According to a report on the British financial website This is Money, the U.K. Gambling Commission is eyeing social gaming sites to determine if they should be treated the same as traditional real money online gambling sites.The Commission is reportedly investigating whether or not many of the free games on social gaming sites actually qualify as gambling. If so, they will have to be regulated like any other form of internet gambling such as online poker or sports betting. John Travers, corporate affairs manager for the Gambling Commission, told This is Money, "The key question is, is it gambling or not? We are monitoring developments and assessing any wider implications for licensing objectives."
So, while it does not appear that any sort of changes in the law or regulations are anywhere close to being made, social gaming is definitely on the Commission’s radar. Though some may question how free-to-play games could be considered gambling, the idea does make some sense.
While none of the games, such as the popular Zynga Poker, require a real money buy-in, most encourage players to spend money on virtual currency, tokens, trinkets, gifts, avatars, or in-game items. Some of these items can help advance a player in a game. For example, purchasing additional chips in Zynga Poker has an obvious benefit and purchasing Casino Gold can allow a player to skip rounds in certain shootout tournaments. Other items do absolutely nothing and are just there for fun.
Tetris Battle on Facebook, for example, urges players to purchase Tetris Cash, which can then be used to buy different designs for game pieces, in-game power-ups, or extended game play. HogWild Poker, which is hosting a special U.S.-friendly PocketFives Open on June 21, allows players to purchase HogBucks, which can be used for the site's Staking Series, among other places.Some sites allow players to convert game currency to real world cash and prizes. Black market virtual currency exchanges have also popped up.
Thus, although social gambling games such as the ones on Facebook are free-to-play, many people end up spending real money on them, whether it is to advance their status in the game or simply have a little more fun. Just like in real money gambling, some people purchase virtual chips with real world currency, lose them at the tables, and reload with more real money. As such, the U.K. Commission is attempting to determine whether or not social gambling should be regulated.
An executive from a United States-based social gaming site told This is Money that one customer spent $13,000 in real money on its “free” games over a three-month period.
The impact of regulation on the gaming market could be serious. Companies often use social gaming as a means to enter markets, such as the United States, where real money gambling is currently frowned upon.
Soda Poker’s business development director Oliver Crane told eGaming Review, “Government regulations have made affiliate marketing tougher and tougher, so developing a B2C (business to consumer) model alongside our B2B (business to business) model seemed to be the best way for us to make the most out of our position while allowing us to offer separate products to separate player profiles.He added, "Standard casino and poker operation is incredibly tough, and as we have the critical mass and traffic for it, we decided to go into social, which allows us to operate in our key markets without worrying about the regulatory issues.”
Ivor Jones, a leisure analyst at broker Numis Securities, explained to This is Money, “If regulators conclude that such games with gambling characteristics should be regulated, it will be difficult for them to continue to be offered in many places, which would financially hurt the games operators and Facebook.”
Facebook is already under pressure from investors, as its stock price has dropped precipitously since its May IPO. After opening at $38 per share on May 18, it now sits at just $27.40, a couple dollars above its all-time low. Similarly, Zynga, which makes most of its sales from Facebook's users, has seen its shares slashed in half since its December IPO of $10 per share.
