS’s position matters from a tax perspective: does your skill-based game involve “wagers” subject to excise tax?

DFS and similar fantasy games are more regulated than “pure-skill” games. DraftKings and FanDuel currently offer their DFS products in 43 states and are a good regulatory bellwether. In some states, DFS is offered as an unregulated skill-game product that falls outside of the state’s definition of “gambling.” In other states, legislatures have passed laws that expressly exclude DFS from “gambling,” but do not otherwise regulate or license DFS. In contrast, states like Michigan have enacted comprehensive licensing regulations for DFS. There are also states that outright ban any sort of real-money wagering. And, there are states that have issued DFS-adverse legal opinions and are embroiled in litigation to decide whether DFS constitutes illegal “gambling.” In other words, the regulatory landscape for DFS-type games is complicated and requires guidance from an experienced gaming attorney.

Arcade-Style Skill Games

The third category does not involve mobile phones, computers, or the internet at all. Rather, these games look like arcade cabinets or even like slot machines, and are found in certain bars, restaurants, and other public establishments. Originally, these games were purposefully designed to look and feel like slot machines, but introduced additional player choice or input features so that they would involve skill and purportedly fall outside of the definition of “gambling” in most states. Authorities in some states have cracked down on these types of machines (sometime called “nudge machines” or “skill slots”), concluding that the claimed skill element was a sham or otherwise insufficient to render the machine a true game of skill.

Despite the ongoing pandemic and the ubiquity of gaming options on mobile devices and the internet, these cabinet-type skill games are still thriving. One particularly popular game called “Dragon’s Ascent” has attracted the attention of regulators in the D.C. area and has sparked debate over whether the game (which pays out cash prizes) is an illegal gambling device. Players score points by shooting magic balls at dragons to capture them, using the joystick and buttons to direct and time their shots. The two-player version looks like a traditional arcade cabinet. The eight-player version adds an impressive-looking table that doubles as a screen. Both versions include drink holders, and the game’s promotional material specifically targets bars as a way for them to “offer something new.”

Although the barriers and start-up costs to enter into this specific market are significantly higher than the mobile game field, the presence of arcade-style skill games demonstrates the level of innovation and variety in the industry. Bars and restaurants that survive the pandemic may very well be interested in real-money skill games as one way to bring customers back to their in-person establishments. It is also possible that bars and restaurants will partner with more skill game developers to introduce mobile or more individualized real-money games to their establishments. After all, having a pint and betting $5 on a game of pool or darts is one of the most traditional and familiar ways to bet on a game of skill. Technology may advance, but people’s desire to compete, wager, and win real money remains the same.

Have more questions? Do you need a legal opinion or help getting your game through the regulatory 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

A Guide to Getting Your Skill-Based Real-Money Game Approved in the United States.

Skill-based real-money gaming has been a popular form of entertainment across the world for hundreds of years. From Roman legionnaires wagering on an early version of backgammon to $5 eight-ball games at your local pool hall, skill games have always attracted players looking for a chance to win real money. With smart phones in every pocket, skill-based gaming has entered a new era where anyone with an internet connection can play various money skill games through their phone or computer and stake anywhere from $0.25 to hundreds of dollars on the outcome.

Gaming is a rapidly growing industry and the skill-based real-money market is no exception. Indeed, there is already at least one publicly-traded California-based company (Skillz.com; SKLZ) investing substantial resources in the real-money skill-based U.S. market. However, any sort of real-money gaming business implicates federal and state-level regulation. While a government license is not necessary in most states, your game must still pass private sector review. Apple’s App Store is indispensable in the current market; advertising through social media like Facebook is another must. Banking and payment processing is likewise an integral part of your ability to run a business.

I have advised a number of companies, both international and U.S. based, on the legality of their skill-based real-money games. Through Artaev at Law, I have prepared detailed memorandums and analysis for a number of companies, as well as provided consultation to investors seeking more information about the real-money skill-games market. As a game developer, here is what you need to know:

1. Get Your Game to the Players.

If you were to get into the full-scale casino gambling market, you would have to comply with stringent state-level regulatory requirements, pay substantial application and licensing fees, and otherwise deal with an intricate governmental regulatory framework. Further, in the few states where casinos are even legal, there is only a limited number of licenses that a state will issue. In other words, it is impossible. But real-money skill gaming operates outside the gambling regulatory framework, which means you don’t have to go through a government licensing or regulatory approval process to offer your product (in most states).

