May 2012 Archives

Around the Virtual World



A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

PlayStudios launches myVegas social casino games with MGM

Social casino game startups are the cliché of 2012. Everybody is either starting a new company in this hot market -- on the bet that the U.S. will allow online gambling sites again -- or spending a lot of money acquiring casino game startups. But PlayStudios believes it is different because it is a blend of Silicon Valley and Las Vegas. The company was founded by Andrew Pascal, a longtime Silicon Valley entrepreneur and former casino empire executive.

American Express launches FarmVille rewards card

American Express has created a card that rewards FarmVille users with virtual cash for their real-world purchases. Users of the hit social media game can begin signing up for the FarmVille card starting Tuesday. The card is part of American Express' prepaid Serve platform.

[Report] Marketing Goes Local

PwC, together with the Location Based Marketing Association (LBMA), has developed this white paper to educate the industry on location-based marketing and to provide a general overview for retailers, brands and their agents, mobile network operators, and service providers on the application of these services to drive customer engagement and brand awareness.

Gamification market to reach $2.8 billion in 2016

Gamification, the process of applying game mechanics to activities that aren't games, is rapidly becoming a big business, according to a new report by Wanda Meloni of M2 Research. She projects the market to reach $242 million in 2012 (more than double the 2011 total), and to climb to $2.8 billion in 2016.

Could Virtual Nanotransactions Solve the Mobile Payments Problem?

Very few people in the mobile industry will disagree that mobile payments are today's biggest challenge for developers. In the Apple universe, there is a strong solution to the problem: Apple simply requires users to register their credit cards before they can use any services. But this approach only works for a very small segment of high end users in the developed world.

Around the Virtual World



A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

Magid National Study Finds Social Networking Gaming Growth is Slowing

The research, conducted as part of the Magid Media Futures 2012 study, found social network gaming user growth has slowed in the United States. About two in five (38%) social network users, up slightly from 36% in '11, say they regularly play games on social networks. Social network gaming has decreased among its primary demographic, females age 12-44, with less than 43% of users age 12-17 (down from 54% in 2011) and about 36% of users 25-44 (down from 40% in 2011) reporting playing on a weekly basis.

Internet Gaming On The Horizon For NJ, Lawmaker Says

Internet gaming could be a reality in New Jersey before the end of the year, eventually providing Atlantic City's casinos with a much-needed influx of revenue, a state senator sponsoring such legislation told a roomful of attorneys Wednesday.

Overexposed? Thanks to SceneTap, San Francisco bars are now profiling you

SceneTap is a maker of cameras that pick up on facial characteristics to determine a person's approximate age and gender. The company works with venues to install these cameras and track customers. It also makes web and mobile applications that allow random observers to find out, in real-time, the male-to-female ratio, crowd size, and average age of a bar's patrons. And no one goes unnoticed. "We represent EVERYONE in the venue," SceneTap proudly proclaims on its website.

Judge: An IP-Address Doesn't Identify a Person (or BitTorrent Pirate)

A landmark ruling in one of the many mass-BitTorrent lawsuits in the US has delivered a severe blow to a thus far lucrative business. Among other things, New York Judge Gary Brown explains in great detail why an IP-address is not sufficient evidence to identify copyright infringers. According to the Judge this lack of specific evidence means that many alleged BitTorrent pirates have been wrongfully accused by copyright holders.

For Start-Up, Virtual Casinos

Andrew Pascal was one of Steve Wynn's trusted lieutenants when the Las Vegas magnate was rebuilding his gambling empire a decade ago. Now the former president of the Wynn Las Vegas and Encore casinos is the chief executive of a Silicon Valley gaming start-up aimed at running virtual casinos.

Gamblification Gets Street Cred


50CentBlackjack.jpgIn yet another example of Gamblification's growing popularity, GSN Digital, the interactive division of the Game Show Network, has collaborated with rapper-actor 50 Cent to create a virtual casino on Facebook where players can experience Blackjack in a whole new way. Friends can gather together at an online table and test their luck against a virtual dealer or even themselves.

