Gambling and Skillgames

How are we going to solve online identity? Just stop by 7-11.

A number of years ago, I was involved in some discussions about age verification for online gambling. At that time, as with it is today, there are plenty of technology pushers around - trying to sell ID tokens, biometric systems, etc. etc. etc.

My answer was simpler - use convenience stores.

After all, these pervasive, local merchants are the gateway to adulthood.

They sell us alcohol, cigarettes, porn, and lottery tickets.

They are entrusted by the state to verify our identities and our ages.

It would seem New Hampshire has figured this out. The state is beginning to support online lottery games, but the sales are tied to the existing retail infrastructure as players need to go to a lottery retailer, buy a ticket with a unique number, and register online to play (and presumably reverse the process to cash out).

Simple and as secure as anything else anyone has proposed.

And only the beginning for online skill and gambling games.

Know anyone at 7-11?

"New lottery games: A small change", http://www.unionleader.com/article.aspx?headline=New+lottery+games%3A+A+small+change&articleId=0e853e6a-1924-40db-bb54-d78c944c7d79>

"State To Launch Online Gaming Website Next Week", http://www.wmur.com/news/24016014/detail.html

There's a Sumo scandal brewing in Japan. 65 wrestlers have admitted to gambling illegally on baseball. This is in the wake of recent assault and drug use accusations.

It kind of sounds like a US sport.

What is different is that sponsors are taking the accusation seriously. Nagatanien, a major sport sponsor, is canceling its sponsorship of the next major tournament and reviewing its entire involvement with Sumo, as are several other sponsoring firms.

There has been a growing wave of gambling problems tied to different sports. Ranging from the mostly benign (wagering on other sports - with the main concern being debt and involvement with "interesting" folk) to very serious accusations of match fixing and odds manipulation.

The global nature of sport and wagering is making this a problem both for legitimate wagering firms and for sports organizations.

N. Fujimura (2010), "Sumo Loses Biggest Sponsor Amid Gambling Scandal (Update1)", http://www.businessweek.com/news/2010-06-22/sumo-loses-biggest-sponsor-amid-gambling-scandal-update1-.html

Gambling is Easy, Skill is Hard. Proving that a game is a gambling game is pretty straightforward, but how do you prove that a game is NOT a gambling game, that it is a game of skill? This is an increasingly important question as traditional computer game companies, such as Virgin Gaming, try to take familiar computer games into the play for cash and prizes world and slot machine manufacturers look to skill games as a way to reach new audiences.

Such is the case with Pace-O-Matic's "Moxie Mania Empire Edition" game licensed by Moxie Metro in New York. The basic game is (perhaps) a skill game using a variant of Tic-Tac-Toe where a player finds the best cell to score of the 9 available. After a long and winding series of legal battles, the game was declared a gambling game because the court determined that the prize which could be won was determined by chance.

Thus, though the game would be considered to have a "positive expected value" for any skillful player, the prize amount was chance driven, thus the game was gambling.

To review, there are three elements to determine whether a game is a gambling game:

1. A payment or consideration to be able to play.
2. A prize or reward of actual value based on the game's outcome.
3. An element of chance in determining the game's outcome.

In this case, the chance solely drives the size of the prize, even with perfect play, thus, the game has an element of chance and is gambling.

It was an interesting move by Moxie Metro and Pace-O-Matic as perfect skill play will always have a positive outcome (so, no risk of losing funds), but the court ruled that this was not sufficient.

Solo skill games for money are, I think, at high legal risk for being determined a game of chance, or having no players, or losing money. In order to be popular, players need to think they can win (my "illusion of skill" argument), operators need to know that players aren't going to win (more than they spend), and all of this needs to be done with no element of chance to get into legal trouble.

VERY HARD, if not impossible from a game design perspective.

Conversely, I think the real potential is with multi-player games. Core mechanics such as Rock-Paper-Scissors, Battleship, checkers, etc. lend themselves to rapid play with no element of chance (RPS raises some problems for another day).

