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EU CPC network moves the dial on in-game currencies

Gözde Cengiz and Tobias Schelinski look at the practical impact of the European Consumer Protection Cooperation Network principles on in-game currencies.

In March 2025, the European Consumer Protection Cooperation Network (CPC) issued its Key Principles on In-game Virtual Currencies. These principles were prompted by coordinated enforcement procedures - most notably against Star Stable, a multiplayer online game - where national authorities raised concerns about lack of price transparency and the design of in-game purchases. 

While the guidelines are not directly enforceable, because the CPC Network lacks the necessary executive power, they are grounded in and specify existing European Union consumer protection legislation, including the Unfair Commercial Practices Directive (2005/29/EC) (UCPD), the Consumer Rights Directive (2011/83/EU) (CRD), and the Unfair Contract Terms Directive (93/13/EEC) (UCTD). 

Price transparency

The CPC stresses the importance of price transparency. According to the CPC’s interpretation of Articles 6 and 7 of the UCPD and Article 6(1)(e) CRD, consumers must be informed of the real-world value of virtual content in a clear and unambiguous manner. Practices that disguise the cost, such as staggered in-game currencies or inconvenient currency bundles that do not match product prices, may be deemed misleading. The CPC is of the opinion that the Star Stable case revealed that many young users were unable to assess how much real money they were spending due to these opaque structures.

Withdrawal right 

The CPC interprets the consumer’s right of withdrawal in a manner that does not correspond with industry standards. The industry standard is that users have a right of withdrawal regarding the purchase of in-game currency. According to the CPC, however, users have an additional right of withdrawal regarding the purchase of digital content with the purchased in-game currency. This raises significant operational and refund policy considerations and accounting issues for game providers and platforms.

Contractual fairness

The CPC says terms of service must be drafted in line with Article 3 of the UCTD. Clauses granting unilateral rights to modify or remove purchased content or restrict user access without a right to challenge may not be enforceable. Game developers must ensure that such clauses do not create an imbalance of power or circumvent statutory rights.

Protection of consumer vulnerabilities

The CPC is concerned about online games targeting vulnerable demographics, particularly children, through persuasive design and in-game monetisation. Articles 5-8 of the UCPD and Annex I Point 28, prohibit direct exhortations to children to purchase. Even when games are not explicitly targeted at minors, traders are responsible for designing systems that do not exploit child psychology or impulse spending tendencies.

What does this mean?

Though non-binding, the CPC’s principles are likely to influence enforcement under the CPC Regulation (EU) 2017/2394. Diverging national implementation remains a risk. Game developers, providers and platforms should monitor further proceedings and ensure compliance programmes are harmonised across jurisdictions. The CPC’s reaction to cases like Star Stable signals a more assertive enforcement approach in the digital consumer protection landscape. In part, the CPC is contradicting established industry standards. We expect the CPC will take action against other online game providers sooner or later. The CPC's actions must be closely monitored. EU-based developers and publishers need to reconcile monetisation models with regulatory expectations, balancing legal risk and commercial design with clear, consumer-friendly practices. With regard to the CPC principles, we recommend EU games businesses proactively implement the more straightforward recommendations in the guidelines.

Is industry self-regulation of loot boxes working in the UK?

Debbie Heywood looks at conflicting views.

In July 2023, UK Interactive Entertainment (Ukie), the leading UK trade body for the games industry, published voluntary principles and guidelines on loot boxes after the government urged the industry to do more to prevent harm, particularly to minors. The government considered that the guidelines, if properly implemented and enforced, would meet its objectives of restricting the purchase of loot boxes by children without parental consent, and providing all players with access to and awareness of spending controls and transparent information about loot boxes.

Just before the general election, the Conservative government said it was working to monitor implementation and effectiveness of the new guidance and would provide an update once it had been in operation for a year, however, there was a change of government shortly after that. So far, there has been little indication as to the government's plans on gambling reform and whether or not that might include loot boxes. DCMS has commissioned an independent study by Public Group International Ltd which has not yet been published and, no doubt, more will become clear after that.

In a report published in Royal Society Open Science on 28 May 2025, Leon Y Xiao and Mie Lange Lund claimed that a study of the top 100 highest grossing iPhone games on Apple's app store showed that the self-regulatory approach is not working. It concluded the Ukie guidelines are not being widely complied with, nor are they being enforced. The report concluded that among games with loot boxes, none sought explicit parental consent for purchases made by under-18s. Only 23.5% disclosed the presence of loot boxes, and among those that did, many obscured the notice, and only 8.6% routinely disclosed the probabilities of obtaining different rewards for all the loot boxes found. The report went on to suggest that Apple had failed to delist games which did not remediate issues, even after having been put on notice, and accused regulators including the ASA and CMA of failing to take enforcement action.

The report was critical of Ukie which hit back, reportedly refuting the assertions made in the study and raising 'significant' concerns about its methodology which have, in turn been rejected by the report's authors. Ukie also underlined that it is not a regulator and does not, therefore, have enforcement powers.

Loot boxes continue to cause controversy both in the UK and in the EU (as we've discussed here) with differing approaches across borders not helping. 5Rights is among the advocacy groups pushing for a tighter regulatory regime.

The ASA has, in fact, upheld complaints against games publishers which have failed to be sufficiently transparent about loot boxes and other in-game purchases, notably in March 2024 when it upheld three complaints made by Mr Xiao himself. Ofcom may also step into the arena in its role as online safety regulator where games are required to implement age assurance (not connected with whether or not the games contain loot boxes). However, not all games containing loot boxes are within scope of the Online Safety Act. It's also worth noting that the CMA's new direct consumer protection enforcement powers under the Digital Markets Competition and Consumers Act may lead to enforcement where consumer protection law is not observed when offering loot boxes.

Whether or not the combined action of these regulators, together with the games industry's own efforts to comply with Ukie guidelines, will be sufficient to deter the government from regulating loot boxes more closely remains to be seen, but, in the meantime, adhering to the Ukie principles is the best way to ensure your loot boxes do not attract regulatory scrutiny in the UK.

Turning point for Germany’s games sector? Newly elected government sets new course

Matthias Brenner looks at the new German government's plans to stimulate the German games sector.

The games market in Germany is one of the largest in the EU with a turnover of close to EUR 10bn in 2024, but the best-selling games in Germany rarely come from German developers and studios. There is not a single game from a developer studio founded and based in Germany in the top ten annual best-sellers chart produced by Game in 2024. This is partly due to the uncertain financial framework and funding conditions in Germany, but things could be about to change under the new government led by Friedrich Merz. 

In the new coalition agreement (Koalitionsvertrag), the CDU/CSU and SPD recognise the German games industry as having 'cultural, economic and technological potential'. The new government has announced that it will strengthen the international competitiveness of Germany as a 'games location' through greater predictability and an adapted funding system. It states: "Games are cultural assets and drivers of innovation, which is why we want to promote Germany as a games location through tax incentives and reliable programs".

The main points of the “Koalitionsvertrag” regarding the games sector are:

• Tax incentives: the announced tax incentives are intended to compensate for disadvantages compared to developers abroad. 
• Reliable funding programs: the existing, fragmented funding system should be consolidated and linked to stricter and clearer performance indicators. 
• E-sports: as previously announced and hotly debated, the non-profit status of e-sports clubs as (charitable organisations) is to be expressly recognised. This should lead to tax benefits, the ability to issue donation receipts and attract sponsors, as well as further support for volunteers.

The new minister

Another longstanding uncertainty has now been resolved: the Ministry of Research, Technology and Space will be responsible for games policies, funding programs, location marketing and the German Computer Games Prize. Dorothee Bär (CSU) is the newly appointed minister. This appointment was well received by the games industry, as Ms Bär has already shown great commitment to the German games industry in the past. She was in office as Minister of State for Digital Affairs under Angela Merkel's government, during which time she campaigned for the non-profit status of e-sports clubs and games funding at the federal level. 

Doubts and uncertainty

There are, however, also critical voices regarding the goals for the games sector set out in the coalition agreement. In particular, the "funding proviso" set out in the coalition agreement is causing some doubt: all measures (not limited to the games sector) in the coalition agreement are subject to the funding proviso, which means that their implementation depends on the 2025/2026 state-wide budget. Furthermore, the new budget for the specific ministry remains uncertain. Therefore, whether and how the programmes promised in the coalition agreement will actually be implemented is unclear. The concrete amounts of funding and timetables have yet to be released.

What does this mean?

The clear recognition of the importance of the games industry in Germany together with funding announcements in the coalition agreement are a positive sign for the industry under the new government. However, it remains to be seen whether these announcements will result in actual funding programmes and tax relief in the near future, and whether the government will be able to strengthen confidence in Germany as a prime location for the gaming industry.

An iPhone, a gambling problem, and the loot box debate

Marie Keup looks at the Antwerp Enterprise Court's LS v Apple ruling.

In 2018, Belgium classified paid loot boxes in video games as illegal gambling under its Gambling Act (Act of 7 May 1999 on games of chance, betting, gambling establishments and player protection), prompting several developers to modify their games and gaming platforms their terms of use. 

The issue resurfaced in January 2025, when the Antwerp Enterprise Court ruled on LS v Apple (Antwerp Enterprise Court (18th Chamber), 16 January 2025, LS v Apple [A/23/00441]), a landmark case involving loot boxes in Top War: Battle Game, downloaded by a claimant who spent over €67,000 on the game. 

Rather than suing the game’s publisher, the claimant targeted the platform provider, Apple Distribution Limited (Apple), alleging that it facilitated access to illegal gambling by hosting the game.

The Court found that the loot boxes met the legal definition of a 'game of chance' and were therefore unlawful under Belgian law. It held Apple liable for breaching the Gambling Act by making the game available but did not clearly establish whether Apple had - or should have had - knowledge of the loot boxes’ illegality. 

The case has been referred to the CJEU to determine whether a platform’s general awareness of unlawful loot boxes in a region is enough to impose liability (C-47/25). 

The LS v Apple ruling is significant for several reasons. Not only is it the first Belgian court decision on the classification of loot boxes but it also raises fundamental questions about the liability of platform providers like Apple in relation to the games they host, especially when those games contain unlawful elements. The outcome of this case, particularly the CJEU's interpretation, could have far-reaching implications for the gaming industry and the responsibilities of platform operators across the EU.

For more detail on this ruling, read our longer article.

Using biometrics on online gambling platforms in the EU

ECIJA's Javier De Zea looks at the key GDPR considerations when using biometrics on online gambling platforms.

Biometric technologies - such as facial recognition, fingerprints, or voice scans - are increasingly being adopted by online gambling platforms across the EU. These tools help strengthen identity and KYC checks, prevent fraud, ensure single-account use, and support responsible gambling. The use of biometrics for age verification has become particularly important when protecting minors, not only to comply with gambling law, but also in the context of the Digital Services Act in the EU (and the Online Safety Act in the UK). However, using biometrics raises complex legal and regulatory challenges under EU data protection law.

Under the GDPR, biometric data used to uniquely identify a person is classified as special category data (Article 9.1), meaning its processing is generally prohibited unless an exception applies. For gambling operators, the most relevant legal basis is explicit consent (Article 9.2(a)). Other exceptions such as those related to employment, vital interests, or public health, are not applicable in this context.

To be valid under GDPR, consent must be freely given, specific, informed, unambiguous, and capable of being withdrawn as easily as it was given. In practice, this requires more than a simple “I agree” checkbox. The context matters: if biometric authentication is the only access option, and no meaningful alternative is offered, that consent may be considered invalid. Users should not be penalised for refusing. For this reason, platforms should provide non-biometric alternatives - such as document-based verification or multi-factor authentication - to ensure consent is truly voluntary and withstands regulatory scrutiny.