But this isn't your typical game of Blackjack. Instead of real money changing hands, players can amass virtual currency which can be used to buy clothing and jewelry for their avatars. Players can also purchase tokens that provide in-game benefits, such as the ability to know whether or not taking the next card will 'bust' your hand or not. A public leaderboard also encourages players to jockey for position to be among the best players in the world. This extra layer of gaming mechanics puts an interesting twist on a classic casino game.

Since the application was made public in April, the virtual casino has averaged over 3,000 daily users. Developers say a mobile version of the game for Android and Apple devices will be released later this spring.

For more news and analysis on the Gamblification trend, please visit: Gamblification News

Around the Virtual World



A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

FBI: We need wiretap-ready Web sites

CNET learns the FBI is quietly pushing its plan to force surveillance backdoors on social networks, VoIP, and Web e-mail providers, and that the bureau is asking Internet companies not to oppose a law making those backdoors mandatory.

NJ Online Gambling Bills Clear Assembly Hurdle

A pair of online betting measures cleared a New Jersey Assembly committee Thursday, moving the state a step closer to allowing horse wagers to be placed from hand-held devices at state tracks and permitting casino game betting from personal computers across the state, around the country and abroad.

Twitter: We're still the free-speech wing of the free-speech party

As various levels of government both in the U.S. and around the world have stepped up their attempts to track down dissidents through social networks, the pressure has intensified on companies like Twitter and Facebook to comply with these demands -- even at the expense of their users' privacy. Despite that pressure, Twitter at least seems determined to fight these incursions wherever possible. As a case in point, the company has filed a motion in New York state court to quash a court order compelling it to hand over information about a user involved in the Occupy Wall Street protests, arguing that the order violates that individual's rights.

Social media offers sweet revenge for bad service

If you're tired of being treated poorly by retailers, airlines and other service-industry types, take revenge via social media. You will get heard, and get action.

Leaked Report: FBI is Terrified of Bitcoin Becoming a Currency for 'Cyber Criminals'

Published in late April but leaked yesterday, the unclassified document-of which Wired provided a PDF-outlines the federal government's fears surrounding the Bitcoin currency, primarily that in the near future, "cyber criminals will treat Bitcoin as another payment option alongside more traditional and established virtual currencies."

Virtual worlds can end the loneliness of the long distance learner

Students now have opportunities to learn by doing wherever they are in the world with the advent of Virtual World classrooms and 3D work enactment technology being introduced at UWE Bristol.

Gamblification! The Hottest Trend in Social Games



NOW AVAILABLE -- Pillsbury's Social Media, Entertainment & Technology Team recently finalized a white paper on legal issues with social games and gambling. For a copy, click here.

Gamblification! This is not yet a household word but  we use it to describe the intersection of social media and gambling. It is a play on the concepts of gamification and gambling. While gamification relates to using game mechanics for non game purposes, we use gamblification to refer to the use of gambling mechanics for non gambling purposes (ideally!). Given the complexity of the legal issues around this concept, it is not always easy to ensure that one does not cross the line. 

Many social media companies are leveraging gamblification to capitalize on individuals' gambler instincts. One example of this is the use of gambling-like activities in social games.  Many social games are designed based on gambling-related activities, such as Zynga poker.  In this example, the game itself is centered around playing poker for Zynga poker chips. It differs from real gambling in that you buy chips but can not redeem them. Other social games are leveraging gamblification by including minigames or features within non-gambling related social games and MMOs.  For example, some social games include features that enable users to exchange virtual currency for a chance to win one of a number of virtual goods that can be used in game. The apparent randomness of which item a user will obtain (or whether they will obtain one) has an element of surprise that makes it fun for users. Other platforms, such as Virgin Gaming, enable console game players to wager against each other on the outcome of playing a video game.

