Carpe Diem! Italy Authorizes Issuance of Online Gaming Regulations.

Gaming is a fast-growing segment of the online community—remarkable since people have actually been saying that since 1994! Well online gaming and gambling may become more difficult (and more expensive) in places like Italy, if the Italian Chamber of Deputies has its way. New legislation ratifying and amending existing Italian law authorizes the State Monopolies Authority (Amministrazione Autonoma Monopoli di Stato (AAMS)) to promulgate implementing regulations—which are likely to be issued in early 2010 (although late 2009 is a possibility). Currently, Italy licenses online poker tournament games and fixed-odds sports betting, but online gambling in Italy is limited to Italian gamblers on internal, not international networks.

So what does the new law provide? Although absent the actual regulations it is impossible to predict with certainty, there does appear to be both good news and bad news.

First the good news. The law authorizes the introduction of online cash games—both fixed draws and card games—and permits the implementation of new online lotteries of various types and modes of play. Consequently, online games involving cash are likely to become legal and be introduced in Italy. 

Now the bad news. The tax that will be imposed on these new games is 20 percent of the total (essentially a gross profits tax). This represents an increase above the current 4.5 percent tax on “gross gaming revenues” that applies to sports betting in Italy. In cash online games, unlike tournament poker (in which a tax is imposed as a percentage of gross gaming revenue), the network operator generally takes a “rake” from each game. Thus, using a gross profits tax will allow the operator to set the rake more rationally in the marketplace, but will also result in more tax revenue.

So bottom line, while these new provisions are likely to stimulate new online gaming, the AAMS retains very broad authority to define the basis upon which operators can customize the wagering products and services being offered. Because the AAMS still retains the right to approve each betting product, one wonders if that will not limit both innovation and competition in the online gaming marketplace. That said, gaming and gaming revenues continue to increase and tax revenue will likely follow. We’ll see if the new regulations provide additional opportunities, but as they said in ancient Rome: Cum catapultae proscriptae erunt tum soli proscript catapultas habebunt.

Need to understand more about online gaming, or online gambling, or both? Need help? In Italy? In the United States? Anywhere? Need references? In Italy? In the United States? Anywhere? Contact me at joseph.rosenbaum@rimonlaw.com, check out my bio at Joseph I. Rosenbaum, or contact the Rimon lawyer you normally work with. We are happy to help.

Online Gaming Laws Survey – Free (Yes, You Read Correctly)

With the help of one of our trusty Summer Associates, and stimulated in part by our desire to update and consolidate research we have done over the years in a variety of different contexts, we have prepared a Survey of U.S. Federal and State Gaming Laws & Regulations that apply or may apply to “Online Gaming.” We defined “gaming” relatively loosely, and tried to cover promotions and contests involving money or consideration of any kind, the potential implications of related gambling statutes, “amusement gaming,” and anything related that popped onto our radar screen. With the proliferation of Internet-web-based online advertising, promotions, games and interactive entertainment, these gaming laws will increasingly be implicated and potentially used by state and federal authorities to regulate how these activities are conducted.

Now you may ask, “Why would a law firm be giving away such valuable research for free online, on the web, for everyone to see?” Well you may ask – but first read on:

This is an area in which Rimon has both U.S. and international experience, and as complex gaming, promotional activities and in-game advertising—involving proprietary and user-generated content—proliferate, the convergence and intersection of these laws and regulations with advertising, promotional and marketing regulation will surely increase over time. Contact Joseph I. Rosenbaum if you would like to know more about our experience, our resources, or our ability to help you.

We also maintain a similar chart and database relating to Gift Cards and Gift Certificates, covering both traditional and online payment instruments that are increasingly blurred with prepaid debit cards, stored value cards, smart or chip-cards, reward cards, discount certificates, and traditional credit, charge and debit cards. In the online world, often a simple code or account number, rather than a physical piece of plastic, is the only evidence that a “gift card” exists. Not only are there advertising disclosure regulations and restrictions on expiration dates or the imposition of dormancy or inactivity fees, but escheat and abandoned property laws are implicated as well. It’s a complex area of marketing and the law. In addition, in collaboration with our Security & Data Protection Group, we maintain a database of data breach, information security and identity theft statutes, which is an increasingly handy tool related to prevention and compliance and, of course, knowing what to do when you suffer a breach.

