News story today from GamePolitics.com about the South Korean Game Rating Board (GRB) accusing several MMO publishers of obstructing an investigation related to in-game "jackpot items." The crux of this investigation appears to be that players spend virtual currency for an unknown item. The item may be powerful, it may be worthless, but players are willing to shell out virtual dollars in the hopes that they will get the powerful item at a significantly reduced price.
I'm no expert on South Korean law, but in the US, this type of activity could well be legally problematic. Why? Because, as we've covered on this blog before, every US state has some form of law against illegal lotteries. And "jackpot items" could very well constitute an illegal lottery.
What exactly is a lottery? From a legal perspective, three things define a lottery: prize, chance, and consideration. Prize is usually defined as something of value, and clearly virtual items are "something" that has "value" (if they didn't, no one would spend virtual, or real, currency on them). So we've got prize. Moreover, chance is clearly present. Some players will get items of value, others will not. That just leaves consideration.
Consideration in the area of lottery law is something of a term of art. In can be generally understood as the giving of something of value, but this includes a significant expenditure of time, energy, or attention (this is in contrast to other areas of law, where consideration refers only to monetary value). Thus, for the "jackpot items"activity to be an illegal lottery, the exchange of virtual currency for a chance to get a great virtual item must constitute consideration.
Leaving aside those circumstances where a player buys virtual currency with real money (there's no question that would be consideration), does this impact every game on the planet, which necessarily involves the expenditure of time, energy, or attention to earn virtual currency, could be subject to lottery liability for "jackpot" items?
Perhaps, but I see a few problems with this.
First, most game players spend time with a game as a form of entertainment. I buy a game to play it, and the earning of virtual gold, items and badges is all part of the experience. Therefore, at the end of the day, I got full enjoyment from the fruits of my labor - my time spent playing the game, and earning virtual currency, yielded me exactly what I was hoping it would, an experience. My participation in a "jackpot" item activity is all part of that experience, not the sole reason I played the game (goldfarmers notwithstanding).
So, if the time I spent in the game was because I wanted the experience, and not because I wanted to earn money for jackpot item drawings, then perhaps the jackpot item activity doesn't have a consideration element. Of course, some argued this in the context of the Deal or No Deal text message cases, without much success. But unlike the Deal or No Deal cases, where the "experience" lasted a grand total of 10 seconds (or less) while you sent a text, in a video game the experience could be 50, 60, even 100 hours or more. I think it's hard to argue that the "experience" theory is little more than a cover for the sweepstakes - for me, it's the whole reason I play the game in the first place.
Second, it may be that virtual currency is obtainable without the need to either buy it or grind away earning it. What if every new player of a game was given 10 at the outset of the game, and was given the opportunity to participate in a "jackpot" item drawing? In this case, the new player didn't buy the gold, nor did the player spend significant time earning it. Arguing consideration in this case would be difficult, and made even more difficult if all "jackpot" item drawings were restricted to noobs.
Third, what if you removed the virtual currency element from the equation? What if you granted every player a "mystery item" upon leveling up? Sure, the player spent time leveling the character, but I cannot imagine anyone seeing this as a problem. Furthermore, this would strongly reinforce the "experience" theory espoused above.
The bottom line is that, when it comes to lottery laws, there is a real risk for US games companies. Not only are lottery laws enforced by federal agencies, they are also enforced by state agencies and consumers. This is the proverbial litigation trifecta - federal investigations, state investigations, and class actions. So knowing which side of the law you fall in can be incredibly helpful if you want to avoid significant legal costs and penalties.
If you have any questions about lottery law, you should speak with someone who is knowledgeable about this area if you have questions - this is not something you want to "take a chance" on (sorry, had to say it).