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Hot legal challenges affecting the online gaming industry

The iGaming industry is a fast-moving arena with no territorial borders. The rise of online gaming has globalized the gaming industry and created ongoing regulatory and legal challenges, as well as new products and new jurisdictions which have complicated the jurisdiction question. Indeed, thanks to the Internet and the globalization of gaming, four players residing in different countries are able to play together with no restriction on their physical location. However, as attractive as this may be for gaming ventures and to widen potential markets, this globalization may also become a regulatory nightmare.

Stephanie Attias and Tal Itzhak Ron from Tal Ron, Drihem & Co.

If we take the example of four players residing in Singapore, Estonia, Los Angeles, and Sydney, using a gaming server based in Costa Rica, which jurisdiction has control over whom? Which party involved could face a legal problem? And which regulation would be the most adequate?

Some countries allow their citizens to “bet out” of their country of residence. However, Asia and Europe are facing higher regulatory requirements than ever and the current trend is moving towards global regulation where each nation is imposing its specific requirements. Today, operators need to target their players according to the regulation they have obtained in order to remain compliant. This increases customer protection; however it is also a growing financial burden for gaming operators which are faced with higher costs, stricter due diligence requirements, and ongoing changes in their business structure in order to stay compliant and relevant. All in all, the goal is to adapt regulation so it becomes cost-effective for businesses, and protects customers at the same time.

As quoted by Benjamin Cardozo: “Law never is, but is always about to be”. Gaming operators need to be aware that every “grey area” will eventually require regulation, and this also affects the type of games they provide. If Social Gaming was once completely unregulated, this is only the case today for “skill based games” and we are now seeing the appearance of regulatory requirements in any area where real money is involved. Each nuance needs to be analyzed extremely carefully in order to remain compliant.

SiGMA16 Expo & Conferences Day 1

Tal Itzhak Ron speaking at SiGMA16

Indeed, today’s gaming world is starting to face the same challenges as the banking industry. New rules have been made to make it easier to trace the transfer of funds and these rules have an ongoing impact on gaming operators. In the beginning of March 2017, New Zealand has introduced new anti-money laundering legislation, which has now been extended to cover sports and race betting, accountants and real estate agents. Nowadays, gaming companies around the world are required to comply with stricter Anti-Money Laundering (“AML”) compliance standards, which require the implementation of more detailed “Know Your Client” (“KYC”) rules. This also joins in on regulatory requirements as companies need to make sure they cater only to players from countries which are approved by their regulatory regime. Regulation is becoming an absolute must, and in order to stay compliant, gaming suppliers are starting to act as the gaming regulators’ extended arm in order to avoid their potential liability for offenses committed by the gaming operators.

The main problem today, is that even when gaming ventures are fully compliant with industry standards and have successfully obtained all of the required regulations to operate their businesses, gaming and gambling still appear to be “restricted industries” for most banks, along with other industries such as adult entertainment, firearm or ammunition sales or manufacturing. This means that even though one is compliant as a gaming operator, most banks may consider its activity as restricted and it will be in breach of their policies, therefore unable to do business with such banks. This is a true challenge which needs to be addressed.

For all of these reasons, gaming ventures need to make sure their marketing strategies also comply with regulatory requirements. Everything needs to be analyzed carefully on a daily basis in order to make sure they are targeting the correct clients with regards to their regulatory regime, by selecting the appropriate language used in their marketing, as well as restricting certain IP addresses thus preventing
access to players residing in countries which are not approved by the gaming venture’s current regulatory regime.

Today, more than ever, it is a fact that gaming ventures need ongoing legal advice from gaming law experts, as they might not be immune from regulatory compliance in the long run. The higher the profitability and growth of their business, the higher their profile will become, and the more likely they will be subject to regulatory scrutiny.

About the authors:

Advocate and Notary Tal Itzhak Ron (M.Sc.) – a General Member of International Masters of Gaming Law (IMGL), practicing i-Gaming and Financial Entertainment. Tal graduated from Haifa University School of Law (LL.B.) and Faculty of Computer Science (B.Sc.), and while working as a software developer at a publicly-traded software company, Ness Technologies has further obtained a Master’s Degree in Computer Science from Bar Ilan University. Tal established Tal Ron, Drihem & Co., Law Firm back in 2003, focusing from the start on Hi Tech, Ad Tech, M&A, Financial Entertainment and iGaming industries, quickly becoming one of the first international firms practicing solely on these areas. The firm today advises the world leading operators, platforms and governing bodies and is considered the first point of contact for entrepreneurs setting up businesses in the iGaming, Ad Tech and Mobile App industries.

Ms. Stephanie Attias (LL.M, LL.B) graduated from Fordham University School of Law (New York), with an LL.M in “Banking, Corporate and Finance Law”, and from the Faculty of Law in Nice (France) with a Master of Laws in “Business Law and Economics”, followed by a Master of Finance in “Financial Engineering” obtained with Magna Cum Laude Honors. After working at the U.S. Securities and Exchange Commission (SEC) in New York and in the prestigious law firm of Gide Loyrette Nouel, both in London and Paris, Stephanie joined Tal Ron Drihem & Co., Law Firm in 2012 as Head of Financial Law and Regulation, where she has been advising the top tier of Financial Technologies and Gaming Companies together with the firm’s CEO and Chairman, Tal Itzhak Ron. She is a sought-after speaker in events of the online gaming and finance industries, delivering presentations in major conferences in Israel and around the world.

Relive the highlights from our last show and stay tuned for this year’s SiGMA. Watch out for what we’re branding as the ‘iGaming Village’ this year.

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