The Survey of U.S. Federal and State Gaming Laws & Regulations chart, which you can refer to at any time, lists each state (including the District of Columbia) in the United States, and a citation to the relevant statutes and regulations (organized so that amendments are cross-referenced by date and relevant citation), followed by a brief summary of the salient provisions of the law or regulation itself. We have also noted, where there was current activity, any pending legislation that may apply. For example, the relevance of federal gambling legislation appears in the notes at the introduction of the chart, referencing the recent introduction of bills that would potentially defer enforcement of the UIEGA and seek to establish a federal licensing scheme for online gambling. We will continue to update our research regularly for our clients, and if you want to know more about any of the databases, reference tools, or our teams of professionals who can help you—well you know what to do next. Oh, and if you want to know why we are giving this research to you at no charge—well I did say “you may ask.” So go ahead and ask.

FTC Releases Mobile Marketplace Report

Earlier today, the FTC staff issued a report concerning consumer protection issues arising in the mobile commerce marketplace. A copy of the full report, Beyond Voice, Mapping the Mobile Marketplace is available by clicking the link. The key findings in the report:

  • Cost disclosures about mobile services continue to generate consumer complaints. The FTC staff intends to monitor cost disclosures, bring law enforcement actions, and work with industry to improve self-regulatory enforcement
  • The FTC and its law enforcement partners should continue to monitor the impact on consumers of unwanted mobile text messages, malware and spyware, and take law enforcement action if and as needed
  • Although spyware and malware are not yet significant problems on mobile devices, the FTC is encouraging development of strategies to prevent or minimize their spread, since the issue is likely to magnify as consumers increasingly use mobile devices for a wider range of applications, including Internet access
  • Increasing use of smart phones to access the mobile Web presents unique privacy challenges, especially regarding children. The FTC will expedite regulatory review of the Children’s Online Privacy Protection Rule to determine whether the rule should be modified to address changes in the mobile marketplace. This review was originally set for 2015, and will now begin in 2010 instead.

Given the numbers of wireless and mobile devices in the hands of individuals under the age of 18 (and 13), and the increasing proliferation of mobile devices, this will become a hotter topic in the months and years ahead. As if this point needed to be emphasized, it has been reported that as of January 2007—two years ago—there were approximately 800 million cars, 850 million personal computers, 1.5 billion television sets, but already 2.7 billion (yes, billion) wireless and mobile devices in use around the globe, with more than 800 million e-mail and 1.8 billion SMS text-messaging users.

The sheer numbers are staggering, and we are on top of this issue big time. Contact Joe Rosenbaum, John Feldman or Douglas Wood if you need more information or assistance.

Dazed & Confused, Not Shock and Awe

For 2009, here are my predictions:

The economy and strife, regulation and surveillance will dominate the agenda, with the burden of paying for everything from wars to bailouts right in the crosshairs: watch those advertising budgets boys and girls, the taxman cometh.

Privacy and advertising, long separated by passive print, television and radio, will continue to collide—Congress will either pass ineffective and inappropriate legislation because it’s too busy to pay attention, or will defer legislation another year because it’s too busy to pay attention.

Wireless and mobile technology will continue to make us say “wow” and will continue to miniaturize our lives, putting not just communication, but also our wallets, calendars, purchasing, entertainment and working tool kits in our hands, not our laps.

The use of wireless and additional licenses, spectrum and bandwidth will bring the FCC and the FTC colliding in their zeal to regulate, and they will either cooperate because they are too busy to fight or fight because they are too busy to cooperate. In either case, regulation, re-regulation and self-regulation will continue to increase, unregulated.

Marketing, promotions, new media, digital content and distribution platforms will transform gaming and interactive play into entertainment, education and information—giving us more choices, but continuing to blur the lines between advertising, entertainment and information.