M. Webb (2010), "Court Ruling Says Moxie Mania Empire Edition Is Illegal", http://www.vendingtimes.com/ME2/dirmod.asp?sid=EB79A487112B48A296B38C81345C8C7F&nm=Vending+Features&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=90CB95AF28D8497A8B64067285D7171D

Moxie Metro web site, http://moxiemetro.com/index.php

Pace-O-Matic web site, http://www.paceomatic.com/index.html

Richard Branson has re-entered the game industry with a tournament game site, Virgin Gaming. The site is supposed to award $1 Million in prizes over the next 12 months and will use existing console games.

(If you've been to PlayNoEvil before, you'll know what's coming next)

First of all, I am a huge fan and fascinated by the potential of skill games as an online business. I think skill games and more advanced gambling games could be the drivers of a new industry.

However, you've got to design for the medium.

Without basic changes, I suspect Virgin Gaming will rapidly join the ranks of failed tournament services.

Pool of Players

Customers are key to a business and a tournament service relies on having many, many players so that the entry fees far outweigh the cost to operate and the prize pool. Most console games are HEAVILY SKILL driven. There are great players and then there are the rest of us. They know it. We know it. In pretty much any sports or FPS or other twitchy game, I know I've lost in the first couple of minutes. Ranking systems somewhat compensate for this, but as seen with Team Fortress 2 and most other online shooters, the best players dominate the game and everyone else quits.

The Illusion of Skill

A 'great' skill game is one where everyone thinks that they are above average. Poker has achieved this. The game is designed so that for virtually every hand there is a way to see to have won when you've lost. Poker is a study in brilliant player choice and information disclosure. The game is strategic, but simple and, because of chance,a player is likely to not go too long without a victory.

Game Duration / Game Sessions

A good tournament service needs to have lots of short game sessions so that players who've lost have a chance to re-enter the tournament or enter another event. If a game takes a long time to lose, players will abandon it rather than try again. Learning opportunities and feedback needs to be fast.

The Dark Side

While Virgin Gaming is using the Xbox Live and Playstation service, there is no strong identity in the system (both services now support pre-paid debit card players), so there is only a weak linkage between an account number and a person. Once a game is played for money, even if there was strong "account identity", there is very weak "player identity" - after all, I could bring in my "ringer" buddy to play on my behalf when real money is on the line.

... and then there is cheating (a problem even on console games).

... and then there is tournament abuse (manipulation of ranking and reputation systems).

... and, of course, the complicated legal issues for these games (skill games are not legal in all US states).

I discuss tournament and ranking abuse, cheating, and identity problems at some length in my book Protecting Games.



I'm looking forward to the day someone gets this right. It will be a true revolution in gaming.

"Virgin Gaming FairPlay Guarantee", http://virgingaming.com/fairplay.html?f=FTR_1F_001

O. Chiang (2010), "Richard Branson Launches Virgin Gaming, An Online Game Tournament Service", http://blogs.forbes.com/velocity/2010/06/15/richard-branson-launches-virgin-gaming-an-online-game-tournament-service/

A bill has been introduced to legalize intrastate Internet gambling in New Jersey. The proposed bill would allow currently licensed traditional casinos to set up web sites that could be used by New Jersey residents to bet online. Other discussions of this issue have suggested that interstate compacts between states that legalize gambling (similar to combined lottery pools) may be the way online gambling is legalized within most of the US (bills have been introduced in Florida and California as well).

The claim is that there are around 500,000 NJ residents who wager $150 million a year at offshore voting sites. (that's $300 each - not a huge amount considering this is likely counting each wager made).

A representative of Interactive Media Entertainment and Gaming Association claims that 1500 jobs and $200 million in revenue could be raised.

"Some N.J. lawmakers betting on the Internet for new casino game revenue", http://www.nj.com/business/index.ssf/2010/06/some_nj_lawmakers_betting_on_t.html

The Swiss Supreme Court has ruled that poker is a game of luck in Switzerland and can only be played in casinos.

Meanwhile, the Ohio House has introduced a bill to regulate "skill games" (mostly games similar to slot machines, but with some element of skill).

There are some interesting public policy questions implied by a game played for money that may need to be considered:

1. How do you prevent money laundering?
2. How do you handle addiction / problem gaming? Do you?
3. What age limits or verification are appropriate?
4. How do you ensure the integrity of the game, skill or luck?
5. How do you ensure the integrity of the game operator?
6. If there is a game machine or software, who validates its integrity?
7. What the __ is a game of skill and how do you "prove" that a game as implemented is actually a game of skill?

