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.

Continue Reading

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

Social Game Site Excludes Washington Players; Gambling Commission Comments

As 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.” In response to this, at least one social game company, Poker Stars, has decided to deny Washington residents access to their site. Continue Reading

Drafting Effective Blockchain Patents

As the number of blockchain-based patents and patent applications increases, more companies have become interested in pursuing these patents. Other companies still think that blockchain-based inventions are not patentable. To help sort fact from fiction, we have prepared a paper to provide an update on blockchain patents, provide guidance on the types of blockchain inventions that are patentable and how to draft applications to maximize their value. This paper is an update to our prior paper entitled “Patent Strategies for Cryptocurrencies and Blockchain Technology” available here.

Social Casino Game Found to Be Illegal Gambling

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

Crypto-Crime: The SEC and DOJ Go After BitFunder and Its BitFounder

Taking further steps into the world of cryptocurrency, two entities of the federal government recently took legal action against BitFunder, a now-defunct Bitcoin exchange, and its founder, Jon Montroll. The Securities and Exchange Commission filed civil charges against BitFunder and Montroll, and the U.S. Attorney’s Office in Manhattan brought criminal charges of perjury and obstruction of justice against Montroll, who was arrested and taken into custody. BitFunder was an exchange that, among other things, empowered its customers to create and trade Bitcoin denominated shares of enterprises. The numerous allegations and charges against the defendants include: Continue Reading

Patent Strategies for Cryptocurrencies and Blockchain Technology

Cryptocurrencies and blockchain technology are rapidly emerging as disruptive technologies. As has happened with many new technologies, particularly disruptive ones, a patent arms race is occurring. The number of patents being filed for these technologies is rapidly increasing.

The number of published applications shows roughly a tenfold increase over the number of issued patents.

Despite this increase in patent filing activity, many companies are unaware of what aspects of this technology can be patented and many myths and misconceptions exist. In addition to the usual misconceptions about patents (detailed below), the open source aspect of many blockchain-based inventions leads to greater confusion. The patentability of software and technology platforms does not cease just because some or all of the software is open source or built on a known protocol. Continue Reading

Seeking foreign investors for your tech startup? Congress says, “not so fast.”

The U.S. Congress is currently considering legislation that would tap the brakes on foreign direct investment in the United States, particularly on investments in sensitive industries like artificial intelligence, robotics, and semiconductors. We know: you’re saying we already have that in the form of the Committee on Foreign Investment in the United States (known as CFIUS). Continue Reading

Apple Requires Disclosure of Odds for Loot Boxes

Apple just announced a number of changes to its App Store Review Guidelines, including the requirement that apps offering “loot boxes” or other mechanisms that provide randomized virtual items for purchase must disclose the odds of receiving each type of item to customers prior to purchase. This comes as the incredibly successful monetization mechanic of loot boxes has come under scrutiny as we have addressed in our prior posts on Are Loot Boxes An Illegal Gambling Mechanic? and an Update to that post. Continue Reading

LexBlog

By scrolling this page, clicking a link or continuing to browse our website, you consent to our use of cookies as described in our Cookie and Advertising Policy. If you do not wish to accept cookies from our website, or would like to stop cookies being stored on your device in the future, you can find out more and adjust your preferences here.

Agree