Even when valid consent is obtained, biometric processing must still respect the GDPR’s core principle, starting with purpose limitation. Biometric data may only be used for the specific purpose for which it was collected, typically authentication or fraud prevention, and it cannot be repurposed for unrelated goals like profiling or marketing. In parallel, the principle of data minimisation requires that only the minimum amount of data strictly necessary for the processing purpose is processed. If simpler alternatives already achieve the objective, the use of biometrics may be excessive and unjustified.

This gives rise to a regulatory tension: while the principle of consent emphasises user autonomy and choice, the principle of minimisation discourages offering options that involve unnecessary or overly sensitive data. In other words, giving users the freedom to choose a biometric option is not enough if that option itself is not justified by necessity. A practical way forward is to offer biometric authentication as an optional enhancement. If users can choose between biometric and traditional methods, and opt in for convenience or added security, the processing is more likely to meet both consent and minimisation standards. 

Given the high risks associated with biometric data, a Data Protection Impact Assessment (DPIA) is mandatory. This should assess not only technical safeguards such as encryption and on-device processing, but also necessity, proportionality, and potential risks to users. Then, if third-country vendors are involved, Schrems II compliance, including Transfer Impact Assessments and SCCs, is also required.

One persistent challenge is the fragmented interpretation across Member States. National Supervisory Authorities may vary in their assessment of what constitutes valid consent or proportionality, creating uncertainty for cross-border operators. Until a harmonised legal approach emerges, platforms should prioritise transparency, careful documentation, and meaningful alternatives to maintain compliance and build user trust.

Restrictions on gambling and betting content on social media platforms

ECIJA's Ricardo Cardoso looks at recent actions by social media platforms to comply with laws on distribution and promotion of online gambling.

Social media platforms have become vital channels for gambling operators seeking to engage digital audiences. Stricter laws are, however, changing how content pertaining to gambling and betting is distributed. Recent actions by platforms like YouTube, Facebook, Instagram, and X reflect efforts to balance commercial interests with responsible advertising, amid growing concerns about gambling addiction and underage exposure.

YouTube's Community Guidelines have recently been updated to prohibit content that encourages online gambling. Creators can no longer include URLs, logos, or verbal mentions of gambling websites unless the domain is certified by Google Ads or reviewed by YouTube. 

While in-person gambling and online sports betting content are exempt, videos featuring online casino websites or apps may now be age-restricted, meaning such content will not be viewable to users under 18, those not logged in, or users located in regions with stricter regulations.

These changes reflect YouTube's broader effort to comply with regulatory demands and reduce exposure to harmful content, particularly among younger audiences.

Similarly, Meta enforces a stringent Gambling and Gaming Policy across its platforms such as Facebook and Instagram. Advertisers must obtain written permission prior to launching campaigns as well as demonstrate compliance with local laws. The approval process requires the submission of detailed documentation, including licences and information about gambling products or services. Ads are restricted to users over 18 and are only permitted in jurisdictions where gambling is legal. 

Since its 2022 ownership change, X has adopted a more permissive stance on gambling ads in an effort to attract advertisers. Nevertheless, it continues to enforce local legal restrictions. In certain countries, only licensed operators may promote certain types of gambling. 

TikTok, popular among younger users, enforces strict bans on gambling ads in most markets. The platform uses strong moderation to detect and remove unauthorised gambling content, often suspending accounts that use indirect promotion. Educational content, like poker strategy guides, is allowed if it complies with local laws and includes responsible gambling messages.

The evolving global regulatory landscape, which aims to better protect consumers and protect minors and the vulnerable, has prompted social media platforms to enforce age gates and restrict gambling advertisements. 

Operators face challenges in crafting compliant campaigns while maintaining engagement. As platforms tighten restrictions, gambling brands must prioritise creative, compliant strategies to reach audiences effectively. Gambling operators must continually adapt, balancing compliance with effective outreach. As regulations evolve, their success will depend on the ability to navigate diverse platform policies and deliver content that meets both legal and ethical standards.

M&A gaming trends: strategic shifts and market developments 

Richard Faichney and Rochelle Ampomah-Ababio look at what to expect in gaming M&A in the context of recent activity. 

The gaming industry underwent significant M&A activity in 2024, shifting from speculative, financially driven deals to strategic investments focused on long-term growth. According to Drake Star, the total disclosed value of gaming-related M&A transactions reached USD$27.3 billion across more than 960 deals, marking a 39% increase compared to 2023. This increase has been driven by market consolidation, corporate investments, and a rebalancing of funding sources for gaming studios. 

The shift in M&A activity 

As financial investors became more reluctant to back gaming studios, many developers pivoted towards publishing partnerships and strategic investors. Corporate-led transactions have now overtaken private funding, with over 40% of high-value gaming deals backed by corporations, according to InvestGame. Companies such as Epic Games have attracted major investments, including USD$1.5 billion from Disney, while Sony and Kirkbi contributed to a USD$2 billion funding round. Similarly, FromSoftware (the creator of Elden Ring and Dark Souls) secured backing from Sony and Tencent, reflecting a growing trend where major gaming studios align with corporate investors for long-term growth. 

At the same time, traditional venture capital firms (VCs) have become more selective about funding gaming content. Many VCs now prefer to invest in tools and infrastructure that support the gaming industry rather than in game development itself, which is seen as too risky. Instead, corporate investors, who have a deeper understanding of game IP and audience engagement, are filling the gap by co-investing with VCs or directly funding studios. This hybrid funding model allows VCs to reduce their risk exposure while still benefiting from high-growth gaming investments, while CVCs (corporate venture capital arms) gain financial discipline and scalability insights from traditional VCs. 

Economic and regulatory pressures 

While M&A deal volume increased in 2024, rising interest rates and regulatory scrutiny significantly influenced transaction structures. Many publicly traded gaming firms struggled to grow organically, and declining share prices made it difficult to use shares as a form of acquisition currency. As a result, cash-based transactions became the preferred method of funding deals. 

Regulatory bodies also played a major role in shaping gaming M&A. The Microsoft-Activision Blizzard deal set a precedent when the UK’s Competition and Markets Authority initially blocked the deal over concerns about cloud gaming, later approving it after Microsoft agreed to grant Ubisoft exclusive streaming rights for Activision’s games for 15 years. This case is expected to serve as a benchmark for future gaming acquisitions, with regulators taking a more active role in reviewing deals involving market dominance, platform control, and cloud gaming. 

Market contraction and M&A implications 

The gaming industry has struggled to sustain the pandemic-era growth boom. According to Epyllion, video game spending fell by 3.5% in 2022 and remained flat through 2023 and 2024, failing to meet prior forecasts. This stagnation has been accompanied by declining player engagement, underwhelming game launches, and widespread studio layoffs - with more than 15,000 redundancies in 2024 alone. 

To navigate these challenges, gaming companies have restructured their strategies. Some, such as Take-Two and MTG, have successfully balanced acquisitions and divestitures, selling non-core assets while acquiring studios that strengthen their core business. Others, like Embracer Group, have shifted towards cost-cutting and internal restructuring, prioritising financial stability over expansion. 

Shifts in platform investment: mobile’s decline, PC & console growth 

The mobile gaming industry has seen a sharp decline, with its share of gaming investments dropping from 42% in 2021 to just 20% in 2024, according to InvestGame. Challenges such as Apple’s IDFA privacy changes, rising marketing costs, and declining user acquisition efficiency have made mobile gaming a less attractive investment sector. 

In contrast, PC and console gaming have gained momentum, with Steam breaking all-time high user engagement records. Gaming investments in PC, console, and multiplatform projects have doubled, rising from 26% to 56% over the past three years, according to InvestGame. The loyal player bases and strong brand recognition of PC and console titles can make them more attractive than mobile games, which tend to rely on short-term monetisation models. 

Global power shift in gaming investments 

China’s dominance in gaming investments is starting to slow, even as Tencent remains the world’s largest gaming investor, deploying USD$1.8 billion across 100 deals in 2024, according to InvestGame. Meanwhile, NetEase is reportedly scaling back its international investments, even considering selling several of its overseas assets. 

At the same time, South Korea and Japan are emerging as stronger players in global gaming investments. Krafton (the creators of PUBG) has invested over USD$300 million across 30 deals, focusing on early-stage gaming companies, with 70% of those deals occurring between 2023 and 2024. Kakao Games has also expanded its investment footprint, participating in at least three deals annually since 2022. This shift highlights the growing influence of non-Chinese Asian gaming companies in shaping the industry’s future. 

What’s next? 

Looking ahead, gaming M&A is expected to remain strong but selective, with investors prioritising strategic acquisitions over speculative growth. Key trends to watch include: 

• Corporate-led acquisitions continuing to dominate: according to Drake Star, major gaming firms still have USD$10.5 billion in cash reserves, which will support continued deal-making. 
• Demand for high-profile studios increasing: developers with strong intellectual property and stable revenue models will continue to attract premium valuations. 
• Rise of hybrid CVCs investment models: many corporations are choosing to co-invest with venture capital firms to share financial risks while gaining access to new talent and technologies. 
• Further integration of gaming and social media: deals such as Voodoo’s acquisition of BeReal and Telegram’s expansion into gaming mini-apps suggest gaming will continue merging with broader digital ecosystems. 
• Investment growth in AI and cloud gaming: as the cloud gaming sector continues to evolve, strategic acquisitions in AI-powered game development and streaming platforms are expected to increase 

The gaming investment landscape is undergoing a transformation, with corporate investors taking the lead in funding and shaping the industry. With over 40% of nine-figure gaming transactions now backed by corporations, according to InvestGame, there is a clear shift from traditional venture capital investment towards long-term strategic alliances. 

At the same time, hybrid investment models are becoming more common. Corporations are balancing financial risks by partnering with VCs to fund platform and technology startups, while also making direct investments in gaming studios with proven financial stability. As the industry consolidates further and capital becomes more selective, gaming investments will increasingly be driven by strategic positioning rather than speculative growth. 

We expect to see further M&A activity this year, but the biggest deals won’t just be about funding games, they’ll be about securing key footholds in an increasingly competitive gaming landscape. 

Payments and games in light of incoming EU legislation

Martin Dowdall considers the impact of reforms to the EU payment services framework and new legislation regulating cryptoasset services, on payments for games.

Reform to the EU's payment services regulatory framework and new legislation regulating cryptoasset services may pose new challenges to the industry.

The tutorial level

In the 1980s, when it came to video games, payments meant shovelling coins into Space Invaders and Ms. Pac-Man cabinets until your pockets were empty. A lot has changed. Many video games are now host to thriving payment and digital commerce ecosystems. Perhaps unsurprisingly for an industry that is always on the bleeding edge of technology, the use of blockchain technology is also now widespread in video games. 

State of play

In 2025, many of the most popular games allow players to spend their money on additional content including cosmetics (such as character skins) and other virtual items. It is even possible, much to the chagrin of the purists, to buy a bit of extra help for the trickier levels in the form of upgrades and even extra lives. These transactions often involve a preliminary step of purchasing an in-game currency with real money.

In-game currencies are big business. One example is Linden Lab's title, Second Life which allows players to create and sell in-game content. Between 2003 and 2024, Second Life creators had earned over USD$1 billion in sales. 

Other games, such as CryptoKitties, use blockchain technology to allow users to trade in-game items for cryptocurrency and in some cases to earn cryptocurrency by playing the game. 

Cheesing regulation

When it comes to in-game currencies, many game companies have availed themselves of the Limited Network Exclusion (LNE) from the EU's PSD2 which is the main piece of legislation regulating the provision of payment services in the EU. 

The LNE applies to payment instruments that can be used only within a specific network of service providers or for a very limited range of goods or services. Examples include store cards, fuel cards, and public transport cards.

Blockchain-based services and cryptocurrencies often fell outside of regulation entirely until relatively recently.

PSD3 and MiCA – the final boss?

