#SGSConfLV

1. Virtual Currency
What It Is,
What It Isn’t,
And
How to Use It Legally

2. Presented by
Martin Owens
Internet and Interactive
Gaming Law
Sacramento, CA
▪Nothing in this presentation should
be taken as direct legal advice. For
your particular needs, be sure to
consult a qualified professional

3. First Surprise:
Electronic Virtual Money Is Nothing New
▪Money was first
reduced to a
transmissible abstraction
in ancient Sumeria, 5000
years ago.
▪The first letters of
credit

4. ▪ And virtual money
went electronic as soon
as the electric
telegraph could send
bank wires, in 1871

5. BUT▪ Just because something is called money or
virtual currency, doesn't make it so.
▪ It may or may not fit the legal description
of money

6. So, What is Money?
Something Which Fulfills Four Functions
▪ Medium of exchange
▪ Unit of accounting
▪ Stable store of value
▸ Substantial Fluctuation NOT welcome
▪ Legal tender- MUST be accepted
▸"All debts public and private"
▸ Central control- third party validation

7. Further characteristics of money
▪Uniform
▸ Identical appearance
▪Divisible
▸ prescribed sub units: $ 100, $50, $20, $10
▪Durable (relative)
▪Portable
▪Relatively scarce▸authority regulates generation & release

8. So.....
What about online gaming?
Points, Chips, Bonuses, “Gold Pieces”,
In-game currencies ?
▪ Are they money, legally speaking?
▪And why do you care?

9. Answers:
▪They may be, depending on
circumstances, and
▪You care very much
because if something is
considered money, special
procedures and licenses are
needed to transfer it,
especially internationally.

10. ▪Money
launderingdisguising the
source, control, or
object of transfers
involving the
proceeds of illegal
activity-is a very
heavy felony (18
USC §1956)

11. In addition:
▪ US residents must
report on tax returns all
income they receive,
whether or not it comes
in the form of actual US
currency
▸"Recognition event"

12. So, how do you know
if your in-game
currency/points/whatever is
considered to be "money" ?
▪Is it instantly
convertible back
into cash
▪(as with casino
chips in Vegas?)

13. ▪ If it's only usable within the game - can't
be converted back out- then it won't be
much of a problem.(World of Tanks)
▸"Gold farming" is so far not seriously
considered as money laundering
–So long as you declare the income

14. The cashing out problem
▪ Have you just “ parked” your money for a
brief time in an online game or virtual
market?
▸No real participation?
–No profits, losses, transactions?
– “ HIT AND RUN”

15. Are you a
Commodity Exchange?
▪November 2012: US Commodities
Futures Trading Commission forces Irishbased Intrade to close American accounts
▸Not only positions/options on actual commodities
futures, but "proposition bets" on political eventualities
and even show business trends
– registered exchanges only
▸Many virtual currencies are themselves
commodities
–They can be bought, sold, held, and traded, but are not a stable
store of value

16. Avoiding Trouble
▪The game’s the thing
▸Focus of the site is on actual games and
gaming, not payment system conversions
▪Transparency
▸Source and ownership of the money are
properly tracked
▪ Value recognition point:
▸Especially for "mixed" payment systems,
value of virtual currencies used in ADW
applications must be established and fixed.

17. For issuing virtual currency or
something like it:
▪ Terms and conditions of membership
▸Customer solely and exclusively responsible
for legal use
▸Abuse and lawbreaking as grounds for
termination

18. And Finally,
▪The best way to avoid trouble is don't go
looking for it.
▸Avoid boasting and defiant language

19. Why Aren't There Better Maps?
▪Because you are
the pioneers, and
you're still making
them

20. Thank You