Garth McDonald, Wiggin
Should social gaming be regulated? Mark Lipparelli, ex-chairman of Nevada Gaming Control Board has said there are “risks” and John Travers of the UK Gambling Commission remarks that it is “at the perimeter.” A blip has certainly shown up on the regulatory radar.
Social games now dominate the bestselling games charts on Facebook and are expected to reach $7.49bn (£4.64bn) turnover by 2013. Gambling-related social gaming is a growing and controversial component of this market but as player numbers and social responsibility concerns grow, so does the scrutiny from regulators.
These social games are identical to online casinos, bingo and poker rooms; real money is paid into an account and poker, roulette and slots are offered with the opportunity to win prizes. Why then is this not “gambling”? Under UK law at least, this boils down to the definition of what constitutes a “prize” in the Gambling Act 2005. To be “gaming” the prize must be “money or money’s worth.” Players of social games play to win virtual money and prizes, creating a closed loop system in which real money comes in but cannot be cashed out. The argument goes that there is no real-world value in these intangible prizes and as such it falls outside of the Act’s definition of gaming.
The case of Mitchell versus Zynga  casts doubt over this notion. Mitchell hacked into Zynga Poker accounts and appropriated $400bn (£248bn) worth of poker chips, with an estimated (by Zynga) real cash value of $12m (£7.4m). Mitchell argued that these chips were worthless as they could not be taken out of the game, but both the court and Zynga were prepared to accept that the virtual chips did have a “real” value (not least because Mitchell had actually sold and collected £53,000 worth in cash) and Mitchell was given a two-year prison term.
Other jurisdictions recognise the value of intangibles or aspirational prizes as gaming proper. Malaysia has said it is “gambling if any money is spent, regardless of the nature of winnings” and Sweden recognises gambling where any prize has an “aspirational element.”
Aside from the legalities there are calls for social gaming to be regulated for public policy reasons: to protect children or vulnerable people from spending inordinate sums of money. In Japan the Compu Gacha concept, whereby players buy virtual items, has been regulated on social grounds.
The harder and faster that social gambling grows, the more regulators and politicians will feel backed into a corner. Smart thinking would be for the industry to self-regulate first.