In 2022, the EU proposed reform of PSD2 and its replacement with a third payment services directive (PSD3) and a new payment services regulation (EU PSR), potentially impacting in-game currencies.

One of the proposed changes is a narrowing of the LNE. In its opinion on the review of PSD2, the European Banking Authority stated as follows: "In addition, the Guidelines on the LNE under PSD2 introduced provisions in Guideline 3 that payment instruments allowing the holder to acquire goods or services only in the premises of the issuer can only be used in physical premises and cannot be used in online stores. The EBA is of the view that it would be beneficial for the EC to clarify the interpretation of the term ‘premises’ in the Directive". If such a change were to make it into the final draft of PSD3/EU PSR, many video game companies might have to make changes to their in-game currencies and in-game marketplaces.

The EU Markets in Crypto-Assets Regulation (MiCA) has applied in full since 30 December 2024. MiCA brought the issuance of a wide range of cryptoassets and related services in the EU within the scope of regulation for the first time. Video game companies will therefore have less flexibility in relation to the use of in-game cryptoassets and may need to restructure their services if they wish to stay outside the regulatory perimeter. 

Video game companies will therefore have less flexibility in relation to the use of in-game cryptoassets and may need to restructure their services if they wish to stay outside the regulatory perimeter. 

Dispute resolution in esports: Riot Games introduces independent arbitration court

Marc Schuler and Hugo Khalfallaoui look at Riot Games' solution to handling disputes in esports.

Riot Games launched a dedicated arbitration court initiative in late 2024. It aims to provide a structured dispute resolution system for players, coaches, and teams engaged in League of Legends and VALORANT T1 and T2 competitions across EMEA. By creating this independent tribunal, Riot Games is not only addressing long-standing concerns about contract enforcement in esports but also setting a precedent for other game publishers.

As esports continues to grow, so do the complexities surrounding player contracts, transfer agreements, prize money disputes, and employment-related conflicts. Unlike traditional sports, esports lack a centralised framework to settle disputes efficiently. Disagreements in esports are mostly being handled through internal rulings by publishers, tournament organisers, private negotiations, or, in some cases, costly and time-consuming litigation in national courts. 

The introduction of Riot Games' arbitration court provides an alternative – a neutral forum to resolve disputes fairly and quickly, handled by arbitrators that understand the industry-specific challenges.

The arbitration will address issues like unpaid salaries, bonuses, prize money, and transfer disputes and follows a few key principles:

• Independence: the arbitration court operates separately from Riot Games, with arbitrators appointed from a pool of legal professionals specialising in dispute resolution. Arbitrators cannot hear a case where Riot Games is directly involved.
• Efficiency: cases will be heard by a single arbitrator and may be decided on the basis of written submissions - restricted to one per party, thereby limiting the need for oral hearings. In order to accelerate the process, decisions will not contain reasonings. The decision will be final and binding, with no possibility of appeal. This will ensure that disputes are resolved more quickly than in national courts.
• Fairness: the arbitrators decide the dispute by applying principles of equity, fairness and industry best practices rather than national or international laws, allowing for resolutions that consider the specific nature of esports.
• Affordability: the arbitration court is designed to be self-sustaining. Administrative fees and arbitrator expenses are scaled according to the complexity of the case, keeping the process financially viable. Riot Games has also introduced a legal aid fund, making it easier for players and smaller teams to afford arbitration costs. 

For professional players, teams and coaches, the introduction of an independent arbitration court has several advantages:

• Stronger contractual protections: players and coaches can now challenge breaches of contract in a structured legal environment rather than relying solely on informal negotiations.
• Quicker dispute resolution: instead of facing long delays in national courts, parties can expect faster outcomes, reducing uncertainty in their careers.
• Professionalisation of the esports industry: standardising dispute resolution brings esports closer to traditional sports, strengthening the industry’s credibility with sponsors, investors, and regulators.

Riot Games’s initiative is a positive step. The success of this arbitration court could encourage other game publishers to establish similar systems or possibly lead to a more comprehensive, industry-wide arbitration framework. However, the enforceability of arbitration decisions across different jurisdictions remains an open issue. While arbitration is generally recognised under international law and Riot Games will enforce arbitral awards and take disciplinary action for non-compliance – as per the Esports Global Code of Conduct, national courts may still play a role in enforcing or challenging certain rulings. 

A positive step

The launch of Riot Games’ independent arbitration court is a significant milestone in the evolution of esports governance. By offering a transparent, accessible, and efficient way to resolve disputes, Riot is not only protecting the rights of players and teams but also enhancing the professionalism of the entire industry. Whether this model will inspire broader adoption remains to be seen, but it is a step toward a more mature and legally robust esports ecosystem.

GDPR and anti-cheating measures in (online) games: limiting disclosure of anti-cheating metrics

Sharif Ibrahim looks at what to do when a suspected cheater makes a DSAR to circumvent anti-cheating measures.

Cheating in games is a notorious problem in modern-day online gaming. Some players exploit glitches in games, using third-party software and employing other trickery to illegally gain an edge over opponents. Combatting cheating is extremely important for the industry, not only to combat cheating as an illegal practice in itself, but also for commercial reasons – a game which cannot prevent or remediate large-scale cheating is likely to become unpopular.

Game developers/publishers use various tools to detect cheaters. These are becoming increasingly advanced, offering developers/publishers a broader arsenal. A higher level of sophistication of anti-cheating measures improves chances of success, but cheaters keep coming up with new ways and tools, among which are some unexpected and unconventional methods. One relatively unusual weapon is the GDPR. This is not a new variant of DOOM’s BFG9000, but it is, in fact, the General Data Protection Regulation. 

Cheaters may attempt to invoke Article 15 of the GDPR under the guise of obtaining their personal data. In principle, every data subject may submit a data subject access request (DSAR) under Article 15 GDPR. The data controller (ie the developer or publisher operating the (online) game) is obliged to respond to a DSAR and indicate whether it processes a data subject’s personal data and if so, provide access to (a copy of) the personal data, including information detailing (among other things), the purposes of processing, categories of personal data and recipients of information. 

Personal data is defined as “[…] any information relating to an identified or identifiable natural person (data subject); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person […]” Because this definition of personal data is quite broad, it may comprise certain data that is crucial for combatting cheating. This can also include certain information which, should it fall into the wrong hands, may enable cheaters to circumvent anti-cheating measures or reveal the technical working of the anti-cheating measures (and consequently enable the cheater to avoid getting caught in future cheating attempts. A typical example is where a player is confronted with (temporary) gameplay restrictions and then, in a quest to discover why, submits a DSAR.

Luckily, it is possible to limit the amount of personal data to be disclosed to a data subject (ie a player/cheater). Article 15(4) GDPR and recital 63 GDPR state that a DSAR “[…] shall not adversely affect the rights and freedoms of others.[…]”. This specific example is even recognised in the EDPB guidelines on data subject access rights, pp. 54-55.

When dealing with a DSAR and evaluating where information should be withheld from a player to safeguard anti-cheating measures, make sure to: 

• respond to the DSAR within the deadline of one month after receipt of the request (or within three months if an extension is required for complex and large requests, but make sure to communicate this to the player within the initial deadline of one month)
• clearly indicate the reason for withholding the information
• cite the legal grounds for withholding that information (ie Article 15(4) GDPR) in your response to the player
• you may be able to provide only basic information under certain circumstances.

If you have question on how to handle a DSAR in general, or if you are confronted with a DSAR from a (suspected) cheater, don’t hesitate to contact us, we’re happy to help and have a wealth of experience in handling DSARs and any applicable exceptions.

High Court ruling on valid consent to send gambling marketing materials

Debbie Heywood looks at a High Court ruling which suggests that getting valid consent to marketing to gamblers can be problematic.

On 23 January 2025, the High Court handed down a ruling looking at the consent requirement under the GDPR and PECR in relation to a vulnerable recovering gambling addict. RTM, a self-described recovering gambling addict, had agreed to terms and conditions pre-GDPR and then consented to revised terms and conditions introduced in 2018 when the GDPR came into effect. This included consenting to the processing of personal data about RTM's activities on the sites owned by Bonne Terre Ltd and Hestview Ltd, operating as Sky Betting and Gaming (SBG), using cookies, and then to receiving direct marketing. SGB carried out detailed profiling analytics and algorithmic predictions to target the RTM with a significant amount of direct marketing.

RTM claimed he had not given legally effective consent to the use of his personal data and that he had not consented to receiving direct marketing, nor had he been provided with a compliant way to opt-out of receipt.

The High Court upheld RTM's data protection claims (although was unpersuaded by an additional claim relating to misuse of private information). The Court held that consent had to be of a "relatively high" quality and that this was context-specific, taking into account:

• the individual's subjective state of mind as to what they thought, understood and desired
• the individual's autonomous choice about consent based on external circumstances
• the evidential basis on which the controller relied.

The Court said that by ordinary standards, RTM was a highly vulnerable individual. He had not read the terms and conditions but had simply clicked through them in behaviour "which is too overborne, passive, unfocused and ambiguous and too bound up with the craving or compulsion to access gambling, to which the consenting is experienced as a condition to be overcome, to meet the necessary legal standard". The Court therefore found that the individual lacked subjective consent and that the autonomous quality of his consenting behaviour was impaired "to a real degree" so consent was insufficiently freely given.

While the Court agreed that the post 2018 engineering of consent mechanisms was sufficient to for SGB to rely on it being probable that where boxes had been ticked, a specific autonomous decision had been taken to consent, it said a data controller relying on consent cannot rely absolutely on generic probabilities. The Court distinguished between a non-vulnerable individual making an autonomous choice not to read the privacy terms and conditions, and the position of a highly vulnerable individual. There was an ineradicable risk that that the autonomy of the consenting behaviour of gamblers is vitiated to some degree by problem gambling. In this case, the Court accepted that it had been. Therefore, SGB's use of cookies and subsequent direct marketing were not lawful processing.

The Court recognised direct marketing about gambling to online gamblers raises special issues and was at pains to stress both that its decision rested on the individual circumstances of the Claimant, and on the timing of the activities, recognising that online gambling industry practice has moved on. The Court also recognised that it is not possible for businesses to assess the quality of consents on an individual and personalised basis. However, the Court did say that "there is an obvious risk of defective consent" when sending direct marketing about gambling to gamblers. 

One of the issues in this case was that the parameters for detecting a problem gambler were set very high, and anyone falling just below that threshold would be designated a highly-valued customer, who was targeted with marketing materials and promotional offers. The same data was used by both the problem gambling department and the marketing department, but they did not communicate with each other. There was also insufficient granularity in detecting problem gambling at the time. The Court recognised that problem gambling detection systems had moved on considerably in the industry since the time when the facts of the case took place.

While the scope of the judgment was limited to the facts of the case, it does raise issues when relying on consent in the online gambling sector. In particular, even where there is a proper risk management system in place, and effective consent procedures, the business may be at risk from individual claims relating to the validity of their consent. The judgment also underlined the importance of transparency to gaining effective consent, something which is often cited as an issue in the complex digital advertising ecosystem. A remedy hearing will take place later this year and it will be interesting to see the outcome.

Loot boxes: the debate continues in 2025

ECIJA's Ricardo Cardoso and Taylor Wessing's Patrizia Neifert look at what's on the horizon for the regulation (or not) of loot boxes in the EU.

In recent years, the regulation of loot boxes in video games has become a pressing issue within the European Union. Loot boxes, which offer players randomised in-game items in exchange for real or virtual currency, have sparked heated debates about their similarities to gambling and their potential impact on gamers, particularly minors.

The controversy surrounding loot boxes stems primarily from their randomised nature, which creates a gambling-like experience. The rarest and most valuable items, typically the hardest to obtain, encourage some players to spend significant amounts in pursuit of these rewards. Critics argue that this creates a similar psychological response to slot machines, fostering addictive behaviors.