Continue reading “Dazed & Confused, Not Shock and Awe”

Japan Arrests Woman for ‘Killing’ Her Virtual Spouse

Last week, Japanese authorities arrested a woman for killing the digital avatar of her online husband—no, we didn’t make this up. Arrested in her home in southern Miyazaki, she was taken to Sapporo in Northern Japan. The woman became angry on learning her online husband divorced her. She used his ID and password to log onto the “Maple Story” interactive game to execute the virtual murder. Although not yet formally charged, she was arrested for suspicion of illegally accessing a computer and manipulating electronic data. Although the police thus far have no reason to believe she was contemplating any real world criminal act, she still could face five years in prison or a fine of as much as $5,000 if she is ultimately charged and convicted of the computer access and manipulation charges. Maple Story, like many interactive, online virtual world games, allow real world participants to create digital characters called “avatars.” While many virtual experiences are essentially sophisticated online interactive games themselves, even non-game based virtual worlds enable avatars to engage in social networking, relationships with other avatars, transactions involving the exchange of value, and the creation or deployment of intellectual property—content ranging from video programs to musical concerts to creating wardrobes for their avatars. Because avatars exist in a virtual, digitally created world, their owners often engage in activities they would never consider in the real world.

Continue reading “Japan Arrests Woman for ‘Killing’ Her Virtual Spouse”

Cyber Attacks? It’s Not Just War Games Anymore

Is a cyber attack an act of war? Analysts reported that while the Russian military was acting against the Georgian republic, Georgian websites were also under attack. Cyber warfare can exploit security gaps to take control of civilian infrastructure, such as power grids, as well as government websites and military command and control operations. It has long been known that cyber-weaponry could supplement (and sometimes replace) traditional military activities. But when does a cyber-attack itself constitute an act of war? (We all appreciate the notion of “war” as a historical concept is and continues to change.) Tactics such as urban warfare, bioterrorism and suicide bombers have caused grave concern, not only over government’s ability to deter violent and damaging non-traditional acts of war, but also how to respond when they occur. A big challenge in the cyber warfare world is identifying who did it. In 2007, Estonia asked NATO to come to its defense when a cyber attack disabled government and bank websites. Apparently in 2008 we didn’t need a cyber attack to bring down some of our financial institutions (sorry, couldn’t resist). Question—how does one respond to a cyber attack—with bullets or chips?

Are You For Real?

In the 1960s, Stanley Milgrim, then a psychologist at Yale University, conducted a controversial experiment. In an obviously controlled setting for the study, Milgrim and his associates directed their subjects to give ever-increasing electrical shocks to strangers whenever they gave the wrong answer to questions in a test of memory. The strangers were really actors pretending to experience pain and did not actually receive any jolts of electricity. The study, intended to measure how compliant people would be to obey authority figures, even to the point of inflicting pain on otherwise innocent individuals, was disturbing, to say the least. The subjects, despite some discomfort at first, continued to “shock” the test-taking actors. The experiment raised ethical concerns about subject study methodologies, among other things.

However, recently, Mel Slater, a computer scientist at University College London in England (with a joint appointment to the Universitat Politecnica de Catalunya in Barcelona), reproduced this experiment without running afoul of the ethical concerns that the original study raised. Mr. Slater conducted his experiment in a virtual world where test-taking “victims” were avatars whose expressions changed from happy to pained in response to the actions of participants in the study—much the same way the real-life actors did more than 40 years ago. Not only were the results astonishingly similar, but to the surprise of many, the real-life participants experienced increased heart rates and described feelings of regret or feeling badly about delivering electrical shocks—even though they knew the strangers on the other side of the screens were avatars and not real people!

Continue reading “Are You For Real?”

Hey Baby, Remember Me? You Will.

Webkinz? Barbie Girls? Be-Bratz? Club Penguin? Never heard of these? Your 6-year old has. At a time when advertising and marketing to children is in the cross-hairs of regulatory agencies, virtual worlds are discovering that imagination can run wild in an environment where children—some as young as 5 or 6 years old—can shop, adopt pets, and play dress-up.

