Social Gaming Thriving as Online Gambling is Slowed by the Legislative Process

The U.S. DOJ’s announcement last December –that it was now interpreting the 1961 Wire Act as primarily prohibiting only online sports betting– generated a lot of excitement and speculation that many states would move to legalize online gaming.

Today, almost one year later, the excitement remains although little actual activity has occurred. So far, only Nevada and Delaware have enacted legislation permitting online gaming. DC enacted legislation, but it was repealed before it was implemented.

As this article makes clear, however, social gaming continues to provide a viable and profitable online gaming alternative, while states craft legislation to address online gambling.

Meanwhile, a number of companies are jockeying for position in anticipation of more online gaming legislation. Numerous acquisitions have occurred in this space. For example, International Game Technology acquired Facebook casino games developer DoubleDown in January, 2012 for $500 million.  DoubleDown does not permit betting with real money, but rather generates revenue by selling virtual gaming chips.

Social entertainment company RockYou acquired Facebook casino developer Ryzing, creators of Bingo by Ryzing.

Social game developer Zynga is doubling down on its gambling-based business strategy. Zynga rakes in some serious profits from Zynga poker (selling virtual poker chips that cannot be redeemed for cash). Reportedly, Zynga is expanding its focus in this area to include online gambling.

Social game developer Big Fish launched a new iPhone app called Big Fish Casino, which includes real-money gambling (in the UK) in conjunction with the Betable gambling platform. This is the first time that a real-money gambling game will be available in the App Store.

Facebook, too, has started hosting real-money gambling games, by offering Bingo Friendzy by Gamesys on its platform.

Casino operators are also jumping on the band-wagon.  Las Vegas Casino operator Station Casinos announced it is acquiring a stake in Fertitta Interactive, which offers online games, social gaming, and entertainment services, including an online poker game.

And the list continues.

As this sampling shows, many companies are diving into online gambling, where it is legal. Others are leveraging social gaming and other models that (ideally) do not involve real money gambling. Others are employing creative business models and strategies involving contests, sweepstakes and gambling-like activities in social games or what we refer to as gamblification!

Pillsbury’s Social Media, Entertainment & Technology Team has prepared a white paper on legal issues associated with these “gamblification” strategies.