Are social media casino games regulated?

Try to imagine the last time that 24 hours of your time passed without checking into Facebook, Instagram, Twitter or YouTube. Social media has become part of our everyday life, with a majority of us now having immediate access to the Internet via smartphones and tablets. This fixation with social media has resulted in the addition of many new pastimes as more software developers turn to platforms like Facebook to promote their games.

Studies have shown that as gambling operators market their games on Facebook and YouTube, more players are handing over more money, leaving many anti-gambling lobbyists calling for stricter reforms for online gaming. But what are the current laws regarding social media gambling? Are there any? And what is being done to enforce them?

This article will take you through the current regulations and the possible changes that could emerge in the future.

What are social media casino games and how do they generate revenue?

Some of you may be scratching your head, thinking there are no casino games on social media. Guess again my friends; any time you’ve logged into Facebook and sat down for a good Farmville session, or downloaded the Candy Crush app and paid for extra credits, you have effectively participated in a real money casino game.

These social media games are cleverly disguised as kid-friendly romps, using colourful, cartoony graphics that allow us to get fixated in the fun, entertainment factor and turn a blind eye that we’re effectively participating in a form of gambling. In 2015 alone, social media casino games are expected to bring in close to US$4.4 million in revenue globally.

Social media casino games replace the real money betting we’d see in an online casino (like placing a wager on a slot spin or a hand at blackjack) with the option of purchasing credits, which gives you access to more game time or further rewards. These games start as free-to-play, but are so addictive that it’s easy to find yourself handing over money to unlock special features before you know it.

In-game credit purchases are known as micro-transactions (the “in-app purchases” on Apple or “in-app billing” on Google) and in 2013, micro-transactions within free-to-play games accounted for 92% of all revenue generated for iOS and Android, giving you an idea just how prolific these games are.

Micro-transactions for social media and mobile games provide two main functions. For one, they allow the game operator to dodge any legal loopholes as social media games aren’t classified as casino games by law, so don’t fall under the scrutiny of online gambling laws. Two, operators are able to generate profit from players who are blind to the fact that they’re technically gambling their money.

Games are inherently designed with time and feature limitations so that players want to spend more money in order to unlock awards and win more, while only ever winning more in-game credits rather than benefiting from actual cash wins.

International laws and regulations for social media casino games

Laws regarding online gambling differ from country to country, but the interesting thing about social media games is that they’re not technically considered casino games, and are therefore not regulated in any way. To the naked eye, Facebook, mobile and other social media games simply provide innocent entertainment, a way to pass the time on your phone or tablet in this highly technological age. However, as more information emerges about the link between social gaming and real life gambling, many activists are fighting to enforce regulations on these recreational mobile games.

Naturally, social gaming developers would like to keep their industry as regulation-free as possible, so many of the leading companies collaborated to form the The International Social Games Association (ISGA) in a bid to pre-empt any possible future regulations. The ISGA developed its own list of core principals in order to show policymakers that they are following guidelines when it comes to their games. The ISGA principals agree to:

• Adhere to necessary laws and regulations
• Are transparent in their functionality
• Treat purchases and payments responsibly
• Manage player privacy appropriately
• Use appropriate advertising models

Whether or not these principals will be enough to keep social casino companies free from legislation is unknown, but for the time being social media games remain globally unregulated.

Australian laws surrounding social media casino games

Currently, all forms of online gambling in Australia are regulated by the Interactive Gaming Act (IGA) 2001, a legislation that was created before the birth of Facebook, therefore carrying no mention of social media gaming. The IGA restricts Australian operators from advertising their services to Australian residents, effectively making it illegal for Aussies to gamble at Aussie run casino sites (excluding sports betting, which is completely legal), but leaving us free to bet at offshore casinos without issue. Free-to-play social media games aren’t technically classified as casino games so there’s nothing in the IGA to exclude Australians from accessing them or spending money.

Due to the huge rise of mobile games and smartphone use, Australian gambling experts are now urging state and federal governments to reconsider the IGA to update laws to include social media gaming. A recent government funded study conducted by Gambling Research Australia showed that 28% of people aged 12 to 17 who played casino style games on social media moved on to spend more time and money on real gambling. A third of these youngsters along with 15% of adult players also believed that playing these mobile games would increase their skills and chances of winning when playing real money casino games.

The study was led by Dr Sally Gainsbury, a gambling expert at Southern Cross University, who says that social media casino games regulation would be unlikely, with the loophole of Aussies being legally allowed to gamble at offshore sites making it difficult to enforce regulations.

Dr Gainsbury’s stance is that rather than regulate, we need to educate players to understand that just because they do well at social media games doesn’t mean they’ll succeed when gambling, doing more to curb potential problem gamblers. Other anti-gambling lobbyists have suggested enforcing tougher regulations against offshore sites, using a similar approach applied by pornographic regulations, including blocking access and fining Internet service providers.

As it stands, unless the IGA 2001 receives an overhaul there are virtually zero regulations for Australians spending money on social media casino games. Even if the IGA does undergo a complete reform, it will still be near impossible to regulate social casino games as the operators are based offshore and out of Australian jurisdiction.

The top 10 most profitable social media games

The most profitable social media games aren’t always the most popular ones, with leading Facebook game brand Zynga (responsible for the huge titles like Candy Crush, Farmville, Words with Friends, Draw Something and Mafia Wars) actually struggling financially. A report done by App Annie Index showed these as the most profitable social media mobile games in 2013:

• Clash of Clans
• The Simpsons: Tapped Out
• Puzzle & Dragons
• Hay Day
• Candy Crush Saga
• Kingdoms of Camelot: Battle for the North
• CSR Racing
• Minecraft – Pocket Edition
• DragonVale
• Diffusion Million Arthur

So if you’ve ever played one of these games and bought in-app credits for real money, you are in the huge percentage of mobile gamers who have participated in social media casino gaming. Only time will tell if games like these undergo regulating in the future.