Attorney Shao Shiwei | Do Fragments Consumed in the Viral “Battle Royale” Mini-Game Constitute a Rake?

 

Introduction:

We recently received a consultation regarding a platform that intends to launch a clone game similar to the “Battle Royale” mini-game featured in Chao Wan Yu Zhou (Trendy Toy Universe). The platform is concerned whether its mechanism, which requires players to consume fragments (virtual coins, items, etc.), would be deemed as the platform “taking a cut,” and whether this could therebygive rise to criminal liability for the crime of operating a casinounder applicable law. This article addresses these questions.

 

 

Author: Attorney Shao Shiwei

 

01

Does a Platform’s “Taking a Cut” Through Fragment Consumption Amount to the Crime of Operating a Casino?

Whether it is the recently popular “Battle Royale” or traditional mini-games such as card draws, chest openings, or lucky wheels, these games share a common characteristic: they are probability-based mini-games. Whether a player wins is determined by an uncertain event governed by the platform’s mechanisms.

If the platform requires users to contribute fragments to participate in the game, the fragments contributed by losing players are generally destroyed by the platform. Through the cycle of continuous user payments and fragment contributions, consumption of the contributed fragments, and subsequent further payments and contributions by users, the platform generates profits.

 

However, with respect to such mechanisms, some game project operators, after reviewing the relevant legal provisions, raise the following question:Could this constitute the act of “taking a cut for profit” under the crime of operating a casino as defined in the Criminal Law?The answer is that it cannot be generalized; each case must be assessed on its own facts.

 

The author previously stated in “Play-to-Earn Blockchain Games: How to Avoid Becoming Gambling” that, for a game to involve gambling, it must simultaneously satisfy three elements:

1、Prerequisite for Participation: Users are required to pay to purchase in-platform items or game currency;

2、Mode of Operation: The gameplay involves chance, with users participating in a manner of “staking small amounts to win large ones,” and there is a possibility of loss;

3、Outcome of Proceeds: Users withdraw funds, directly or indirectly, to obtain fiat currency;

 

Therefore, if the platform does not provide users with direct or indirect channels to cash out in-game items or tokens, and merely incorporates a mechanism for consuming fragments during gameplay, without simultaneously satisfying the above three elements, it does not constitute a gambling-related crime.

 

As for the provision in the Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Online Gambling that “the cumulative amount of rake-taking profits reaches RMB 30,000 or more,” which constitutes serious circumstances for the crime of operating a casino, this provision’s determination of criminal liability is also premised on the platform’s conduct already constituting the crime of operating a casino. Therefore, it should not be narrowly interpreted that the platform’s destruction of user fragments constitutes “rake-taking.”

 

02

Legal Recommendations

There is indeed a possibility of transformation between probability-based games and gambling-related crimes.such possibility exists.The uncertain gameplay mechanics of such games can stimulate users' desire to win, making them highly attractive. To mitigate risks related to gambling, we recommend that game project operators pay attention to the following three points when designing gameplay mechanics:

 

1. Treat secondary items as fragments randomly drawn by players.

Based on the following regulations, it can be concluded that the fragments used in probability-based games must not involve direct cash contributions from users. Participation should not allow the use of fiat currency to directly purchase virtual coins for gameplay, nor should primary items that are directly exchangeable with virtual coins be used for participation.

 

Notice on Strengthening the Management of Online Game Virtual Currency issued on June 4, 2009

(20) Online game operating enterprises shall not adopt methods such as drawing lots, betting, or random selection to distribute game items or virtual currency under the premise of users directly contributing cash or virtual currency.or other chance-based methods to allocate game items or virtual currency.

 

Issued on December 1, 2016 (now invalid[1])theNotice of the Ministry of Culture on Regulating the Operation of Online Games and Strengthening Interim and Post-Event Supervision

(4) Virtual items issued by online game operating enterprises, which users can obtain by directly purchasing with legal tender, using online game virtual currency, or through a fixed exchange ratio, and which have the function of being directly exchanged for other virtual items or value-added services within the game, shall be managed in accordance with the relevant provisions governing online game virtual currency.

 

2. Simultaneous presence of the three elements constituting gambling in games entails a high risk of criminal liability

As noted above, for a game to be deemed gambling-related, it must simultaneously involve paid input, random gameplay mechanics, and cash or physical-item payouts. “Paid input” is one of the revenue sources for game operators, while “random gameplay mechanics” serve as the mechanism that encourages users to keep playing. Most games incorporate these two elements, which in themselves are not objectionable.

For most game operators facing criminal liability, the issue lies with “cash or physical-item payouts.” To achieve compliance, the exchange of in-game tokens or items must be strictly unidirectional: any tokens or items issued by the platform may only be used for various in-game features and must not be redeemable for cash or physical items.

 

3. Disclosure of win–loss probabilities and publication of users’ random-draw results

Game operators must publicly disclose the draw probabilities and the winning results for participants.

Notice

(6) … Online game operating enterprises shall promptly publish on the game’s official website or on the random-draw page the names, attributes, content, quantities, and draw or synthesis probabilities of all virtual items and value-added services that may be obtained through drawing or synthesis. The published information regarding random draws shall be true and effective.

(7) Online game operating enterprises shall publish the random-draw results of participating users on the game’s official website or in a prominent location within the game, and shall retain relevant records for inspection by competent authorities; the retention period for such records shall be no less than 90 days. When publishing random-draw results, appropriate measures shall be taken to protect user privacy.

 

4. Fragments obtained through random draws must not be obtainable solely through a particular game; alternative acquisition methods must be available

Providing users with alternative acquisition channels helps mitigate gambling-related risks. While preserving the entertainment value and element of chance inherent in random draws, it also enables users to consume more rationally.

Notice

(8) Where online game operating enterprises provide virtual items and value-added services through random draws, they shall simultaneously provide users with other means to exchange virtual items and to use online game virtual currency directlypurchaseand other means of obtaining virtual items and value-added services with equivalent performance.

 

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[1] No new regulations have been issued to replace them; therefore, they may still serve as reference.