Transcript Social Currency and Virtual Currency: What You Need to Know Prepared for The Mobile Payment Conference September 9, 2011 By Sean F.

Social Currency and Virtual Currency:
What You Need to Know
Prepared for The Mobile Payment Conference
September 9, 2011
By Sean F. Kane
Social Media, Entertainment & Technology Team
Pillsbury Winthrop Shaw Pittman LLP
Overview
 Where are we now?
 Are there really legal issues with Virtual & Social
Currency?
 Questions?
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Where are We Now?
 The world has experienced a societal shift of epic proportions!
 The internet, mobile apps, location-based services and social
networks are shifting the balance of power from traditional/big
business to new/small businesses.
 Video games, social networks & apps are leveraging these
phenomena and are increasingly being used for both entertainment
and business applications.
 These trends are driving new business models, including
“freemium,” virtual goods, virtual & social currencies.
 These and other factors result in unique and emerging legal issues.
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Social & Virtual Currency . . . how and why?
How currency is obtained
Purchased with real money
Earned by in-world actions
Sweepstakes/Contests
“Gambling”
Release of user information
Survey participation
Acceptance of exposure to
advertising
Gifted
How virtual currency is
implemented
Real-time payment
Pre-purchase currency/use later
Gift currency to others
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How currency can be used
Only in-game
Cashed out for real money
Used to buy real world goods
Traded for other currency
Parties to Transactions
Solely with virtual world (direct)
With third parties (indirect)
Hybrid
Virtual & Social Currency Models
 Single Currency Model
 Dual Currency Models – use more
than one currency model within a
game, app, etc.
 Some items can be bought with a social or

virtual currency that a user can purchase
others can only be earned
 Protects integrity of games or apps
where skill or other factors are part of
the experience
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Virtual & Social Currency . . . but real laws
Allowing users to buy, use and potentially sell,
virtual or social currency raises a number of legal
issues
 Many currencies will be viewed as “stored
value” or “gift card” accounts by relevant
state and federal regulators
 No requirement that there be an actual
certificate or plastic card under most laws
 If offering falls under these laws, must
comply with disparate state laws (fees,
forfeiture, escheat, etc.)
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Other Virtual & Social Currency Concerns
 Banking / Money Transfer / Anti-Money
Laundering
 Gambling Laws (e.g., if risk something of
value to earn)
 Sweepstakes / Contest Law
 Property Rights (some currency only right
to use not own; lose if account is
terminated)
 Data Privacy and Security (opt-out/opt-in)
 Tax (withholding, reporting, recognition)
 Much more
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Terms of Service Agreements
 TOS critically important for all websites … but there are
some unique issues for Virtual & Social Currency
 One size does not fit all – need careful consideration
and customization
 Virtual & Social Currency
 Ownership v. license
 Right language to facilitate shutting down secondary
markets.
 Example: Bragg v. Linden Lab
 Dispute over right to virtual property upon account
termination
 Court informally acknowledged a right to virtual property
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TOS Balance is Key
Publisher Interest
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Player Interest
Who are your customers?
 Provides real owner with some protection from disclosure
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Although They’re Probably…
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The End
Questions?
Sean F. Kane
Social Media, Entertainment & Technology Team
Pillsbury Winthrop Shaw Pittman
[email protected]
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