Apple Updates Crypto Currency Aspects of App Store Review Guidelines

Apple’s App Store Review Guidelines have been updated to address various aspects of crypto currency. Some of the relevant provisions include the following.

One of the provisions relates to prevents an app from including ads that run background processes such as crypto mining. This is a tactic that has arisen, unbeknownst to many users. The relevant provision recites:

2.4.2 Design your app to use power efficiently. Apps should not rapidly drain battery, generate excessive heat, or put unnecessary strain on device resources. Apps, including any third party advertisements displayed within them, may not run unrelated background processes, such as cryptocurrency mining. Continue Reading

SEC Declares Ether Is Not a Security

The SEC has formally announced that Ether is not a security. The U.S. Securities and Exchange Commission Director of Corporate Finance William Hinman said that the commission would not be classifying ether or bitcoin as securities. Other comments of note include that if a cryptocurrency network is sufficiently decentralized and purchasers no longer have expectation of managerial stewardship from a third party, a coin is not a security. Also, labeling an investment opportunity as a “coin” or a “token” does not make something not a security. The facts and circumstances matter.

Recent Blockchain Patents of Note

As we have previously reported, the number of blockchain patents being filed and granted is continuing to increase. According to a Thomson Reuters report, 225 out of the 406 blockchain patents (55.4%) filed in 2017 came from China, followed by 91 (22.4%) from the U.S. and 13 (3.2%) from Australia. The following is a brief summary of a few such patents that have been recently filed or granted in the U.S.

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Churchill Downs Seeks En Banc Review of Big Fish Decision

Churchill Downs has filed a Petition For Rehearing En Banc, seeking to overturn the Ninth Circuit decision in the Big Fish case. As we previously reported, The Ninth Circuit Court of Appeals reversed a district court’s dismissal of a purported class action and held that a social casino game constituted illegal gambling under Washington law. According to the Court, all online or virtual gambling is illegal in Washington state. The panel held that the virtual chips extended the privilege of playing the game and fell within Wash. Rev. Code § 9.46.0285’s definition of a “thing of value.” Continue Reading

Belgium Gaming Commission Loot Box Report – Extends Beyond Game Companies to Licensors and Game Platforms

We previously reported, that the Belgian Gaming Commission has recommended criminal prosecution against certain game companies due to the allegedly illegal use of loot boxes. This report follows previous reports on findings by the Netherlands.

The Belgian Gaming Commission includes recommendations that extend to certain companies doing business with game companies, including Licensors (e.g., FIFA) and platform providers.

In its Loot Box Report, the Belgian Gaming Commission stated: “A wager (bet) of any type is sufficient to qualify as betting for these games. Use of money is not necessary. Just because virtual currency is used in a game does not mean that there is no wager. It must be possible to attribute a value to this wager, however. Value can be defined as the degree of usability. Specifically, items that the player finds useful or nice and for which he pays money.” Continue Reading

Legal Issues With Blockchain-Based Crypto Games and Collectibles

The use of blockchain technology for crypto games, such as CryptoKitties, and other token-based digital collectibles is on the rise. Also growing is the number of tokenized-assets marketplaces such as Rarebits and cryptocurrency designed specifically for gaming, such as Enjin Coin. These innovative platforms are leveraging the power of blockchain technology as applied to games and other interactive entertainment. Continue Reading

The Game Goes On: Sheppard Mullin Obtains Dismissal With Prejudice of Class Action Alleging Social Gaming Micro-transactions Constitute Illegal Gambling

This blog post originally appeared on the Class Action Defense Strategy Blog on February 8, 2016

Another lawsuit alleging illegal gambling in a social game has been dismissed. Over the last year, social gaming mobile applications have come under attack from the Plaintiffs’ bar as gambling in disguise. Plaintiffs’ attorneys theorize that in-app micro-transactions where consumers pay cash for virtual items (i.e., gold coins or gems) designed to speed up or otherwise enhance gameplay are, in effect, wagers insofar as other in-game materials can subsequently be “won” with those items. None of the plaintiffs have prevailed in these recent cases. Continue Reading

Netherlands Declares Certain Loot Boxes Gambling; Warns of Coming Enforcements

As we have previously reported, the subject of loot boxes has received increasing scrutiny around the world. In one of the most recent pronouncements, the Dutch Gambling Authority (the “Authority”) declared the loot box mechanics used in a number of games to be illegal gambling and warned that it will begin enforcement actions as of June 20, 2018. It also indicated that the Authority is in close contact with other European regulators, so this report may lead to similar investigations and/or outcomes in other EU member states. Additionally, the Authority declared that all of the loot boxes that were studied could be addictive, but did not provide suitable control measures to exclude vulnerable groups from loot boxes and/or to prevent addiction.

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Korean FTC Issues Fines Over Loot Box Advertising

According to a recent news article, the Korean FTC fined three game companies for allegedly not making clear disclosures regarding the odds associated with certain loot boxes. Loot boxes are items that players can win or buy and that give the player a virtual item, but the players do not know which one until they “open” the box. According to the article, some of the games encouraged players to buy loot boxes to collect 16 puzzle pieces, and award players with special in-game items once the collection is completed. This mechanic, known as Kompu Gacha,  was once popular in Japan until the Japanese FTC raised concerns there. Continue Reading

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