Original author: Lawyer Shao Shiwei (senior lawyer at Shanghai Mankiw Law Firm)
introduction
In order to increase users participation in games, many game companies will set up points malls. Users points in the game can be exchanged for physical objects or gift cards, such as shopping cards, mobile phones, etc. Is this legal?
On July 15, 2023, the Guiyang Procuratorate WeChat public account published a case Open a casino online, sue! Sentence! Effective! , in the Crazy Fishing game, the game operator added functions such as exchanging game props for real objects in the game. Ye Moumou and 11 other people were sentenced to five years in prison by the Guiyang County Peoples Court for the crime of opening a casino. It varies from four months.
So, is it necessarily illegal to redeem game points for physical cards? Today we will discuss this issue.
What kind of redemption of points would constitute the crime of opening a casino?
A legal game can only set up the point up function (players recharge legal currency to purchase in-game virtual currency), but cannot set up the down point function (realize in-game virtual currency or virtual props), otherwise there will be gambling risks. , the relevant legal analysis is in my previous article Blockchain games that make money while playing, how to avoid becoming gambling? 》 is also mentioned.
It is common sense that game developers cannot set up platforms with monetization functions to directly monetize virtual currencies/props in games into legal currency. But in addition to improving the experience of the game itself, monetizing game currency is indeed a good way to attract more users to participate in the game and enable game developers to gain more revenue.
Therefore, some game companies have adopted a flexible method, exchanging points for items as a marketing tool to encourage more users to recharge their points and play games. As everyone knows, whether it is providing exchange services to users in cash or in kind, its essence is the same, and it will be regarded as withdrawing money by the judicial authorities, just like the case of the crime of opening a casino in a fishing game judged in the above case.
So, is the point redemption function necessarily prohibited by law?
Can the game set up the function of redeeming points for physical goods?
A mantra that I often say recently - This is a very complicated problem is also applicable to this problem. Let’s look at a legal provision first:
Notice of the Ministry of Culture on regulating online game operations and strengthening interim and ex-post supervision (hereinafter referred to as the Notice) (Wenshifa [2016] No. 32) (9) Online game operating companies shall not provide users with online game virtual currency exchange Services of legal currency or physical objects; (10) Online game operating companies shall not provide users with services of exchanging virtual props for legal currency. If they provide users with virtual props to exchange for small amounts of physical objects, the content and value of the physical objects shall comply with the provisions of relevant national laws and regulations.
Although the Notice has expired, it has not been replaced by new regulations, so it still has a certain degree of reference value. Let’s start with this provision and explain it.
These two provisions prohibit game developers from reverse exchange of virtual currencies/props. Article 9 prohibits the exchange of virtual currency for legal currency or real objects; Article 10 prohibits the exchange of virtual props for legal currency, but the regulations leave a loophole as to whether they can be exchanged for real objects.
So here are 3 questions:
1. Since there is a provision that virtual items can be exchanged for physical items, does that mean that the exchange function has a legal basis? Why are there still legal risks related to criminal punishment on relevant platforms?
2. Only virtual props are allowed to be exchanged for physical objects, and virtual currency is not allowed to be exchanged. So what is the difference between props and virtual currency? How to avoid the legal risk of props being identified as virtual currency and then being classified as a crime of opening a casino?
3. What kind of exchange services does the platform provide in order to be recognized as small-amount physical goods?
Regarding the first question, we cannot deny that not all platforms that set up the function of redeeming points for physical objects will be recognized as opening casinos. In practice, for example, game points from “Tencent Happy Landlord” can be redeemed for third-party products such as JD.com cards and phone cards. Although the Notice is invalid, it does have a certain degree of reference value. So why is it said to a certain extent?
Because this is indeed an expired law, the statement that props can be exchanged for physical objects is, strictly speaking, no longer valid.
Regarding the second question, regarding the difference between props and virtual currency, according to the Guidelines on Key Points for the Supervision and Law Enforcement of Virtual Currency in Online Games released on November 16, 2010 and currently in effect, for items purchased directly by users with legal currency Virtual props (game currency) that have the function of being exchanged for other game props, game currency or value-added services provided by the game operating company can be managed with reference to the management requirements for online game virtual currency.
Therefore, it is not the game companys defense that we provide users with the exchange function are virtual props, not virtual currency!, it can be recognized by the judicial authorities.
Regarding the third question, Article 9 of the Notice stipulates that if the props are exchanged for small amounts in kind, it can be allowed. But the regulation remains vague. The content and value of physical objects should comply with relevant national laws and regulations. What does this mean? Its not clear here. The value is considered small amount and there is no clear limit. Is it considered a small amount if it is less than 100 yuan, or is it a small amount if it is less than 500 yuan? Maybe everyones perception is different. In practice, some platforms use phone credit cards as redemption coupons. Logically speaking, there should be no difference in the publics perception of the value of voice credit cards. However, in practice, there are still cases where people are sentenced to the crime of opening casinos, such as (2021) Hunan 0923 In Xingchu Case No. 189, the court held that the exchange mall set up in the game can directly exchange virtual props into virtual cards for cash, so the platform has a gambling nature and is a gambling website.
Mankiw lawyer advises
The platform implements points exchange services for users. Whether the platform itself has corresponding functions or cooperates with a third-party banker (fund settlement platform), there will be gambling risks. Therefore, platforms are not encouraged to do this. For game developers who still hope to gain user growth through this feature, here are some suggestions:
1. Try to avoid the legal risk of game props being recognized as virtual currency. For example, game props cannot be purchased directly with legal currency, and the props do not have the function of being exchanged for game virtual currency, etc.
2. Do not cooperate with third-party entities such as banks to provide users with final fund realization services. How to understand this sentence? For example: the platform sets up a game virtual prop that can be exchanged for a 200 yuan shopping card service, and the third-party entity cooperated with the platform repurchases the shopping card from the user at a price of 150 yuan. In the end, the platform still realizes the process of indirectly exchanging cash to the user, then The platform must involve gambling.