A recent study involving 40,000 participants, conducted by Bournemouth University researchers, found that nearly half of loot box users exhibited some degree of gambling risk. Another study has found that the purchase of loot boxes can cause mental health issues, including depression and anxiety.

As concerns have grown, various EU Member States have taken steps to address the issue. Their approaches have ranged from banning loot boxes outright to imposing certain restrictions. Belgium, for example, has prohibited their sale in video games unless developers secure a gambling licence. Following this ban, several major game publishers either altered their games’ mechanics or withdrew certain titles from the Belgian market altogether.

Recently, the Enterprise Court of Antwerp found that Apple has been allowing certain elements of in-game loot boxes in apps offered in the Belgian App Store, which was found to violate Belgian gambling legislation, and has asked the Court of Justice of the European Union whether gambling activities are excluded from the Electronic Commerce Directive’s liability protection.

In Germany, the lifespan of loot boxes appears to be on shaky ground, at least those offered in games targeted at minors. Following a call from the European Commission to gather input on guidelines under the Digital Services Act for protecting minors, a working group, part of the German Advisory Council of the Digital Services Coordinator was established in Germany on7 February 2025.

One of the working group’s main aims is to discuss the use of loot boxes by minors in detail, find measures to optimise the protection of minors, pass their findings to the European Commission, and inform the EC's planned guidelines. 

There is currently no unified EU-wide regulation specifically targeting loot boxes. As the European Commission continues to gather data and expert opinions, the possibility of harmonised legislation does, however, remain on the horizon. Lawmakers face the challenge of balancing consumer protection with the interests of the video game industry, a sector that significantly contributes to Europe’s digital economy.

What do new EU product safety laws mean for games businesses?

Philipp Behrendt and Katie Chandler look at what games businesses need to do if games are confirmed as being in scope of the new EU General Product Safety Regulation.

The European Union has modernised its product safety liability regime. On 13 December 2024, the new EU General Product Safety Regulation (GPSR) came into force, replacing the current General Product Safety Directive.

Whether or not software and games fall under the scope of the GPSR is unclear. The legislation does not explicitly reference software in contrast to the Product Liability Directive. The European Commission recently published a Q&A on the GSPR in which it confirmed its position that software is within scope. We are currently waiting for the Commission's guidance paper to verify this view. Large retailers, in particular online marketplaces are increasingly taking the position that software, and therefore games, are within the scope of the GPSR. If that is the case, the following aspects in particular will need to be considered for games.

Existence of an economic operator established in the EU 

Under Article 16(1) GPSR, a company must have an EU-established operator in order to market products in the EU. We can assist games companies in setting up EU subsidiaries where required if they do not already have an EU presence. 

Application of the GPSR to distance sales

The GPSR applies from the point in time of placing a product on the market. A product is deemed to have been made available on the market (for the first time) when it is offered for sale online or via another form of distance selling to consumers (Article 4). 

The expansion of the scope of application in online trading entails special obligations for economic operators. Economic operators must already provide the following information when offering a product (see Article 19):

• identification of the manufacturer: name, registered trade name or registered trade mark, postal and email address
• if the manufacturer is not established in the EU: identification of the responsible person in the EU (eg the authorised representative), stating their name, postal and email address
• identification marking: illustration of the product, its type and other product identifiers
• clear and visible warnings and safety information.

Online marketplaces are now requiring sellers to provide this information for all consumer products. 

Extension of the assessment criteria for product safety

The assessment criteria for determining whether a product is safe are expanded by the GPSR (Article 6). The amended criteria require: 

• an explicit assessment of how other products affect the product under assessment and whether safety-related properties are influenced
• the assessment must take into account the consumer categories for which the product is intended: for example, the risk for children, the elderly and people with disabilities must be assessed
• cyber security aspects and the product's developing, learning and predictive functions must be evaluated
• effects on the mental health of consumers must also be considered, which may well need to be considered carefully for games. 

Internal risk assessment

Under the GPSR, before placing a product on the market, manufacturers must compile an internal risk assessment for each and every product and provide technical documentation. When assessing safety, the Article 6 aspects listed must be taken into account. We can help you develop a risk assessment. 

Stricter requirements for product recalls

The system for product recalls is becoming (even) more complex. All affected consumers are to be informed directly and immediately by economic operators and providers of online marketplaces about product safety recalls or safety warnings. In addition, the EU legislature is breaking new ground by introducing a right to redress in the context of product safety law. Article 37 of the GPSR requires the economic operator responsible for the product recall to provide a remedy. 

Use of Artificial Intelligence by gaming operators from a Spanish perspective

ECIJA's Javier De Zea looks at EU and Spanish rules governing the use of AI by gambling businesses, including to detect problem gambling and fraud.

Imagine this: a self-excluded player tries to bet again - new email, VPN activated, altered details, different payment method. Everything seems to work until they log in - screen freezes, account blocked. The operator’s AI has flagged ID matches, IP inconsistencies, and a near-identical device fingerprint. If the Spanish General Register of Gambling Access Restrictions (RGIAJ) confirms self-exclusion, the attempt is immediately stopped. This is one of the ways AI helps operators in Spain with fraud detection, security, and personalised user experiences. However, AI use must comply with several regulations, including the EU Artificial Intelligence Act (AI Act) as it is brought into application, the General Data Protection Regulation (GDPR), and Spain’s General Gambling Law along with its regulatory developments.

In this context, to mitigate legal exposure, operators will need to first conduct a risk assessment of their AI systems in accordance with the AI Act’s criteria. While basic recommendation algorithms pose little risk, AI used for fraud detection requires stricter supervision due to its impact on players' fundamental rights. If it involves biometrics or emotion recognition, it is potentially classified as high-risk, requiring transparency, documentation, and human oversight. In some cases, AI may even be prohibited if it manipulates or exploits vulnerable individuals and provisions regarding prohibited AI already apply. 

This is especially relevant in Spain, where Royal Decree 176/2023 requires operators to identify risky gambling behaviours and take preventive action. AI can detect high deposits, excessive gambling, or irregular betting, triggering alerts, restrictions, or manual reviews. However, if AI fails - or worse, accidentally enables, encourages, or reinforces excessive gambling among vulnerable players, operators risk serious regulatory consequences under both EU and Spanish law. To remain legally secure, Spanish operators must maintain a defence file documenting risk assessments, compliance checks, and protocols for human oversight. 

Beyond risk classification, operators must determine their role in the AI supply chain under the AI Act and will need to comply with their specific legal duties as they are brought in. For example, those developing their own AI will need to ensure full regulatory compliance, while those deploying or integrating third-party AI will also be responsible for adhering to EU transparency and consumer protection standards, among others. 

AI also faces limitations in advertising and promotions in Spain. Royal Decree 958/2020 may prohibit certain AI-driven aggressive marketing and imposes restrictions on the timing, content, and delivery of gambling advertisements. For example, AI-powered content generators might create promotional messages with language or imagery that breaches advertising regulations, such as portraying gambling as a guaranteed source of income or overly associating it with success. AI could also optimise ad targeting across digital platforms, inadvertently leading to gambling promotions appearing in inappropriate contexts, such as in content aimed at younger audiences. If not carefully controlled, AI could breach these rules, leading to legal and reputational risks.

Additionally, operators must establish strong AI governance, including internal AI policies and employee training. Many have already appointed a Chief AI Officer (CAIO) to oversee compliance, working closely with the Data Protection Officer (DPO) to ensure alignment with GDPR when AI processes personal data. In fact, any AI making automated decisions affecting users must undergo a Data Protection Impact Assessment (DPIA) to evaluate risks and safeguards.

There’s no doubt that AI is reshaping Spain’s gambling sector, but if left unchecked, it could exacerbate power imbalances and restrict player rights. With the Spanish Directorate-General for the Regulation of Gambling (DGOJ) increasing audits, operators must go beyond efficiency and profit - though that’s part of the game - to ensure AI upholds legality, transparency, and credibility.

New UK Gambling Commission consumer protection rules and finalised legislation on the gambling levy and online slot limits 

Debbie Heywood looks at new rules from the UK Gambling Commission which will require operators to introduce additional customer notifications, and at new secondary legislation.

On 4 February 2025, the Gambling Commission announced new rules designed to empower consumers and boost operator transparency. Changes include: 

• from 31 October 2025, all gambling businesses must prompt customers to set a financial limit before they make their first deposit, and make it easy to review and alter this limit at any point 
• gambling businesses must remind customers to review their account and transaction limits every six months 
• operators holding customer funds are currently required to set out in their terms and conditions whether or not those funds are protected in the event of operator insolvency. Operators holding unprotected funds in the event of insolvency, must, from 31 October 2025, actively remind users their funds are unprotected once every six months. 
• the current requirement on operators to make annual financial contributions to a list of research, prevention and treatment organisations will be removed close to the introduction of the government's statutory levy (see below). 

The new rules follow a consultation and are consistent with the 2023 Gambling White Paper. 

February 2025 also saw confirmation of the long-planned gambling levy and online slot limits:

• The Gambling Levy Regulations were made on 25 February 2025 and come into force on 6 April 2025. Among other things they introduce a statutory gambling levy payable from 1 October 2025.

• The Gambling Act 2005 (Operating Licence Conditions) (Amendment) Regulations 2025 were also made on 25 February 2025. They introduce a GBP5 online slot limit stake on over-25s from 9 April 2025 and a GBP2 limit for under-25s from 21 May 2025.

Sponsoring London Games Festival and Games Industry Law Summit

London Games Festival

We're a proud sponsor of the London Games Festival which is celebrating its tenth anniversary this year. The festival takes place from Wednesday 2 April to Sunday 13 April 2025, and is set to be the biggest yet, with a city-wide celebration that incorporates a programme of activity for global games professionals and players across the country. You can find out more about the schedule here. Since it started in 2016, Games London has helped generate around GBP£100 million for games businesses that have participated in its programmes and we're delighted to be a part of that. We're very much looking forward to seeing all our video games clients and contacts in a few weeks' time, particularly at the BAFTA Games Awards and the VIP 100 day which we'll be attending. 

Don’t forget to book your ticket here. Let's help London Games Festival beat last year's record-breaking attendance of over 100,000 visitors! 

Games Industry Law Summit 

We are also delighted to announce our sponsorship of Games Industry Law Summit. The next summit is taking place on from 1 to 3 April 2025. An international team of partners and associates will be attending and speaking at the summit and our speaking slots will cover topics including M&A and indemnification clauses. Click here for more information. 

We are also judging the annual moot court legal challenge (we're currently marking the written submissions alongside our fellow judges). Winners will be announced ahead of Games Law Summit Vilnius in August. Details of the legal challenge/moot court can be found here. 

We can't wait to see all our games clients and contacts in sunny Rome in a few weeks' time!

What would an EC Digital Fairness Act mean for EU games businesses?

Patrizia Neifert looks at the potential impact of the review of EU consumer protection Directives and at calls for a Digital Fairness Act.

On 3 October 2024, following a call for evidence and public consultation, the European Commission published an EU Fitness Check evaluation of the fitness for purpose of: 

• the Unfair Commercial Practices Directive
• the Consumer Rights Directive
• the Unfair Contract Terms Directive.

The focus of the evaluation is whether these Directives are fit for purpose in the digital age or whether additional action is needed to ensure a level of digital fairness equivalent to that offline. The EC found that while the three Directives have provided a degree of regulatory certainty, they do not address all the consumer protection issues impacting consumers online. In particular, the EC found a need for rules better adapted to specific harmful practices including:

• dark patterns in online interfaces that may unfairly influence consumer decisions
• addictive designs of digital services that push consumers to keep using the service or to spend more money
• personalised targeting that takes advantage of consumer vulnerabilities, exploits personal problems, financial challenges or negative mental states
• difficulties with managing digital subscriptions, for example, with unsubscribing
• problematic commercial practices of social media influences – even though these are already regulated to some extent under existing consumer protection law
• a lack of (cross-border) enforcement of the EU consumer law caused by limited resources, length and complexity of procedures, and a lack of specialists and tools to detect and tackle infringements of EU consumer law. 