Instead, real-money skill game providers find themselves faced with so-called private company gatekeepers. The popularity of real-money skill gaming is in large part due to the ubiquity of the smartphone. Apple’s App Store is the only practical way to get real-money skill games onto iPhones (no, people will not “unlock” their iPhones to sideload your real-money skill game, especially when the App Store already has a robust selection of these games that are easy to download and use). Google’s Play store does not currently allow real-money skill games, so there developers must either provide sideloading options or use a Progressive Web Application (PWA).

The bottom line is that developers must pass Apple’s “gatekeeping” to even get their app on the market. That means complying with the App Store Review Guidelines. Section 5.3.4 is particularly important:

5.3.4 Apps that offer real money gaming (e.g. sports betting, poker, casino games, horse racing) or lotteries must have necessary licensing and permissions in the locations where the app is used, must be geo-restricted to those locations, and must be free on the App Store.

Apple considers real-money skill games to fall into this category, even though skill games do not depend on chance like the “sports betting, poker, casino games, horse racing” examples. This guideline can be distilled into three requirements: (1) The app must be legal where you are offering it; (2) The app must be geo-restricted to only those locations where it is legal; and (3) the app must be free.

The first requirement is the most important and the most confusing for app developers. How do you demonstrate that your app has “necessary licensing and permissions” if the states where you are offering your real-money skill games do not regulate such games? This is a situation where a legal opinion or memorandum from an experienced gaming attorney is helpful. In general, such a legal opinion will describe your game, explain how the game fits within existing federal regulations, and then present a state-by-state analysis (supported by applicable statutory and case law citations) to show that the skill game does not violate those states’ anti-gambling prohibitions or any other law.

The second requirement of geo-restriction is self-explanatory. Your app can only offer real-money gaming if the user verifies their location in a state where such gaming is legal. You can still offer practice or play-money games without geo-restriction (or if the user does not want to or cannot verify their location).

The third requirement is that the app must be free. Section 5.3.3 of the review guidelines further clarifies that “in-app purchase” cannot be used to purchase credit or currency for use in the real-money gaming app. That means that you will need to set up some sort of external mechanism for deposits, link the user’s existing account and balance to the app, and ensure compliance with the external payment processors’ requirements.

Once submitted, the review process can take between several weeks to more than a month. A lot depends on whether your app is similar to other apps already approved or whether it is something completely new. Other factors, like the reviewer or the law firm reviewing the legal analysis may also impact the timeline.

2. Advertise Your Game.

Advertising is critical to your app’s success and online advertising platforms have special rules for real-money games. Social media companies like Facebook and Twitter require prior approval and permission before running your gaming ad. The process is similar for both platforms and generally involves filling out a questionnaire, selecting the geographic areas you are targeting, providing a link to your app’s website, and submitting a legal opinion that your app comports with the law where it will be advertised. Google and YouTube (owned by Google) do not currently allow real-money skill game advertising.

This process may be a bit more lengthy than getting approval from the App Store. Depending on the nature of your product, your location, and the platform, the process may take several months. The social media platform may also come back with additional specific legal questions for your counsel to answer. The level of follow up and scrutiny is hard to predict because the social media companies farm out the review to outside law firms, which have their own standards and review processes.

3. Set Up Your Payment Processor and Bank.

Once your game is live and advertised, it’s time to start making money. There are a lot payment processors out there (PayPal, Square, etc.) and each has their own set of rules and guidelines for business accounts. The federal Unlawful Internet Gambling Enforcement Act applies to payment processors, so they must be especially careful not to facilitate illegal gambling activities. Credit card companies present another potential obstacle, as credit card companies often lump skill-based gaming with gambling into the 7995 merchant code.

For example, after states started rolling out regulated sport-betting options, Visa issued guidance that made its payment services available for “all transactions that are consistent with local, federal, and international laws.” Visa introduced new 7800-series merchant codes for legal gambling, but none of those codes apply to real-money skill gaming transactions. Practically, this means that skill-gaming transactions may still fall under the blanket 7995 code and Visa may not authorize the transaction. Nor does Visa issue an MVV (merchant verification value) for 7995 merchants, meaning that skill-based real money gaming companies are limited as to their direct-pay options.

This essentially requires skill-game companies to explore options through payment providers like PayPal. Provided you are based in the United States and can link a bank account, the process should be straightforward. If you are based in another country however, there is a whole another set of hurdles to overcome.

There’s More.

Getting your game approved, advertised, banked is only the first step. You will also need robust terms and conditions that govern your relationship with your users, which is especially critical when dealing with real-money gaming and facing potential payout disputes. A privacy policy is also a must, especially if you are offering your game internationally. Then there is the issue of taxation and whether you should be paying excise tax on skill-based game wagers. Real-money skill-based gaming is a hot market, but requires experienced legal counsel to get through these various issues.

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.

Categories
business law esports gambling law gaming law internet law

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.

Categories
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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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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