Remember virtual pets? You could purchase a small, self-contained computer (of course it wasn’t marketed as a computer, but as a digital companion) with names like Tamagotchi or Giga Pets—often with a tiny display that had the “pet’s” image.

Small buttons on the outside of the casing allowed you to feed your pet or wash it, and there were even pets that could interact with other pets (e.g., Digimon). If you didn’t treat your pet right it might even die!

Now toys purchased at retail stores—toys for young children—are showing up with flash drives which, when plugged into a computer USB port, unlock features and hold the keys to virtual worlds where children can play—in dollhouses, shopping malls, with pets and characters. Building brand awareness is critical for marketing-driven companies, and building brand awareness in young children who may carry the imprints into their teenage and adult lives…well, you know…. Next up, potty-training your virtual baby. Stay tuned.

Content is King, but the Medium Is Still the Message

Recently lawyers have begun to debate the question of just how much control advertisers can exert when paying for product placements or branded entertainment before the line between First Amendment expression by the creative staff putting together the program and the financial subsidies from advertisers is crossed. Now, the Ninth Circuit has dealt with a similar question relating to the immunity that interactive computer service providers have typically enjoyed under the Communications Decency Act (the “CDA”). The CDA insulates service providers from liability so long as the service provider remains a publisher of information and content of others (there are exceptions, so the immunity is not blanket and you should always consult legal advice for specifics that apply to your situation). That said, a company that operates an online web service that specializes in matching roommates based on their preferences has been held in violation of the Fair Housing Act because a questionnaire put together by the company asks for certain demographic information that, when posted on the website, could be used by users and site visitors to discriminate against others. The company, Roommates.com, asked users to disclose information, among other things, about roommate preferences such as age, sex, children, etc. The Ninth Circuit held that although Roommates.com was immune as long as it was simply enabling the distribution or display of information provided by its members, when it became an information content provider, it lost immunity with respect to that activity and information. And by putting together the questionnaires and soliciting their preferences in response, Roommates.com was not simply posting content authored by users, but rather was eliciting specific information that could be abused and that might or might not have been voluntarily posted or disclosed absent the questionnaires.

Hmmmm…user profiles, play lists, segmented marketing, asking consumers to participate in promotions…this is an interesting test of the limitations of the CDA to protect and insulate interactive online service providers from liability. As social networks, virtual worlds and other digital arenas that don’t simply enable but also solicit or encourage certain information to be provided, and as web services become more targeted, focused and segmented to match consumer preferences, the immunity is likely to be tested further. Stay tuned.

The Law of Unintended Consequences

China: A 30-year-old man in the southern Chinese city of Guangzhou appears to have died of Internet gaming exhaustion. He had been playing online for three days and was declared dead at the Internet café where he had been playing. Clinics have sprung up to treat “Internet addiction,” noting that children and teenagers often play online games or surf the Web for days at a time. China has more than 140 million Internet users, and a huge market for online games.

Poland: A bus driver in Slupsk, a city in northwestern Poland, was fired for sending 38,000 text messages on his employer’s cell phone. The driver, Leszek Wojcik, told reporters he wanted to buy a car if he won the 100,000 zloty prize ($36,000) in an SMS (text messaging) contest. According to the Slupsk city transport service, Mr. Wojcik ran up a bill of about 94,000 zloty ($34,000) in his losing bid to win, sending an average of 1,200 text messages per day at a cost of 2.40 zlotys per message. Among the lessons learned: promotions and advertising using SMS, streaming and mobile technology are extremely powerful.

USA: A U.S. federal judge didn’t recall how he spent $3,000 at a strip club. He apparently also forgot a few other things, such as using a credit card for either an Internet dating service or to pay for pornography—all reportedly while married; the marriage has since ended. At the trial, when the Judge was asked about the $150 credit card charges, he reportedly replied, “I’m embarrassed to be even talking about this. I think you pay extra to get certain features, such as if you upload a picture or—I don’t even recall.” Under the Constitution, federal judges are appointed for life, and while they are supposed to follow an official code of conduct, they can be removed from the bench for high crimes, misdemeanors, treason or bribery.