What to expect?

One of the conclusions of the Fitness Check is the need to develop a Digital Fairness Act to tackle some of the issues highlighted, close regulatory gaps, simplify existing rules, and facilitate meaningful enforcement.

Games companies are likely to come under scrutiny as the EC gets ready to regulate further on these issues and may find themselves caught by a large part of any Digital Fairness Act. The EC highlighted the use of gambling-like features and addictive designs in video games as issues which need to be tackled. In the context of games, addictive design can include autoplay of new content, pull-to-refresh content and an infinite scroll function. It may also include temporarily available content, incentives for continued gaming (eg rewards) or even penalties for disengagement in games, microtransactions during critical gameplay moments, loot boxes and in-game currencies. In particular, the combination of offering virtual items/in-game currencies and loot boxes is seen by the EC to be non-transparent and therefore problematic. 

The EC is also focusing further on the impact of dark patterns and targeted advertising on vulnerable consumers, beyond the existing framework. This is another area where games and online gambling businesses tend to come under scrutiny.

The Digital Fairness Act will very likely set out binding provisions for safeguarding players, with minors in focus. Some of the proposed solutions in the Fitness Check included banning the sale of loot boxes to minors. Another suggestion was to turn in-game purchases off for all players by default. While it's currently unclear whether any of these proposals will be adopted, a Digital Fairness Act would very likely introduce tighter regulations for the games industry and change common practices relating to loot boxes and in-game purchases. 

As always, EU games businesses need not only to comply with the existing regulatory framework, but also to keep a close eye on legislative developments.

LATAM opening up for gambling

ECIJA's Xavi Muñoz Bellvehí looks at the regulatory environment in the Latin American online gambling market.

The Latin American gambling market is emerging as a dynamic and diverse region for the online gambling industry. With countries at different stages of regulation, the region's future offers growth potential, especially as operators and regulators continue to adopt the 'let’s wait to see what our neighbours are doing' approach. 

Despite the challenges posed by such a fragmented legal framework, the Gross Gaming Revenue (GGR) of the online gambling market in Latin America is projected to exceed USD$3.4 billion by the end of 2025, driven by key markets like Brazil, Mexico, and Colombia. A closer analysis reveals three distinct categories across Latin America: unregulated or grey areas, regulated markets with minimal illegal gambling, and regulated markets where illegal gambling persists. 

Unregulated or grey areas

Some Latin American countries remain unregulated, or their frameworks leave significant legal grey zones. However in most of those, the local authorities are not enforcing the laws against online gambling and therefore it is being offered to their residents. For example, Honduras and Guatemala lack clear online gambling legislation, leaving operators in a state of uncertainty or, in a situation of operating without oversight which amounts to the same thing. Similarly, Bolivia, while having some gambling laws, has not implemented online-specific regulations.

Other countries like Costa Rica face similar challenges where gambling is technically illegal but land-based casinos, State administered gambling activities and operations providing local support to online offshore betting operations that do not entail the direct placement of bets, are allowed. This creates a paradox where Costa Rica hosts many online gambling support operations but does not directly regulate the online gambling activities themselves. 

The lack of regulatory clarity creates a fragmented market, exposing players and operators to risks like fraud and unfair competition while depriving governments of tax revenue. However, these markets also offer opportunities at this stage for proactive engagement with regulators.

Regulated markets with minimal illegal gambling

Responsible gambling is synonymous with safe gambling, and to achieve this, operators and players must adhere to clear, concrete guidelines. 

Colombia, the first in the region to legalise online gambling in 2016 through Law 643/2001, operates under a well-structured open licensing model. Coljuegos, the regulatory body, has effectively enforced rules and the country's approach has attracted international gambling groups.

In 2023, Peru’s president signed a bill to thrust Peru into the regulated market of online gambling. As of February 2024, operators are now eligible to apply for a licence for the right to offer online gambling in the country. For international operators wanting to enter the region, Peru may be looked at as a testing ground that offers lower barriers to entry than Brazil (such as low public licence costs), even if the market size is smaller.

Regulated markets still facing illegal gambling

Even in regulated markets, illegal gambling can persist, often due to enforcement gaps or deeply rooted unregulated networks. 

In December 2023, Brazil, Latin America's largest market, legalised fixed-odds sports betting on “real sporting events”, as well as on “virtual online gaming events”, or online casino games under Law 14.790/2023. While the government works on implementing ordinances to clarify advertising, taxation, and operational standards, which are expected to be published by 1 January 2025, illegal operators still dominate a significant portion of the market, but it is too early to draw definitive conclusions.

Online gambling in Argentina operates under a decentralised framework. By late 2023, 15 out of 24 jurisdictions had legalised online gambling, covering over 85% of the population, but this patchwork system underlines the complexities of the Argentine market: while some have supported the idea of replacing the current province-by-province system with a national framework as in Spain or Germany, others see this is as likely to be politically challenging.

In the Dominican Republic and Mexico, outdated regulatory frameworks and inconsistent enforcement enable unlicensed operators to thrive. Despite amendments to the Mexican Federal Gaming and Raffles Law and the implementation of various controls and sanctions, illegal activities persist, suggesting that these measures have not been effective in addressing the issue.

Overall, this region is a clearly a hot spot for gambling operators now and the place many will want to be.

French Supreme Court rules against exhaustion of rights for digital video games copies

Marc Schuler and Hugo Khalfallaoui look at the Cour de cassation’s most recent decision on exhaustion of rights in relation to digital video games copies.

On 23 October 2024, the Cour de cassation issued its ruling in the case brought by the consumer association UFC Que Choisir against the video game publisher and distributor Valve. The dispute involves Valve's digital content distribution service through its platform 'Steam' and its subscription terms and conditions.

The Court: 

• confirms that a video game is a complex work which cannot be considered solely as a software
• rejects the application to video games of EU Directive 2009/24/EC on the legal protection of computer programs
• rejects applying the exhaustion of rights to digital video games copies. 

UFC Que Choisir filed a lawsuit against Valve Sarl and Valve Corporation, seeking to challenge a number of provisions of Valve’s Steam Subscriber Agreement, especially those prohibiting resale and transfer of Steam accounts and subscriptions purchased on the platform. UFC Que Choisir was arguing that Valve could not prohibit users from reselling their digital video games copies purchased on the platform, as Valve's rights were exhausted as of the first sale on the platform. 

In accordance with section L. 122-3-1 of the French Intellectual property code, implementing section 4(2) of Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society (InfoSoc Directive) once the first sale of a tangible copy of a work has been authorised by the intellectual property right holder within the EU, the sale of this copy cannot be prohibited within the EU. Recital 29 of this Directive specifies that the issue of exhaustion of rights does not arise for services, particularly online services.

By contrast and in accordance with Article 4(2) of Directive 2009/24/EC concerning the legal protection of computer programs (Computer Program Directive), the first sale of a copy of a computer program within the EU by the right holder or with its consent exhausts the distribution right concerning that copy. Such exhaustion applies to both tangible and digital copies of the computer program, including copies downloaded online during their first sale (CJEU,3 July, 2012, UsedSoft, C-128/11).

According to UFC Que Choisir, the software of a video game is not ancillary and should fall under the Computer Program Directive rather than the InfoSoc Directive. Furthermore, UFC Que Choisir considers that no difference should be made between a copy made from a tangible medium and one downloaded from the internet in the context of the video games second-hand market.

The Cour de cassation recalled that, according to the CJEU, video games constitute a complex work comprising not only computer programs but also graphic and sound elements that, while encoded in computer language, possess their own creative value and cannot be reduced to such encoding. To the extent that these graphic and sound elements contribute to the originality of the work, they are protected under copyright along with the entire work (CJEU, 23 January 2014, Nintendo, C-355/12).

It further considers that unlike software intended to be used until obsolescence, video games often rapidly enter the secondary market after being played and can remain usable by new players years after their creation. 

Based on the above, the Cour de cassation confirmed that only the InfoSoc Directive applies to video games and that the exhaustion of rights principle does not apply to digital video game copies. 

Code of Conduct for Gambling Related Agreements in football comes in with new season

Debbie Heywood looks at self-regulatory steps by English football in relation to socially responsible gambling sponsorship.

The Premier League, English Football League, FA and Women's Super League formally adopted a code of conduct covering social responsibility in relation to gambling sponsorship in English football in July 2024. This was partly in response to the expectation set out in the Sunak government's White Paper on gambling reform that sports governing bodies should develop and adopt gambling sponsorship codes of conduct. The Code started to bite at the start of the 2024-25 season. It contains four general principles around gambling sponsorship:

• Protection - sponsorship must be specifically designed to limit its reach and promotion to those under 18 and those at risk of gambling harm.
• Social responsibility - gambling sponsorship must be promoted and delivered in a socially responsible way including by providing awareness messages as part of all marketing activities.
• Reinvestment: commercial income raised from gambling sponsorship must be reinvested into infrastructure and programmes that serve football fans and communities.
• Integrity - gambling sponsorship must not compromise the integrity of football competitions nor harm the welfare of participants in them.

The Premier League has committed to withdrawing gambling sponsorship from the front of matchday shirts but not before the end of the 2025-26 season. At the start of the current season, eleven Premier League teams had gambling brands on their shirt fronts, up from eight in the previous season.

The Premier League also came in for criticism in a report produced by researchers at the University of Bristol Business School which claimed that the number of betting adverts during the opening weekend of the season saw a 165% increase from the previous year. The Betting and Gaming Council which represents around 90% of the UK's betting and gaming industry, said the research "fundamentally misunderstands both advertising and the way it is strictly regulated". 

There is a raft of regulation surrounding gambling advertising including on football club websites and at sporting events. Gambling operators selling into the British Market require a licence. The conditions of the licence and codes or practice require them to comply with the CAP and BCAP Codes overseen by the Advertising Standards Authority. The codes include a focus on preventing harm to children and other vulnerable people, including by requiring that gambling adverts do not strongly appeal to children or young people by reflecting or being associated with youth culture, or feature anyone gambling or playing a significant role in an advert if they are or appear to be under 25.

In addition, the Betting and Gaming Council has an Industry Code for Socially Responsible Advertising to which members are required to adhere and the sporting organisations themselves have to comply with advertising codes as well as their own codes of conduct.

The controversy around gambling sponsorship of sporting events and teams and of gambling advertising during sporting events is likely to remain unless organisations like the Premier League can demonstrate that their self-regulatory approach complements legal obligations and is providing the required protections, particularly to children and the vulnerable.

Legal framework for influencers in Spain

ECIJA's Camille Gonzalvez looks at the regulatory framework around influencers and influencer partnerships in Spain, particularly in the context of gaming and gambling.

As digital advertising gains prominence, influencers have become key figures in marketing, reaching diverse audiences - especially youngsters - in high-engagement sectors like gaming, gambling, and cryptocurrency trading as well as in broader mainstream markets. Over the past decade, marketing strategies in video gaming have been transformed, mainly due to the integration of social media and streaming platforms like YouTube and Twitch. 

In the gambling sector, however, collaboration with influencers has faced greater challenges in Spain. The implementation of Royal Decree 958/2020, of 3 November 2020, on commercial communications for gambling activities (RD 958/2020) prohibited gambling advertisements featuring high-profile figures. This restriction limited influencer partnerships in gambling until the recent Supreme Court ruling from April, which annulled certain articles of the decree, including Article 15’s ban on using public figures, allowing new opportunities for partnerships between gambling operators and influencers.

