Trifling and Gambling with Virtual Money

43 Pages Posted: 14 Sep 2017  

John Holden

Florida State University

Date Written: September 12, 2017


Gambling, in particular sports gambling, is one of the most pervasive illicit activities in the United States. In contrast to Europe and parts of Asia that have vast legal networks of both online and brick and mortar betting parlors, the United States has largely confined sports betting to the state of Nevada, while tolerating so-called daily fantasy sports in a number of additional states. Slightly less pervasive, though equally or perhaps more often associated with illegal activity are virtual currencies. Indeed, the growth of the illegal gambling market is being partially fueled by virtual currencies. While Bitcoin garners most of the media attention, often associated with volatile valuations or criminal activity a variety of smaller scale virtual currencies have emerged. The challenge for judges and an essential prerogative for lawmakers is to make sense of how to treat virtual currencies under antiquated statutes and interpretations of what constitutes money.

Some of the high-profile cases involving Bitcoin, such as United States v. Ulbricht, and the collapse and theft from the Mt. GOX exchange have raised questions as to whether Bitcoin is money, or even property, whose loss or theft is compensable. Smaller narrow-use virtual currencies have also emerged with a unique distinction from Bitcoin and first generation virtual currencies, they are associated with in-game virtual play and have zero-value per terms of service agreements offered by game makers. No fewer than seven decisions have been issued addressing these in-game currencies, finding that despite the existence of secondary markets allowing users to transfer accounts for fiat currencies, the terms of service agreements control in determining the in-game currencies to be valueless.

These federal holdings create a major problem for law enforcement and prosecutors because if the virtual currencies have no value and virtual games, casinos and/or sportsbooks award prizes with zero-value then it is an impossibility to violate most gambling statutes. This problem becomes exacerbated by secondary markets that use market-based pricing to establish a value for accounts contradicting the game makers’ valuations. The emergence of “skins-gambling” an ancillary feature of a popular video-game has already blossomed into a multi-billion-dollar industry that might be outside the reach of law enforcement, and almost no one has noticed.

Keywords: Virtual currency, esports, gambling, gaming, ICO, skins, Bitcoin

JEL Classification: K00, K10, K14, K33, K40, K49, L50, L59, L63, L80, L83, L86, L89, O34

Suggested Citation

Holden, John, Trifling and Gambling with Virtual Money (September 12, 2017). UCLA Entertainment Law Review, Forthcoming. Available at SSRN: or

John Holden (Contact Author)

Florida State University ( email )

Tallahasse, FL 32306
United States

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