Whether using legal currency to purchase randomized virtual goods is considered gambling?

Author – Karolis Kubilevičius

With the age of technology, new ways to gamble have become possible. Enterprises offering services through virtual platforms have started selling virtual goods to persons of any age. By adding an element of chance and making the virtual good randomized, the user who is spending legal currency to purchase it does not know what he is going to get. Naturally, once a person does not receive his desired virtual good, he is more likely to purchase another virtual good and thus in the process risk getting addicted and suffering side effects of compulsive gambling.

Consequently, in the first paragraph, the author analysed definition and legal regulation of a virtual good in the context of gambling. It was established that a virtual good is an intangible object, which only exists in a digital form and can be purchased with legal currency, but can only be used in an online system or any other similar platform by a single person at the same time. Furthermore, the author found that countries are reluctant to regulate the sale of randomized virtual goods with an exception to a few selected countries.

Secondly, the author analysed the definition of gambling and its negative effects on a person. The author found that gambling consists of three elements: an element of chance; an element of prize and an element of consideration. If one element is removed, the activity can no longer be treated as gambling. Moreover, after conducting an overview of related research, it was established that addiction to gambling can cause biological, psychiatric and social consequences to a person.

Finally, in the last paragraph the author analysed the online gambling regulations in the European Union. The author found that online gambling regulations scope and reach varies from country to country, with each country having different limitations on gambling.

Introduction

Gambling  is one of the fastest-growing international commercial industries in the world. Today a person can choose from a vast array of different types of gambling games. The most popular ones include (but are not limited to) casino-style cards games, dice games, electronic games, betting on sporting events, pitching quarters, lottery tickets, raffle tickets, bingo and the rest. While some of the aforementioned games involve strategy or set of skills, majority are based on luck. To date, one of the most popular forms of gambling is online gambling. In Europe alone, the online gambling market is expected to rise from €16.5 billion in 2015 to €24.9 billion in 2020. One of the main reasons why online gambling is so popular is the easy accessibility. A person (if he chooses so) is provided with anonymity and may access gambling sites from any part of the world, as long as he has two main components: (1) a device, which is capable of accessing internet (i.e. a computer, a mobile phone, etc.) and (2) internet. Moreover, the two aforementioned components make it difficult for the legislators to regulate online gambling, therefore leaving many areas unregulated. And while some countries do fully regulate online gambling, majority do not. Despite the fact that there are many legal issues regarding online gambling, the author’s main focus is going to be on examining the issues regarding the purchase of randomized virtual goods, by using legal currency.

In essence, gambling is defined as operating a game of chance or playing at or betting on any game of chance at which money, property or other things of value is a bet, whether the same be in stake or not. Although it is just one of the possible definitions of gambling, it defines the main aspect of gambling – buying a chance in order to win a certain prize. Because people purchase this chance with legal currency, it is one of the strictest regulated areas. People who frequently engage in this activity tend to develop a gambling addiction, which can be harmful not only to the person himself or herself, but to his or her family as well. Due to the potential harmful effects to a person, many countries have a minimum age requirement, which all the gambling operators must follow in their respective jurisdictions. In Europe, the minimum age requirement usually varies between the age of 18 and the age of 21. Due to the peculiarities of internet gambling, many teenagers can easily bypass this minimum age requirement and engage into gambling activities (e. g. lying about their age, name, surname, etc.). And while countries tend to regulate internet gambling, by applying the same laws that they apply to conventional gambling, there are types of internet gambling that is often overlooked. One of these areas are video games or any other similar platform, where users can purchase randomized virtual goods by spending legal currency.

The problem regarding the purchase of randomized virtual goods arises when a person does not know what he is going to receive. In the event that a person does not receive the desired virtual item, he will insist (usually) on buying more randomized virtual goods in order to finally get the desired item. The difference between internet gambling and the sale of randomized virtual goods is so slim that different countries cannot come to a unanimous decision, whether the sale and (or) purchase of randomized virtual goods should be considered gambling and therefore regulated accordingly or not. For example, New Zealand’s gambling regulator – the Gambling Compliance office of its Department of Internal Affairs – claims that randomized virtual goods do not meet the legal definition of gambling. Meanwhile, Hawaii’s legislators have introduced two sets of bills, which aim to prevent the purchase (and sale) of randomized rewards and (or) virtual items to people who are under the age of 21. Moreover, taking into account that technology used to sell randomized virtual goods is constantly changing, the area is becoming harder to regulate. Due to the lack of literature regarding the discussed topic (mainly because the issue is quite new), many countries tend to take a conservative approach on the matter and adopt wait and see approach (as in New Zealand’s example). This indicates the novelty of this topic.

At first glance, it could appear that the problem is not relevant, because existing gambling regulations could apply. Nevertheless, many countries are reluctant to apply the current gambling regulations to this area due to various reasons (e. g. not all countries treat virtual goods similarly). In addition, majority of current gambling laws do not apply to the sale of randomized virtual goods, because it is not treated as gambling, under the existing legislations.  This means that at the current moment the sale and (or) purchase of randomized virtual goods is not regulated. A person of just about any age can freely purchase randomized virtual goods. By allowing companies to continue selling randomized virtual goods in video games or similar platforms, without a clear distinction (or the lack of) from gambling, the safety of public order is not guaranteed. 

Finally, to fully realize the relevance of the problem it is important to mention that gaming industry is one of the fastest growing industries in the world. Since virtual goods are mostly sold in video games, the global virtual goods market value is estimated to reach $189,76 billion by 2025. With the continuing rapid development of technologies, more and more people will have access to internet, new technologies and thus to the virtual gaming industry. Therefore, it is relevant to analyse whether purchasing randomized virtual goods with legal currency is considered gambling.