September 18, 2018

On 17 September 2018, 16 gambling regulators issued a Declaration highlighting their, “concerns relating to the blurring of lines between gambling and gaming”. The signatories consisted of 15 regulators from Europe (including the UK, France, Spain and the Netherlands) and one regulator from the US (the Washington State Gambling Commission).

In summary:

• Although each jurisdiction has its own legislative framework and each regulator therefore has different duties and powers, the declaration states that the regulators share a number of “common principles”. These are expressed to include, “the need for gambling to be regulated to ensure high standards of integrity, fairness and consumer protection, in particular in relation to children”.
• The declaration states that the regulators are, “increasingly concerned with the risks being posed by the blurring of lines between gambling and other forms of digital entertainment such as video gaming”. The declaration refers to examples of activities that have given rise to this concern, being, “…skin betting, loot boxes, social casino gaming and the use of gambling themed content within video games available to children”.
• The regulators express a commitment to, “thoroughly analyse the characteristics of video games and social gaming… [to] enable an informed dialogue with the video games and social gaming industries to ensure the appropriate and efficient implementation of our national laws and regulations”.

The concerns expressed in the declaration are not new. For example, the UK Gambling Commission made similar points in the position paper Virtual currencies, eSports and social casino gaming  that it published in March 2017 and in a press release on Loot boxes that it issued in November 2017. However, the fact that 16 regulators have committed to joint action marks a significant escalation. In addition:

• Although the declaration states that the concerns relate to “digital entertainment”, it is very clear from its title, the examples that it contains and the actions that are planned, that the focus is very much on the games industry. Within this, the focus is expressed to be on protecting children. However, from a gambling perspective this means those under 18 which will therefore encompass most games.
• A particular focus appears to be “unlicensed websites offering skins betting”. In February 2017 the UK Gambling Commission brought a successful criminal prosecution in respect of this activity in relation to Futgalaxy. However, it is also clear that the regulators are looking at a much wider range of activities.
• It is encouraging that the regulators want to engage with the industry, rather than taking unilateral action (as has happened in other jurisdictions such as Belgium). However, many in the games industry will be concerned at the way that the declaration hints of possible regulation by stating: “Regulators identify in such emerging gaming products and services similar characteristics to those that led our respective legal frameworks and authorities to provide for the regulation of online gambling.”
• It follows that although there will be no legal obligation on the games industry to work with regulators, they will need to engage in a collaborative way. The declaration alludes to this point with charming understatement: “We anticipate that it will be in the interest of these companies whose platforms or games are prompting concern, to engage with [gambling] regulatory authorities to develop possible solutions.” 
• The declaration states that the regulators, “will work closely with our consumer protection and enforcement authorities”. In its press release on Loot boxes, the UK Gambling Commission referred to the need for this kind of collaboration: “We have a long track record in keeping children safe and we are keen to share our experiences and expertise with others that have a similar responsibility. Whether gambling or not, we all have a responsibility to keep children and young people safe.” This is potentially significant, since some activities that do not fall within the gambling legislation in a country may still contravene applicable consumer law or advertising regulations.

Although only short in length, the declaration might well mark a very significant moment for the games industry and some of the monetisation techniques that it uses.