USA Law and Practice Contributed by: Chao Yu (Charles Yu) and Greg Pilarowski, Pillar Legal
(NY Penal Law, Section 225.00) and Washington (WA Revised Code, Section 9.46.0285), have defined “something of value” to include any tokens or cred- its “involving extension of a service, entertainment, or a privilege of playing at a game or scheme with- out charge”. In particular, the Ninth Circuit held that virtual items extending entertainment privileges may constitute consideration in gambling analysis under Washington State law. Chance For a gameplay mechanism to constitute gambling there must be an element of chance, where the out- come is outside the player’s control. However, if play- er outcomes are not determined by chance, but are rather achieved through a player’s skill, the element of chance is removed, and the game may not be con- sidered gambling. Most US courts use either the pre- dominance test, the material element test, or the any chance test to assess the roles of skill and chance in determining a game’s outcome. The predominance test The predominance test is the most commonly used indicator of whether a game is skill- or chance-based. Under this test, games are considered on a continu- um, with pure skill on one end and pure chance on the other. Games such as chess would be almost at the pure skill end, while games in which outcomes are completely randomised, like traditional slot machines, would be at the pure chance end. A game is classi- fied as a game of skill if the game falls predominantly toward the skill end of the continuum. The material element test Some states evaluate whether a game is skill- or chance-based by determining whether or not chance plays a material role in determining a game’s outcome. For example, even if a game requires considerable player skill, if a chance-based mechanism can inter- vene to alter the outcome, then skill may predominate, but chance still plays the material role in determining the result. The any chance test The any chance test is the strictest test for classifying skill-based games and can render wagering on nearly any game as illegal gambling. Under this test, if any
element of chance affects the outcome, the game is considered a game of chance. Prize In addition to consideration and chance, for an activ- ity to constitute gambling, the player must have the potential to win a valuable prize, or “something of value”. Courts typically interpret “something of val- ue” for the prize element of gambling the same way they interpret it for the consideration element. Most chance-based games do offer a prize. While it is usu- ally clear whether or not a game offers a prize, some- times a prize takes a less obvious form, such as virtual currency or plays of the game. Generally, virtual items that can be cashed out into fiat currency satisfy this “prize” element, whereas virtual items that cannot be cashed out are generally not con- sidered “something of value”. For example, in Taylor v Apple, Inc., No 20-cv-03906-RS (N.D. Cal. 2022) , a California trial court ruled that loot boxes in the mobile game Brawl Stars did not constitute illegal gambling devices because the virtual item prizes offered within the game lacked value outside of the game. Another California trial court, in Coffee v Google LLC., No 5:20-cv-03901-BLF (N.D. Cal. 2020) , held that even loot box items with value on secondary trading mar- kets did not qualify as “things of value” for gambling statutes if those trades violated the applicable terms of use. Likewise, in Mason v Machine Zone, Inc., No 15-2469 (4th Circuit 2017) , the Fourth Circuit found no grounds for recovery under Maryland’s gambling loss recovery statute when a plaintiff only had the chance to win virtual currency that could not be exchanged for real-world currency. However, in Kater v Churchill Downs Inc., 886 F.3d 784, 788 No 2 (9th Circuit 2018) , the Ninth Circuit found that although a social casino game’s virtual chips have no monetary value and could not be exchanged for cash, the game did contain a mechanism for trans- ferring chips between users, which could be used to “cash out” winnings. In addition, in Larsen v PTT, LLC, 3:18-cv-05275-TMC (W.D. Washington, 11 June 2024) , the Western District Court of Washington found the virtual coins of two social casino games, High 5 Casino and High 5 Vegas, constitute “things of value” even if such virtual coins could not be exchanged for
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