Martin Owens


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Martin Owens

  1. 1. Virtual Currency What It Is, What It Isn’t, And How to Use It Legally
  2. 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. 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. 4. ▪ And virtual money went electronic as soon as the electric telegraph could send bank wires, in 1871
  5. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 18. And Finally, ▪The best way to avoid trouble is don't go looking for it. ▸Avoid boasting and defiant language
  19. 19. Why Aren't There Better Maps? ▪Because you are the pioneers, and you're still making them
  20. 20. Thank You