New Approaches for Online Casinos

Posted by Daeity On Monday, January 16, 2012

I had mentioned before that I hoped other developers and publishers would be keeping a sharp eye Diablo 3's Real Money Auction House progress.

Almost all ratings boards (except for South Korea) don't concern themselves with gambling and they leave regulation up to other government bodies. So, if any gambling inquiries or concerns do arise, it will be well after Diablo 3 launches.. possibly even a year or two later.

And because Activision Blizzard's army of lawyers reviewed and approved this new system, they'll be there to defend it in case of trouble (potentially setting new precedents in legal cases). Other video game businesses can use this to their advantage and implement the same RMAH system in their own games without concern for legal entanglements.

I wonder, though, if other gaming organizations are monitoring these developments?

RMT is very common in games, but Blizzard has created a unique method that can completely change the online gambling industry, and finally give them the loophole they need to avoid legal prosecution (if illegal in their country), licensing, regulation, and/or heavy taxes (if legal, but controlled).

Assume, for example, that you live in a country where online gambling is illegal. Here's how someone could design an online casino where they can profit from gambling, but it's not legally considered gambling as it uses the same process as the D3 RMAH. I've compared D3 to a slot machine before, but this is a lot more in-depth (a practical guide). :)

I'll use the example of a virtual MMO game called "Casino World", although this could easily be done through a webpage as well.

  • In this game, you can wander around a virtual environment with other players. It's a virtual casino consisting of games like Craps, Blackjack, Roulette, Slot Machines, Poker, Horse Races, Sports Betting, plus any other game that casinos typically have.
  • The Casino World programming team can control the odds of all their games.
  • Real money is not exchanged within the game, but rather players use a virtual currency which we'll call "G Credits".
  • When players first buy the game, they're given a certain quantity of "G Credits" to start out with. However, if they want any more "G Credits" they have to buy them other players on the Player-Run Auction House using real cash. Alternatively, they can provide special services for other players in exchange for "G Credits", or play the in-game "free to play" games that pay out "G Credits" in small quantities and over long term.
  • As a player, if you want to convert your "G Credits" into cash, you have to sell them to other players on the same Auction House.
  • When participating in the Auction House, the casino will take a cut of your transactions. There will be a listing charge and a percentage based the amount being sold (the percentage is adjustable too, based on your seniority. The casino will take less if you're a more senior member.) It will not cost anything to buy items or G-Credits though.
  • In-game items can be won as prizes or bought and sold between players. These items can be used to customize your appearance, populate your virtual "Casino World" apartment or house, or actually do useful things like upgrading your in-game membership card allowing you to play different games, play games with higher stakes, or offer various forms of insurance. Special items can also increase your odds or chances of winning prizes (1% increase of odds in winning x card or x item.)
  • Although many prizes are useful, they can also be converted into "G Credits".
  • Players start out with low social status and they need to upgrade their membership card (upgrades purchased from the other players on the Auction House) to play more games, play games with higher stakes, unlock social or gaming "skills", or get access to new areas and elite rooms. Players also need to pay fees to play games, but having certain upgrades on their membership card will cut down on those costs.
  • The game will also have a lot of socializing; private rooms or public chat areas where virtual drinks or dancing women can be purchased for "G Credits".
  • When players sell their "G-Credits" to other users, this real cash goes into their in-game Bank Account. Using this cash, they can use it to shop at the Casino Store to buy real items or video games. Alternatively, if you want to "cash out" to receive the real money, there are additional fees and percentage cuts that you must pay.
  • All of these transactions need to take place between players, and "Casino World" is just providing a service to allow them to safely trade and communicate with each other. It's important to keep some fees low to encourage gameplay. But, the idea is to get users playing the gambling games, get them addicted, which forces them to purchase "G Credits" from other players. The company's job is to get players using the Auction House, because that's where their profit comes from.
  • Since the company is not directly awarding prizes or paying out cash, they're not involved in gambling as all transactions take place only between players.
  • The price they pay is receiving a percentage of winnings or losses in exchange for legalizing gambling. However, because they can increase player numbers (being legalized and all), it's an automated electronic game, and they avoid licensing and taxes, they are substantially lowering their expenses and raising revenue. They also make money by selling goods (e.g. video games or merchandise within their Casino Store.)
There's a lot of consider in a system like this and it needs live player testing and analysis. You need to balance "G Credit" sinks to keep it valuable, while also providing enough "G Credit" wins so that players keep using the Auction House. But, the "Casino World" operators have complete control over the virtual currency flow as well as the games itself; they can control all odds, or adjust per player based on their behavior or psychology. And even those minor adjustments can be made automatically, ensuring that all of your players keep paying the machine.

What's great about this approach to online gambling is that even in countries where it's legal, it's typically regulated and you pay absurd taxes or licensing fees. Using this system, however, it's not gambling but rather just a video game with players who trade with each other so you can avoid all of those extra expenses.

All the "Casino World" owners are doing is "introducing a powerful auction house system that will provide a safe, fun, and easy-to-use way for players to buy and sell G Credits they obtain within Casino World. Items can be sold and purchased using real-world money or G Credits. Casino World does not plan to post items for sale in the auction house. The driving purpose of the auction house is to provide players with a fun additional in-game option for what they do with the items and G Credits they obtain in the game."

There's nothing wrong with this at all.

"But officer, this isn't gambling.. it's just a EBay like auction system which has been around forever. It's a PLAYER-RUN auction house and we're just providing a safe and secure way for players to sell their G Credits."

This can sound a little complicated and there's a lot I left out (e.g. "What If" scenarios.) But, I'm hoping you can work this out in your mind and see how it would operate. If you have any questions, though, let me know.