Recognising influencers' growing importance, on 30 April 2024, the Spanish Council of Ministers approved Royal Decree 444/2024 (RD 444/2024), which establishes the requirements to categorise certain users of video-sharing platforms as "users of special relevance”. Some influencers are caught by this definition. RD 444/2024 categorises as "users of special relevance" those individuals or legal entities that use video-sharing platforms to reach significant audiences or generate significant revenue. As a result of this designation, these users are required to register in the national registry established under Article 39 of Law 13/2022, of 7July 2022.

To qualify as a "user of special relevance," individuals or legal entities must meet specific audience or revenue thresholds. Users fall under this category if they earned a gross revenue of EUR€300,000 or more from video-sharing platforms in the previous calendar year or if they have amassed at least 1 million followers on a single platform - or an aggregate of 2 million followers across all platforms - while posting at least 24 videos in that year.

Although the specific taxation of influencers is not the main focus of RD 444/2024, it highlights two critical aspects: (1) distinguishing tax obligations for Spanish residents and non-residents, and (2) treating non-resident influencers who maintain economic or audience connections in Spain as established within the country, thereby subjecting them to Spanish regulations on entertainment.

According to RD 444/2024, users of special relevance must adhere to the following obligations, among others: preventing the exposure of minors to inappropriate content such as violent or discriminatory content, classifying videos according to the age of the audience, and complying with advertising regulations, avoiding the promotion of tobacco, alcohol, medicines, or content harmful to minors.

Businesses that collaborate with influencers must verify that they are duly registered and that their activities on social media and video-sharing platforms align with RD 444/2024. To this end, it is advisable to implement a periodic audit system to review compliance with these provisions. 
For the gambling sector, the Supreme Court’s 2024 ruling on RD 958/2020 opens the door for collaborations with influencers, lifting previous restrictions and allowing partnerships between gambling operators and influencers. However, caution is advised when partnering with influencers whose audiences are predominantly minors; these influencers should avoid any gambling-related advertising to uphold the principle of minors' protection under Article 11 of RD 958/2020.

Smaller games prove appealing

Laura Craig looks at the recent success of smaller games.

A recent October article from the Financial Times, Why small games have a big future, highlighted that some gamers were favouring titles that were smaller in scope, rather than epic adventures with huge consequences. The main point made was that bigger, flashier games with large open worlds to explore and show-stopping graphics may not always provide the experience players want and the smaller games can fulfil very particular functions. The article notes that some users only have a limited time to sit down and play games given other competing demands such as work and childcare, and may not have hundreds of hours to dedicate to an expansive campaign. This means that games that can be enjoyed in short bursts or have more compact stories are increasingly appealing. 

Accordingly, large international studios have started to see success with more focused games developed by leaner teams. Charming and enjoyed by children and adults alike, Sony's platformer Astrobot has you take control of an android who gains unique abilities across various planets. Bethesda also published the popular rhythm game Hi-Fi RUSH in 2023, which was well received due to unique visual design, fun characters, and linking combat with music. These games offer quite unique experiences and are polished, well-designed and do not demand countless hours of player time as they can be enjoyed in shorter bursts.

As well as Triple A studios, indie developers are also playing a key role in bringing small games to life. 2023 saw the release of Mintrocket's Dave the Diver, and it was a hit. The pixellated graphics, smooth animations, and quirky characters oozed charm. However, the gameplay was the real standout – players dive into interesting underwater environments to catch and collect different fish and gain resources, which are then served up in a sushi restaurant to offer a very different style of play akin to a restaurant simulator. This was underpinned by a wider plot involving a civilisation of merpeople, which all combined to make Dave the Diver a huge success. A further indie hit in 2024 has been Animal Well, the first game published by BIGMODE (founded by popular youtuber Videogamedunkey). Created by only one developer, the platforming metroidvania where the player controls a 'blob' in a beautifully depicted glimmering maze populated by various animals has been well received by both critics and players.

There has also been an explosion in popularity for 'cosy games', a subset of small games, on social media. There is no strict definition of what a cosy game is, but they tend to forego challenging combat and tonnes of action in favour of a focus on relaxation and charm, often containing elements of exploration, collectable features, and/or building small communities. Games like the village builder Dorfromantik, Nintendo Switch classic Animal Crossing: New Horizons and life sims like Stardew Valley and Coral island tend to fall under the cosy umbrella, and have dedicated online communities that keep players engaged.

Ultimately, there is always going to be a place for epic adventures that gamers can get lost in for hours on end. However, it does look like there is a growing desire for well-made, smaller adventures too.

Continued success for video game adaptations

Laura Craig looks at the recent success of screen adaptations of games and the impact that can have on sales of the video games themselves.

Translating video games to the screen has historically been seen as a risky venture, with poor box office performance and critical reception. Recently, the tide has changed. 2023 was the highest grossing year ever for video game adaptations, generating unprecedented levels of critical acclaim and award nominations. 

In January 2023, HBO's The Last of Us (TLOU) based on Naughty Dog's 2013 game, received 24 Emmy nominations (winning 8) and was the most watched show in the history of HBO Max in Europe and Latin America. Rolling Stone credited TLOU with ushering in a 'golden age' of video game adaptations. The Super Mario Bros Movie (SMBM) based on Nintendo's iconic characters became the highest grossing film based on a video game and scored the biggest opening weekend of any animated movie. The trend continued in 2024, with the Fallout series being well received by critics and fans alike and becoming the second most watched series in the history of Amazon Prime.

Evidence suggests that adaptation success is translating to an uptick of interest in the original games themselves. Following the success of TLOU, UK physical sales for the PS5 remake jumped by 238%. Nintendo experienced a 14% and 26% increase in hardware and software sales respectively, with a marked difference in hardware sales in territories where SMBM screened. Fallout games have experienced renewed engagement with enhanced download figures and in-game spend, as well as skyrocketing daily playercount. Further adaptations have been announced for 2024, including films based on the Borderlands franchise (starring Cate Blanchett and Kevin Hart) and Sonic the Hedgehog 3 following the success of Sonic the Hedgehog 2, which was the highest grossing video game movie of all time in the US until the release of the Mario Bros Movie. Multiple TV adaptations are also set for release, including two animated series for Netflix (season 2 of League of Legend's Arcane, and a Tomb Raider animated series) and Amazon Prime's live action Yakuza series due to launch in October. 

It is important to note, however, that Fallout and TLOU have succeeded on television because the games they are based on translate well to the TV screen - they are story-rich and character driven, with rich worldbuilding. Both adaptations were also unafraid to diverge from the games where required. TLOU as a cinematic experience was highly adaptable into the TV format, though HBO made considered changes where necessary (such as a well-received episode about a queer couple in the apocalypse, which diverged from the game). Fallout while faithfully drawing from its distinct setting and retrofuturistic design elements, created a unique story, extending an established series without retreading the plot of any game. This worked well in an open world franchise where players can make their own stories. 

Upcoming releases should take note - they may be most successful when they respect the underlying source material, but make appropriate changes where necessary to suit an alternative medium.

What is the new UK government's policy on gambling reform?

Debbie Heywood looks at progress on gambling reform and the new government's policy.

The Conservatives conducted a review of the Gambling Act during their various tenures, concluding under Prime Minister Sunak that reforms were needed. The Sunak government published a White Paper in April 2023 outlining proposed reforms. The DCMS Committee published its report on gambling regulation on 21 December 2023 in response to the White Paper, and the former government's response to the report was published on 19 April 2024. The DCMS Committee made a series of recommendations and the then government's response largely explained how it was already acting on the majority of them. This was not only through work on a Gambling Bill and related consultations, but also due to work by other organisations like the Gambling Commission and the ASA, CAP and BCAP, which are implementing or will implement some of the Committee's recommendations. The recommendations themselves mostly expanded on plans set out in the White Paper.

The Sunak government's response to the DCMS Committee report is a useful summary of various ongoing initiatives and their progress more or less up to the point of the general election.

Now we have a new Labour government so the question is whether and to what extent it will build on the White Paper. In its manifesto, Labour committed to reducing gambling-related harm. It promised to reform gambling regulation and to continue working with the industry to ensure responsible gaming. Beyond these general aims, the manifesto was silent as to whether or not the promised reforms would essentially be those proposed in the White Paper. The 17 July 2024 King's Speech did not mention gambling reform, however, given the extensive and lengthy consultation underpinning the White Paper, it seems unlikely that Labour will start completely afresh. Even if another consultation is pending, proposed reforms are likely to be significantly based on the work done to date. Timing is, however, more uncertain. On the one hand, much of the work on a new Gambling Bill has already been done, on the other, based on the King's Speech, the new government is prioritising other sectors in its focus on growth. 

The UK Advertising Standards Authority issues updated CAP guidance on in-game purchases

Oz Watson looks at what has changed in the updated in-game purchases guidance.

Back in 2021, CAP and BCAP published guidance on the advertising of in-game purchases. The guidance set out what advertisers must do in order to advertise in-game purchases, and the games that feature them, in a responsible manner and without misleading consumers.

The games industry has advanced rapidly in the intervening three years. CAP recently reviewed its guidance to ensure it remains accurate and appropriate to the current games market. The review looked to incorporate key issues in games advertising that have led to upheld consumer complaints. In particular, the revised guidance, published on 21 May 2024, expands on the following issues around misleading ads, saying advertisers should:

• make it easy for consumers to understand how much they are spending (or will spend) on in-game transactions
• clarify before purchase/download of a game, that it contains in-game purchases and, if applicable, loot boxes
• make it clear in ads what content requires extra purchase, and when ads for the game feature purchased content (which may include skins).

The guidance seeks to address the fact that there have been a number of upheld complaints in relation to ads that did not disclose the presence of in-game purchases, including loot boxes. It now reflects the fact that the presence of such content in ads may influence consumers' purchasing decisions and should, therefore, be made clear in the ads for the game. 

The more detailed guidance goes on to cover the following key issues:

Scope of guidance - the new guidance addresses how the UK Advertising Codes apply to in-game purchases within apps and video games. It was formulated following consultation with various stakeholders, resulting in some significant changes particularly around remit, virtual currency price statements, and concerns relating to gambling and loot boxes.

Retention and changes - while most of the original guidance from 2021 remains intact, substantial amendments have been introduced including:

• The guidance covers in-game messaging about item purchases that involve real money or virtual currencies solely purchased with real money.
• The need for real-world monetary values accompanying virtual currency price statements has been removed. Instead, the guidance says clear information regarding digital currency prices must be readily accessible.

Concerns about gambling - although some responses to the consultation equated random-item purchases (loot boxes) with gambling, CAP and BCAP have not defined them as such, following the Gambling Commission's stance.

Children’s exposure - marketing communications targeting under-16s must avoid direct exhortations to buy or use 'buy now' messaging. 

Implementation period - advertisers have a grace period after publication of the guidance during which they can adjust their content informally - six months for in-game content and three months for all other ads - to comply with the new guidance before formal enforcement begins.

The primary aim of the guidance is to ensure responsible marketing that does not mislead consumers about the nature or cost of in-game purchases. It will undergo review 12 months after publication to evaluate its effectiveness. Existing advertisements should be altered or retracted as soon as possible following publication of the guidelines if they are not compliant.

Levelling the playing field in the UK gaming industry

Jo Joyce looks at the impact of the recently enacted DMCC Act on competition for games and gaming platforms.

Covering similar ground to the EUs Digital Markets Act, the UK's Digital Markets, Competition and Consumers Act (DMCCA), finalised in May 2024, is designed to shift the regulatory landscape for digital marketplaces, including gaming platforms operating in the UK. The DMCCA creates robust measures to curtail anti-competitive practices and foster fair competition. A critical area of focus is the potential preferential treatment that gaming platforms may extend to their own games - a practice that could now face stringent legal scrutiny.