Other non-game social media sites are using gamblification as well to drive user engagement with offers and promotions. For example, Cash Dazzle is a platform that drives users to engage with a variety of promotional offers in exchange for tokens that can be used to spin a wheel for a chance to win cash prizes.


Online casino games is  a new battlefield, pitting social game companies against traditional, land-based casino operators and the Indian tribes. The battle is for control of new channels (social and mobile channels) for casino games and other online gambling related activities. This battle is already playing out in a big way. Traditional gambling equipment provider IGT spent $500 million to buy Double Down, a maker of casino games for Facebook. Shuffle Master, Inc., a leading global gaming supplier, has agreed to acquire Ongame Network Ltd., one of the world's largest poker providers to online gaming operators. Betfair, one of the largest players in the European Internet betting exchange, has invested in one of the fastest growing US social game companies.

Gamblification is also driving a need for new types of data that identify the "whales." See Kontangent's post on  "Casino Games are the New Battlefield."

These games and other "gamblified" applications are tremendously popular and the use of gamblification is very likely to increase. There will be huge business opportunities around the gamblification movement that is afoot. However, businesses leveraging gamblification need to be certain that they don't leverage gambling mechanics in a way that crosses the line into illegal gambling.

A variety of factors are relevant to the legal analysis in the US. One is that gambling is largely regulated by state law. In some states there are gambling-specific laws and/or other laws relating to contests, sweepstakes and lotteries. Yet, there is great disparity among the various states regarding what is legal. Add to this historical problem the fact that there is a flurry of new online gambling legislation due to a recent change in position  by the DOJ that has permitted states to legalize online gambling (except for sports betting). 

Additionally, many activities that some online operators believe will avoid triggering gambling laws may not actually be in compliance. Some of the activities use virtual currency as the means by which users get a "seat at the table" or a "spin of the wheel." While many virtual currency based models may be legal, the use of virtual currency alone does not necessarily ensure that there is no risk of running afoul of legal issues. One of the key issues with that is whether the virtual currency has value. In the Zynga poker example, the argument is that because you can not cash out the chips they do not have value, within the meaning of the gambling laws.

The increasing use of gamblification is going to continue to push the envelope of what is and what is not legal. Understanding the complexities surrounding these issues can be challenging for new entrants due to the lack of specific precedent that addresses many of the techniques that are proliferating in the social game and promotional arenas.

Additionally, even if certain "gambling-like" activities are legal, certain state laws may require that the operators go through a licensing process analogous to what land-based casinos currently do.

Convicted Gambler Cries "Fowl" On Definition of Gambling


MB900299267.JPGA recent appellate decision (US v. Lawson) helps clarify what constitutes illegal gambling, as opposed to legitimate pay, to enter contests. While the case arose out of an illegal cockfighting operation, the decision should help provide some measure of clarity for the wave of companies leveraging the gamblification trend. Two of the key takeaways are as follows: 1. it doesn't matter whether someone knows their actions constitute illegal gambling and 2. payment of a monetary prize is considered a bet or wager if the amount to be awarded is dependent on and funded by fees paid by other contestants or entrants in the event. Note however, this case interpreted South Carolina law and that the law in other states may be different.
To further explain, the court rejected the defendants arguments that they didn't know that their actions constituted illegal gambling. The court held that the plain language of 18 U.S.C. § 1955 does not require that a defendant know that their conduct constitutes illegal gambling under state law, adding that Section 1955 is a general intent crime, which does not require the government to establish that the defendants knew that their conduct violated state law.

On the issue of  what constitutes a bet or wager, the court held, for purposes of South Carolina law, a monetary amount awarded to the winner of a contest is not a bet or wager if it is a set amount funded by the sponsor of the event and not dependent on the number of entrants or amounts those entrants have paid to participate in the event. Conversely, payment of a monetary prize is considered a bet or wager if the amount to be awarded is dependent on and funded by fees paid by other contestants or entrants in the event.

The court considered the defendants arguments relating to their convictions for conspiracy to engage in an illegal gambling business, in violation of 18 U.S.C. § 371, and for operating an illegal gambling business, in violation of 18 U.S.C. § 1955 (collectively, the gambling convictions).

