In addition to the legal considerations about gamification, there are series of what we might call regulatory concerns. Areas where some practice might be allowed but it's subject to various restrictions by administrative and other agencies. Let me go through a few of these quickly. Most of them, like the legal issues, become particularly serious when there's money involved. The first, though, doesn't necessarily require that. It's the situation where someone is surreptitiously becoming a marketer or an endorser for a product. The Federal Trade Commission in the United States promulgated a set of rules in the past few years that were primarily targeted at bloggers who were being given money or free products or other consideration by companies, in order to write wonderful things about those companies on their blogs. Some of them were people who actually like the products and just appreciate getting free stuff. But in some cases, the people were effectively becoming paid endorsers, and yet to readers of the blog, they were just some person who was writing an individual blog and happened to genuinely love these products. So the Federal Trade Commission issued rules essentially requiring disclosure. Saying that if you are endorsing a product, in some public way, because they gave you something, then you have to disclose that fact and not have people think that you're endorsing the product purely because you happen to love it. So, how does this connect with gamification? One of the ways that many gamification systems in marketing provide opportunities for people to get points is by recommending products or companies through social media. For example, here this is the Samsung Nation service, which I've used a number of times before, and one of the badges it has is a badge that you can unlock here by liking this post. So if you like the post about Samsung Nation, then you unlock a badge. And there are other badges and achievements in this and other gamification systems that involve things like tweeting about a company or a product, liking it on Facebook, or posting something on it on Facebook or elsewhere. These are situations that might give rise to this requirement of disclosure. Now, in these cases, the person involved is not necessarily getting paid directly, they're just getting some virtual value through the point system or the achievements in the gamified system. Which, itself, may or may not produce tangible, real-world rewards but it's worth thinking about if this is a key structure in the gamified system, whether at some point, it might run afoul of some of these rules. Second concern from the standpoint of regulation is banking. If, in fact, what's involved in the gamified system is a currency, is something that is like money or that is freely tradable back and forth with money, then potentially all of the kinds of requirements that apply to banks, things like record-keeping, reserve requirements, things about currency manipulation, fraud. Money laundering is a big one, restrictions on taking money in and out of countries, consumer protection laws, taxation rules, accounting rules. All that stuff potentially applies, or maybe, you as the service provider are not permitted to engage in this activity unless you are registered and regulated as a bank. This is something that typically a gamified system provider or a company that's using some sort of gamified system is not going to want to have to deal with. They're not in this because they want to build a full fledged financial institution. Even if they're using some sort of virtual goods or virtual currency type system as part of their platform. Again, this is something that you're probably not going to run into with most gamified systems. But worth keeping in mind if there is real money going in or out of the system, and there is some tradable structure around a virtual currency. The third on is gambling and sweepstakes. Again, if there's some reward, some valuable, tangible reward that can be achieved through the system. Then there is the potential to get swept up under either sweepstakes laws which, at least in the United States, are predominantly issues at the state level. Where different states have different requirements about what kinds of sweepstakes you can do. Whether, for example, you have to require that someone be able to enter the sweepstakes without having bought your product and so forth. That's one category. If the idea is basically this is a random drawing, in return for buying a ticket, participating by using a product, or something else, that you're going to win some money if you're the winner of the sweepstakes. Then, potentially the gamified system has some structure that looks like that. You have to think about those rules. Or on the other hand, if this is considered gambling, then a whole other set of rules apply, and these are predominantly at the national level. In the United States, interstate gambling is by and large prohibited. What is permitted is gambling in designated areas like Las Vegas and Atlantic City, and on certain Indian reservations and government sponsor lotterys, as well as a variety of other things that are not quite considered gambling. In many other countries, gambling is permitted but regulated for access to children and so forth. We have all kinds of questions that come up when online gambling sites locate outside of the United States or in other places and then they're available to people in different countries. The point here is that if a gamified system seems like gambling, I've already talked about a few times, the slot machine like aspect of some gamified systems. The fact that these are systems that can actually tie into real tangible rewards, if what this looks like is a different way of gambling, then potentially regulators will say it's subject to those gambling rules. And maybe even those prohibitions, if it is in a country like the United States that has regulations on gambling. This is again, something to think about where there is money involved. There is a distinction in gambling law between what are called, games of skill and games of chance, the idea being that basically, gambling is all over here. Gambling is something where, essentially, you're not guaranteed that you're going to win based on your skill, you're just hoping to win, based on say a pull of a lever on a slot machine. On the other hand, if it's primarily about skill, if you are winning a prize for doing something effectively, whether that's winning a prize for winning a sports contest or for winning some other kind of contest. Where the most skillful person is the winner, then the gambling laws don't necessarily apply in the same way. The question is in a gameified system where there might be elements of randomness and also, elements of skill involved, which side of the line would it fall under? Again, if anything like this is potentially an issue with a system that you're involved with, a good idea to call in someone with more specific legal knowledge to think about it and help advise you on what to do. Now these are by no means all of the legal and regulatory questions that might come up with regards to gamification but they're some of the bigger ones that might lead to a particularly serious problem if the system covers the area that the legal or regulatory restriction involves. And it's not done in a way that takes into account what those obligations might entail.