Anti-competitive games

Gaming platforms are juggernauts in the entertainment industry, providing a medium for play but increasingly acting as gatekeepers to vast digital ecosystems. Their influence extends from game distribution to online multiplayer environments and real-life convention events. However, concerns over anti-competitive behaviour arise when these platforms leverage their dominant positions to unfairly promote their proprietary titles over third-party games.

Methods adopted by platforms to favour in-house content include:

• Algorithmic bias - platforms might tweak their recommendation algorithms to favour their own games, giving them prominent placement in storefronts and search results.
• Marketing and promotions - in-house titles often receive more extensive marketing support and promotions compared to third-party games.
• Exclusive features and integration - platform-owned games often integrate more smoothly with the console or platform’s unique features, such as achievements, social features, and cloud saves.
• Data gatekeeping - platforms are able to gather data about user activity and gameplay statistics beyond what is available to the developers of the games they host - information which, when analysed, can be used for the development and promotion of their own games. 

Such behaviour creates a disadvantage for independent games and acts as a barrier to market entry for smaller games.

Rules and penalties

The DMCCA aims to address the current market imbalance in favour of platform-owned games by defining clear rules for entities designated as having 'Strategic Market Status' (SMS). Platforms with SMS wield considerable market power; under the DMCCA they are subject to additional rules and scrutiny (including potential audits) by designated regulator the Competition and Markets Authority (CMA) to ensure they do not engage in self-preferencing activities that would disadvantage competitors.

Under this new framework, an SMS-designated gaming platform may be required to provide equal access and visibility for all game publishers. This means algorithmic transparency in storefront recommendations and equitable terms for revenue sharing. The DMCCAs provisions seek to prevent practices such as exclusive incentives or preferential placement that could undermine consumer choice and stifle innovation among independent game developers.

Specific codes of conduct will guide operations within these digital spheres. These codes are expected to detail permissible forms of competitive behaviour as well as actions considered detrimental to a thriving marketplace - such as unfair application of platform rules or manipulation of user data for competitive gain.

The CMA has the power under the DMCCA to conduct dawn raids and compel individuals present in the UK to attend interviews. Significant fines are also within the CMA’s arsenal and if a platform fails to comply with investigative requirements those fines can be up to 1% of worldwide annual turnover or 5% of worldwide daily turnover (or up to GBP30,000 per day for an individual who fails to comply). Obstructing an investigation, providing false evidence or destroying evidence would be a criminal offence with potential custodial sentences in serious cases. 

The level playing field

If rigorously enforced by the CMA, the impact of these changes on the economics of gaming could be profound. Independent game developers will likely see improved visibility and sales opportunities. Consumers will benefit from a broader selection of games and potentially higher quality as competition drives innovation.

Most aspects of the DMCCA are expected to come into force in late 2024 (the vast majority of the Act must be brought in by secondary legislation). Consultation on the CMA’s draft guidance for the new DMCCA regime closed on the 12 July 2024, so more information on the CMA’s intended enforcement approach will be available soon. In the meantime, platforms should waste no time in assessing their operations to identify high risk activities and avoid being caught out by the new regime. 

District Courts ask Dutch Supreme Court to clarify the legal status of unlicensed remote gambling offerings

Sharif Ibrahim looks at a recent reference to the Dutch Supreme Court which stands to resolve current uncertainties caused by conflicting lower court decisions.

In 2021, the regulated market for remote gambling in the Netherlands opened. This has triggered many new regulatory developments and changes over the course of the last three years and new developments keep coming, for example in the field of player protection and playing limits.

In parallel to these developments, there is an ongoing debate on the legal status of the agreements concluded between players and unlicensed operators of remote games of chance, mainly those concluded prior to the regulation of remote gambling in the Netherlands. The issue is whether that category of players can validly claim back their losses. One of the most well-known cases in this respect was between a player and Unibet. This was brought before the District Court (in 2015) and the Amsterdam Court of Appeal (in 2016). Both courts concluded that the remote game of chance agreements are not void and that the player cannot claim back their losses.

Recently, there has been an influx of similar cases and there are several conflicting judgments. Some courts considered remote game of chance agreements as void and ordered the unlicensed operators to pay back the players’ losses. Others have sided with the case law from 2015 and 2016 and decided that the agreements are not void so there is no reason to pay back losses to players. 

On 12 June 2024, the courts of Amsterdam and North-Holland, observing that approximately 50 similar cases were pending, jointly decided to submit questions to the Dutch Supreme Court to get clarity on the status of the agreements between players and unlicensed operators. The referring courts expect the answers will lead to fewer conflicting outcomes in these kind of cases. Both courts have also issued a preliminary ruling that the agreements with the unlicensed operators are void, but they have emphasised that this is subject to the views of the Supreme Court whose ruling will be widely anticipated.

Irish government urged to change Digital Gaming Tax Credit system

Ameer Gazder looks at why the Digital Gaming Tax Credit has not yet proved popular.

In May, the Irish Department of Finance was reported as confirming that while a number of applications have been made by Irish gaming companies to claim a Digital Gaming Tax Credit, no claims have actually been filed. The Department cited this as a common phenomenon with newly introduced tax credits and has noted that, in some cases, claims may be filed at the end of a multi-year development process.  However, there may be bigger issues at play which form barriers to widespread adoption.

The Digital Gaming Tax Credit was announced by the Irish Department of Finance in late 2022, as part of efforts to further incentivise investment in Ireland's digital gaming sector by promoting the development of culturally Irish and European games.

The credit, if granted, is honoured against the company's Irish corporation tax which is due and may be claimed against costs incurred in the development phase of a given game. A broad range of developmental activities is covered by the credit, including conceptualisation, prototyping, programming, visual design, audio production, and quality assurance testing. Businesses involved in these activities can claim relief on costs associated with employee salaries, subcontracted services, software licences, and other development-related expenses.  If an application is successful, the business may then claim the credit which will be 32% of the lowest of: (i) eligible expenditure; (ii) 80% of total qualifying expenditure; or (iii) EUR25 million. 

Ireland's video game market is booming with a surge in indie game development and a growing esports scene, so why is that not a single company has so far claimed the Digital Gaming Tax Credit? 

A number of factors are likely to affect take up:

The credit is not available for all games and games with a gambling element - a significant part of the sector - are excluded. 

In addition, to successfully claim the credit, businesses must satisfy a cultural test administered by the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media, with consideration being provided to the following criteria:

• The proportion of the project or activity carried out in Ireland or the EEA, as well as the proportion of Irish or EEA nationals/residents involved in the project
• The Irish or European cultural relevance of the setting, characters, language, or storyline of the game
• The use of materials or music created in Ireland or Europe, including that created by an Irish or EEA national/resident
• The educational content of games intended for children, and the themes relating to diversity and equality
• The content of the game pertaining to the promotion of eco sustainability, and minimisation of climate change.

Finally, the game must also make it to market for the development company to be eligible to receive the credit.

The Irish games representative body, Imirt, is reported as having submitted a pre-budget submission in July, calling for changes to the regime, Whether the Digital Gaming Credit initiative will ultimately be as effective as Ireland’s highly successful Tax Credit for Film, Television and Animation, with or without reform, remains to be seen.

New Gambling Commission rules to improve safety and consumer choice 

Debbie Heywood looks at new UK gambling rules which start to bite in August 2024.

The Gambling Commission announced new rules to help improve safety and consumer choice on 1 May 2024. The changes are in line with the previous government's White Paper and follow a consultation.

Changes will be implemented in four stages: August 2024, November 2024, January 2025 and February 2025. The Commission will: 

• Conduct a pilot of frictionless financial risk assessments aimed at preventing situations where customers can spend large amounts in short spaces of time without any checks. Consumers will not be affected during the pilot phase which is expected to last six months. Following this the Commission will decide whether or not to implement permanent rules which will only happen once data sharing is frictionless for the majority of customers being checked. 
• Implement proposals aimed at better identification of acutely financially vulnerable online customers through light touch checks for customers with a net deposit of more than GBP150 per month on gambling. This will focus on publicly available data and will not require consideration of personal details. These checks will come into force at GBP500 from 30 August before reducing to GBP150 a month from 28 February 2025. 
• Introduce new rules to reduce the speed and intensity of online products while making them fairer and increasing consumer understanding of how to play. Essentially requirements already applying to slots will apply to online products so features which speed up the time for a result to be shown or give the illusion of control, autoplay, audio and visual celebrations of returns less than or equal to stake, operator-led functionality which facilitates playing multiple simultaneous products, and casino game spin speeds of less than 5 seconds (excluding P2P poker) will be banned. This will come into force on 17 January 2025. 
• Require all land-based gambling licensees to carry out age verification test purchasing and customer age checking form 30 August 2024. 
• Require operator staff management roles to hold a personal management licence from 30 November 2024. 

The rules around speed and intensity of online products will need to be taken into account in online gaming products being developed in the run up to 17 January 2025. Existing products will need to check they comply and ensure they adjust accordingly if necessary.

In-scope businesses need to ensure they are ready to comply, particularly in relation to the first batch of changes applying from August 2024.

A tale of two extremes in the game industry: prolific growth and massive cuts 

Shireen Shaikh looks at the implications of industry layoffs.

A recent report by Game Developers Conference (GDC) 2024 surveyed 3,000 developers and found that 35% had been affected by layoffs in the previous 12 months and 56% were worried about future layoffs. In February 2024, Electronic Arts announced the cancellation of its upcoming Star Wars Games, with an estimated 670 employees to be made redundant globally. Meanwhile, Microsoft recently announced plans to make 1,900 redundancies in the gaming division and Sony decided to close its London studio, with 900 staff likely to lose their jobs globally.

News of mass layoffs always sends shockwaves through a sector. This is particularly marked where, as in the gaming industry, this was preceded by a massive growth spurt such as occurred during the pandemic. The news is particularly hard to swallow in an industry characterised by creativity, optimism and community.

Some of the factors causing the job cuts are over-expansion during lockdown (or the transient nature of the increased demand), general economic uncertainty and paucity of funding to start new games studios. Consolidation and a desire to increase profitability, ever-present in any business model, also explain current trends.

Swathes of cuts leave a scar and change the morale and expectations of the workforce for some time. This can give rise to a greater awareness of employment rights and a demand for trade union representation in future. It is no accident that the membership of the gaming division of the Independent Workers of Great Britain Union grew exponentially in 2023, when the job cuts started to proliferate. The branch describes itself as a worker-led democratic union advocating for workers' rights, including an end to unpaid overtime, transparency of pay and better records on diversity and inclusion. It has been resisting calls for return to the office where employers have insisted on this.

It is always challenging for an employer to manage a collective redundancy exercise well, particularly across jurisdictions. Employee or trade union representatives must be informed and consulted with (also elected if there are none to begin with) on a range of prescribed matters set out in the Trade Union and Labour Relations (Consolidation) Act 1992. The messaging to staff must strike the right tone and there may be individual consultation points raised alongside those raised by employee representatives. What makes it even more challenging is when workers are also starting to organise in new ways.

With the second big concern highlighted by developers in the GDC report being the use of AI, it is fair to predict that workers in the game industry are likely to want to organise more collectively in future. This is not just the case in the UK – 150 workers at Sega of America recently became the first US game workers to ratify a union contract in the USA. The innovative nature of such individuals may mean that we see novel forms of collective action emerging, or even creative partnerships we have not yet thought about.

Microsoft to make four exclusive Xbox titles multi-platform

Debbie Heywood looks at Microsoft's plans to make four Xbox titles available on rival platforms.

In February 2024, Microsoft announced it would make four previously exclusive Xbox games available for use on rival platforms. Microsoft insists it continues to invest in developing new consoles, but Microsoft's Phil Spencer also said: "I have a fundamental belief that in the next five to ten years, exclusive games which are exclusive to one piece of hardware are going to be a smaller and smaller part of the games industry".