The court noted that the language of 18 U.S.C. § 1955 provides, in relevant part, that "[w]hoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both." The statute defines an "illegal gambling business" in relevant part as a "gambling business which is a violation of the law of a State or political subdivision in which it is conducted." 18 U.S.C. § 1955(b)(1)(i).

The defendants argued that the district court erred in instructing the jury that the South Carolina gambling statute, S.C. Code § 16-19-130, is violated when a person pays an entry fee to enter a contest of skill and the winnings depend on the number of entries.  

Section 16-19-130 of the South Carolina Code makes it illegal to record or register bets or wagers, with or without writing, upon the result of any trial or contest of skill, speed or power of endurance of man or beast, or aid, assist or abet in any manner in the aforesaid acts.

The defendant  argued that the district court misconstrued the statute. She contended that it is a "distinction without a difference" to determine whether an activity constitutes gambling based on the source of the prize money, and whether that prize money is dependent on the number of entrants and the fee that they have paid. The court disagreed.

nunst066.gifThe court stated that it could not locate, nor did the parties direct it to, any South Carolina cases elaborating on the definitions of "bet" or "wager," as those terms are used in S.C. Code § 16-19-130. However, the government relied on a 2003 opinion letter issued by the Office of the South Carolina Attorney General. In that letter, the Attorney General stated that "mere participation in [a] game of skill where a contestant is required to pay an entrance fee, such fee does not specifically make up the purse or premium contested for, and the sponsor of such event is not a participant for a prize, does not constitute a violation of statutes similar to § 16-19-130." Letter from Robert D. Cook, Ass't Dep. Att'y Gen., to The Honorable Glenn F. McConnell, President Pro Tempore, South Carolina Senate (Aug. 29, 2003), available at 2003 WL 22050876, at *2. The letter opinion later stated that when "participants pay an entry fee" to enter an event, "but the entry fee does not determine or make up the prize, purse or premium," the event would likely be held by a court not to violate S.C. Code § 16-19-130. Id. at *4.

In the absence of any South Carolina law to the contrary, the court found persuasive the South Carolina Attorney General's interpretation of this South Carolina law, noting that that interpretation is supported by the view of the highest court of Nevada, a state with a particular interest in, and familiarity with, gambling. The court noted that the  Supreme Court of Nevada has held that an event involves a wager if the prize or premium is not a fixed amount but rather, as is the case here, depends upon the number of entrants. Las Vegas Hacienda, Inc. v. Gibson, 359 P.2d 85, 86 (Nev. 1961) ("A prize or premium differs from a wager in that in the former, the person offering the same has no chance of gaining back the thing offered, but, if he abides by his offer, he must lose; whereas in the latter, each party interested therein has a chance of gain and takes a risk of loss."); cf. id. at 87 ("The fact that each contestant is required to pay an entrance where the entrance fee does not specifically make up the purse or premium contested for does not convert the contest into a wager."); see also Nevada v. GNLV Corp., 834 P.2d 411, 412-13 (Nev. 1992) (citing Las Vegas Hacienda for proposition that "[a] prize differs from a wager in that the person offering the prize must permanently relinquish the prize upon performance of a specified act[, but] [i]n a wager, each party has a chance of gain and takes a risk of loss")

Based on these distinctions, the court concluded that the district court did not err its instructions to the jury concerning the elements of S.C. Code § 16-19-130 and  affirmed the defendants convictions for violating the illegal gambling statute, 18 U.S.C. § 1955.

As companies continue to leverage contests and other such activities in social games and other social media applications, it is critical to understand where the line is between illegal gambling and permissible contests.  Unfortunately, as was the case with South Carolina, in many states there are little if any cases interpreting the statutory language. Additionally, the law may vary from state to state. Pillsbury's social media team has collected and reviewed the various state laws and is preparing a white paper on legal issues in this area.