Unlicensed online gambling using in-game virtual currency

On 6 February 2017 business partners Craig Douglas and Dylan Rigby pleaded guilty to offences under the Gambling Act 2005 in what is thought to… Read more

On 6 February 2017 business partners Craig Douglas and Dylan Rigby pleaded guilty to offences under the Gambling Act 2005 in what is thought to be the first prosecution brought by a gambling regulator related to use of in-game virtual items such as “skins”[1].  Mr Rigby was ordered to pay £174,000, and Mr Douglas £91,000, in fines and costs for providing facilities for gambling without the required licence and advertising unlawful gambling.

There has been a lot of interest in the gaming industry recently surrounding the use of in-game virtual items to gamble. Under the Gambling Act 2005 it is a criminal offence to offer British consumers facilities for lotteries, betting or games of chance without a gambling licence (unless an exemption applies) – and anyone advertising unlawful gambling also commits a criminal offence. To qualify as gambling under the Gambling Act there is no need for “real” money to be staked or won – it is sufficient if the bet (or payment to participate in a lottery) or the prize is “money’s worth”. When assessing whether gambling using in-game virtual items requires a licence, the focus in Great Britain has therefore been on whether these virtual items are “money’s worth”. In a discussion paper[2]published in August 2016 the Gambling Commission said it was paying close attention to the growing popularity of in-game items which could be won or purchased within computer games and then used as a form of virtual currency on gambling websites and set out its view that a gambling operating licence is required to offer facilities for gambling with virtual items which are traded or tradeable and can therefore act as a virtual currency. The topic was also debated at the Gambling Commission’s “Raising Standards” conference in November 2016when the Commission noted that skins seemed to be moving from a niche sub-culture to the mainstream.

In this case Craig Douglas, 34, of Colchester, Essex and Dylan Rigby, 33, of Ilford, Essex ran a social gaming website at FUTGalaxy.com which allowed users to gamble, including by betting on real-life football matches and playing a jackpot lottery style game, using a virtual currency called “FUT coins”. These coins could be earnt by playing the Fifa football video game in Ultimate Team mode, or bought on FUTGalaxy.com or other third party websites for cash. FUTGalaxy.com had no connection with the Fifa game and the buying and selling of Fifa coins is expressly prohibited by the Fifa game rules. However FUT coins could be readily converted back into cash on third party black market websites and they were therefore considered to be “money’s worth” for the purposes of the Gambling Act, with the result that a gambling licence was required for gambling using these coins.

The Commission made clear in its August discussion paper that taking action against anyone offering facilities for gambling to children and young people was a particularly high priority. FUTGalaxy.com did not have an age restriction and in the judge’s view the defendants knew that children used the site, or at least turned a blind eye to this. According to the Guardian[3] the court was shown a video from Douglas’s YouTube channel (which had a following of well over one million) in which he promoted FUTGalaxy by saying “you don’t have to be 18 for this, because this is a virtual currency”. In its press release[4], the Commission said that “given the nature of the products offered by FutGalaxy.com the Commission was particularly concerned about its popularity amongst, and use by, children and young persons” and the judge similarly made it clear that the fact that the children were gambling on FUTGalaxy.com website was an aggravating factor.

The prosecution was being seen as a test case for the treatment of in-game items in this area. While the defendants’ last minute change to guilty pleas means the position with regard the use of virtual items to gamble is still to be tested in the courts, the case does demonstrate the Commission’s willingness to take action against those who use tradeable virtual items as a de facto virtual currency, particularly where children are involved.

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