E. Engeler (2010), "Swiss crack down on Texas hold 'em matches", http://www.google.com/hostednews/ap/article/ALeqM5g49nVKzWWNq_7AJOjVIjuC34WBYQD9G348UG1

J. Nash (2010), "Ohio House tackles 'skill' games", http://www.dispatchpolitics.com/live/content/local_news/stories/2010/06/02/copy/house-tackles-skill-games.html?adsec=politics&sid=101

There are substantial rumors that Virgin / Virgin Gaming is getting into the the skill / tournament games business for money & prizes.

If so, this will be the most serious move by a larger company into the skill games business.

It looks like the early games being considered are conventional console games. While this may be good for yielding a larger number of games, these games were not designed for this environment. Cheating is a much bigger issue, of course, and the bigger the prizes and cash, the larger the incentives for abuse... and the very fact that the games are being played over a network also increases the risks.

J. Fletcher (2010), "Virgin Gaming to offer online game tournaments", http://www.joystiq.com/2010/06/01/virgin-gaming-to-offer-online-game-tournaments/

"Virgin Gaming - ModNation Racers - Tournament Details", http://virgingaming.com/modnation/details

Is the third time the charm? the fifth? I can't even remember all of the times that skill games have been touted as the "next big thing"... and its already doing pretty well in Europe. I actually believe it, but I think its going to be harder than most realize, especially in the area of appropriate game design for skill games.

Why am I talking about skill games (again)?

Titan Gaming just received a $1 Million investment from a long list of folk for their Titan Platform.

There is depressingly little information about the platform and technology on their site. If anything, it looks like a commerce platform + leader board + GeoIP (though none of this is explained).

If you are pitching an API to developers and rev-shares to web site owners, thats great, but thats just the start.

You can't integrate an arbitrary game with an infrastructure and have a "skill game". There are legal requirements. You need to know how the game is going to behave to make an offer of a game for money.

(don't get me going on cheating in these games !)

The successful skill game companies to date build their own skill games and use traditional skill games as their foundation.

The key is potential population and a game that is like the people of Lake Wobegon - where "everyone is above average".

The repeated failed attempts at skill game services based on First Person Shooters is probably the most graphic proof of this.

Neither Doom nor Chess is a "good skill game" for a mass market service.

Poker is definitely a good model (if you believe its a game of skill).

At least it will be fun to see if this goes anywhere.

Maybe its time to dust off that old skill game business plan.

"Titan Gaming Raises $1M From Prominent Angels For Skill-Based Games Platform", http://eberbach.pl/blog/titan-gaming-raises-1m-from-prominent-angels-for-skill-based-games-platform/

"Titan - Conquer the Competition", http://www.titanplatform.com/index.php

11 current and formal professional Starcraft players in Korea have been indicted for fixing games in a substantial scandal tied to gambling on the e-Sports.

Blizzard's Starcraft is amazingly popular in Korea and is the foundation of a thriving e-Sports movement with professional teams, sponsors and television coverage.

3 gambling web site operators were also indicted.

The investigation is widening and ongoing.

Park Si-soo (2010), "StarCraft players indicted for game fixing", http://www.koreatimes.co.kr/www/news/nation/2010/05/117_65996.html

An interesting alliance of the gambling industry and various sports organizations is at war with cheating in sports. The Internet has enabled sports wagering on an unprecedented scale. You can bet on any sporting event, pretty much anywhere on the planet.

It is an open invitation to fraud and money laundering.

The gambling industry is very concerned about crooked wagering manipulating the results and, of coruse, the various sports groups don't like their games being manipulated.

Players and teams are getting banned.

There have been allegations in soccer, tennis, and now snooker and horse racing.

This is only going to get worse. Online wagering has an insatiable appetite for action. More games. More races. More matches.

Smaller venues and local events will make it ever harder to fight corruption.

More to come.

B. Wilson (2010), "Sport and gambling united against cheating", http://news.bbc.co.uk/2/hi/business/10099724.stm