Microsoft sold 'only' 7.6 million Xbox consoles of the 46.5 million consoles sold in 2023, so its announcement is widely seen as part of a shift to focus more on cloud and mobile gaming (with stated ambitions to build a gaming app store on mobile).

Apple's plans for DMA compliance prove controversial with larger apps

Debbie Heywood looks at Epic Games's response to Apple's DMA compliance strategy.

Apple has announced, as part of its compliance with the EU's Digital Markets Act (DMA), that it will allow EU customers to download apps outside its App Store, will allow the use of alternative payment systems to ApplePay, and will allow iPhone users to select from a number of different browsers as their default. 

Apple was fined EUR1.8 billion by the European Commission in February 2024, for abusive app store rules which were found to prevent music streaming app developers including Spotify, from telling iPhone users about cheaper payment alternatives outside the App Store. Apple is reportedly planning to appeal the decision, however, many of the activities in question are now unlawful under the DMA for in-scope services. 

Apple's DMA compliance strategy has, however, led larger app developers to express concern about Apple's new charging model which accompanies the changes. It will charge a "core technology fee" for each app installation and update where the developer makes the app available other than through Apple's App Store. The first 1 million first annual installs will be free, and reinstallations and updates within the first twelve months of installation will be exempt. Apple claims this means the installation fee will only apply to less than 1% of developers. Epic Games, likely to be caught by the new charge, is among those to strongly criticise the plans, accusing Apple of "malicious compliance" with the DMA and of introducing measures which would affectively allow it to block competitor game stores and new entrants on the App Store. 

Apple removed Epic's Fortnite game from the App Store in 2020 after Epic breached the App Store's in-app payment rules. However, in early March, Apple agreed to re-instate Epic's developer account two days after blocking Epic from launching an online marketplace on Apple operating systems.

Apple claimed it had taken the step to block Epic as a result of concerns that it would not comply with its new rules, introduced as part of Apple's DMA compliance plans. It said it had reversed its decision following assurances from Epic, which is now free to bring the Epic game store and Fortnite back to iOS in the EU.

Germany and Ireland among those looking to take a stricter approach on loot boxes

Oz Watson, Jo Joyce and ECIJA's Xavi Muňoz-Bellvehí look at the evolving approach to regulation of loot boxes in the EU.

The use of in-game purchases is a popular monetisation model. It involves the sale of gameplay extras like cosmetic items and emotes using in-game currency which can be bought for real money to add an additional revenue stream. 

In-game purchases have come under scrutiny due to the risk of player confusion about whether they provide a competitive advantage during gameplay and, in some cases, due to a potential overlap with gambling regulation.

The UK Gambling Commission (the Commission) has identified loot boxes as a potential risk to children - some jurisdictions such as the Netherlands and Belgium have already regulated their use and China has recently announced new rules which include banning loot boxes for children (see here for more). 

Germany now looks as though it may take a stricter approach in this area, aligning itself with the Netherlands and Belgium. The Bremen state governing coalition (made up of the Social Democrats, the Greens and Die Linke) is pushing for a ban on in-game loot boxes and the state parliament has asked the state senate to push for reform at a federal, nationwide, level. So, while the proposals have no practical effect yet, there is strong sentiment among some political parties in Germany to regulate loot boxes. The current regulatory positions adopted by the UK and Germany are broadly similar, in Germany titles containing loot boxes must declare this on the box and the inclusion of loot boxes will be factored into the age rating given to the game. Whilst in the UK, PEGI determines the age rating of a game based on content descriptors (which include loot boxes under the categorisation of 'Paid Random Items') but does not explicitly factor in the presence of loot boxes to the age rating that is assigned. Rather, this content descriptor may accompany the age rating and an additional notice if the in-game purchases include such items as loot boxes.

Ireland's draft Gambling Regulation Bill (discussed in more detail here) also, on the face of it at least, looks likely to bring loot boxes within scope of tighter regulation in Ireland. In the current GRB draft, “game” means a game— (a) of skill or chance, or partly of skill and partly of chance, and (b) where a participant in the game may, having made a payment, win a prize of money or money’s worth; “gaming” means providing a game or participating in a game and falls within the definition of betting. By this definition it seems likely that some loot boxes will be caught. 

Spain also recognises the operational mechanics of loot boxes as conceptually similar to certain gambling activities, such as slot machines, making them potentially fall under the gambling laws. Consequently, the Spanish Ministry of Consumer Affairs has initiated a draft regulation targeting a specific type of loot box, referred to as "random reward mechanisms." These require a monetary transaction from the player to activate the random reward mechanism, offering economically valuable rewards that can be exchanged among game participants or converted into real money or other virtual items, for example aesthetic improvements or competitive advantages.  Currently, when game reward mechanisms fulfil these specific criteria, they are designated as gambling activities. The Spanish Gambling Authority has clarified that, without explicit regulation, these practices are effectively banned.  Also, under this regulatory proposal, access to loot boxes would be restricted for minors through age verification mechanisms.  

It will be interesting to see how these initiatives develop and whether we are going to start to see a wave of increased regulation of loot boxes across Europe. And even if the UK is not currently proposing regulation, its Advertising Standards Authority has recently upheld a number of complaints around adverts which failed to alert gamers to the fact their games contained loot boxes, causing some to call the UK's self-regulatory approach into question.

Slow but definite progress on the UK Gambling Review

Debbie Heywood looks at Gambling Commission consultations.

The government announced a Gambling Review on 8 December 2020 eventually publishing a White Paper on 27 April 2023 alongside Gambling Commission advice. The first set of consultations to implement proposals was launched in August 2023 with a second launched in November 2023 and closing in February 2024.

In December 2023, the Gambling Commission announced a consultation on financial penalties and financial key event reporting as part of its work to ensure effective regulation. The Commission is looking to bring greater clarity and transparency to the way financial penalties are calculated, and is proposing amendments to rules on financial key event reporting to take account of the increased complexity of mergers and acquisitions and globalisation in the sector. This consultation closed on 15 March 2024.

The Gambling Commission is now analysing responses and plans to publish one or more responses in 2024.

In the meantime, on 23 February, the government published its response to its 2023 consultation on maximum stake limits for online slot games. It confirms the plans to introduce a statutory maximum stake limit of GBP5 per spin for adults aged 25 and over, and GBP2 for young adults aged 18-24.

Work on reforming and updating the UK's gambling regime is clearly continuing and gathering pace since publication of the much-delayed White Paper. This suggests that by the end of this year, there should be greater clarity around the changes to be made to the UK's gambling regime.

Turmoil in China's gaming market following proposal on new online gaming restrictions

Laura Craig looks at the impact of China's latest proposals for the gaming industry.

December saw China's National Press and Publication Administration issue new draft regulations targeted at the gaming sector - the Measures for the Administration of Online Games. The proposed rules seek to introduce spending limits for online games, ban rewards for daily player logins, and prohibit minors from being offered 'lucky draw' loot box prizes. The announced regulations therefore impacted several core monetisation and gameplay mechanisms featured in live service games, which make up a large portion of China's gaming sector. 

If passed, these restrictions would not be the first to impact the interactive entertainment industry in China. In 2021, limits were imposed on playtime for minors and approvals for new video game releases were paused due to concerns around addiction, which resulted in revenues for the gaming sector shrinking in 2021 and 2022. 2023 saw renewed growth as games began to be approved for release again, but the proposed restrictions highlight that concerns remain. Following the proposals, Tencent lost USD43 billion in market value and Netease shares fell by a quarter. With further significant losses reported by other major tech and gaming companies, Chinese authorities subsequently reported that the draft rules may be revised and a government official involved with the regulation of press and publications has reportedly been removed from office.

The luck of the Irish – will long awaited betting regulation hit digital gaming?

Jo Joyce looks at Ireland's Gambling Regulation Bill.

Coverage of proposed changes in gambling regulation in Ireland have been focused on the impact on horse racing and casinos but once established, the new regulator, the Gambling Regulatory Authority of Ireland (GRAI), will have powers to regulate digital advertising, websites, and apps. The proposed changes set out in the Gambling Regulation Bill (GRB) are set to significantly change and modernise the digital and remote gambling market in Ireland and the broad scope may bring a range of digital activities and promotions within the scope of gambling laws for the first time. 

As the GRB slowly makes its way through the legislative process, gaming companies need to start considering now whether their activities could bring them within scope of the proposed law and what that might mean if they are caught.

The blurred line between gaming and gambling

A big focus of the GRB is child protection. The Institute of Public Health, called for in-game transactions to be subject to regulatory scrutiny owing to potential links between loot boxes and experiences of problem gambling, particularly among children. When debating regulatory change there was discussion in the Oireachtas (Irish Parliament) on how and whether to bring features such as loot boxes within the scope of regulation (loot boxes are bundles of virtual items related to a video game that can be won by a gamer as a reward or can be purchased with real money).

The gaming industry worldwide has generally resisted the treatment of loot boxes as gambling but the definitions of the GRB would, on the face of them at least, bring loot boxes within scope of tighter regulation in Ireland. In the current GRB draft, “game” means a game— (a) of skill or chance, or partly of skill and partly of chance, and (b) where a participant in the game may, having made a payment, win a prize of money or money’s worth; “gaming” means providing a game or participating in a game and falls within the definition of betting. By this definition it seems likely that loot boxes will be caught. 

Gambling with credit cards will also be prohibited under the GRB. If loot boxes and other in-game transactions fall within the scope of gambling restrictions, then gaming companies will need to ensure that they are not accepting payment for them by credit card – though this may be the least of their challenges. 

Advertising and promotion

A significant effect of the GRB will be a restriction of advertising and promotion of gambling activities. Under the current GRB draft, “advertise” means any form of communication, whether to the public or otherwise, intended to publicise or otherwise market a gambling activity including by electronic means including by telephone and on the internet. 

Restrictions will be particularly tight on social media where advertising of gambling services will be prohibited. All online gambling promotion will become opt-in only, though the acceptable mechanisms for managing opt-in are not yet clear. 

Significant limits will also be imposed on advertising and sponsorship – clubs with members under 18 will not be able to take gambling sponsorship, and gambling advertising will be prohibited between the hours of 5:30 and 21:00 on television, radio and on-demand streaming services accessed in Ireland. 

Penalties

The GRB details significant penalties (up to EUR20 million or 10% of turnover) for companies that breach the law. The Bill defines turnover as total income from gambling less the total amount paid out in winnings. While the Bill does not expressly state that turnover means worldwide turnover, it does not restrict it to turnover derived from Irish consumers. In the case of the most serious breaches, including failure to protect children from gambling, custodial sentences of up to eight years may be handed down which, in theory, could be given to company directors with sufficient personal responsibility for the conduct of illegal activities.

The GRAI will have the power to proactively tackle problem sites and operations run from outside Ireland by making an application to the High Court to require internet service providers to geoblock offending websites, preventing access in Ireland.

New remote licences will include a requirement on the licensee to maintain a register of account holders and to take steps to ensure responsible gambling including the provision of age gating and parental restrictions. 

Giving with one hand and taking with the other?

While much of the GRB may seem to be bad news for the gambling and game industries, there is a corresponding hope that by modernising gambling law in Ireland and providing certainty and clarity for the digital age, the industry can view Ireland as a well-regulated and safe place to do business. Such ambitions for a successful digital gambling industry in Ireland are mirrored by the hopes for the gaming sector, with significant incentives offered by the Digital Gaming Tax Credit introduced in 2022. Unless the scope of gaming activities and the inclusion or exclusion of in-game transactions in the GRB is clarified in the draft Bill however, these ambitions may be hard to meet and game developers may be forced to adopt a cautious approach in Ireland to balance opportunity with operational certainty.