Digital Advertising Compliance: Social Media, Sweepstakes & Promotions October 20-21, 2015
Placing Your Bets on Gamification and Developing Creative Legal Strategies to Maximize Positive Exposure
Thomas F. Knapp Melissa Landau Steinman VP, Business & Legal Affairs Partner CBS Sports Digital Venable LLP
Tweeting about this conference? #DigitalAdvertising Mandatory Weasel Words
Image source: www.wikipedia.org #DigitalAdvertising What is Gamification?
Gamification applies “game-design thinking to non-game applications to make them more fun and engaging” by tapping into people’s “natural desire to compete and play.” See Adam Swann, Gamification Comes of Age, Forbes, July 16, 2012, available at http://www.forbes.com/sites/gyro/2012/07/16/gamification- comes-of-age/.
#DigitalAdvertising Why Gamify?
1. New Way to Engage Customer and/or Capture a Certain Audience 2. Raise Awareness of Brand 3. Encourage Sharing of Brand Experience in Social Media 4. Strengthen Connection With Followers 5. Data Capture 6. Employee Engagement 7. Consumer Education ….Uh, fun (duh!)
#DigitalAdvertising Lottery & Gambling Laws Regulated under Federal and State Laws: First step in evaluating any game or promotion is generally to ensure that it is not an illegal lottery or some other type of gambling. Lotteries generally have three elements: 1. A prize is awarded 2. Winners are determined on the basis of chance. 3. Participants must provide consideration to enter • Consideration=something of value that must be given to participate (monetary or non-monetary)
#DigitalAdvertising Legal Framework
• Regulated at state and federal level • Federal: • Section 5 of FTC Act used to regulate deceptive sweepstakes • FCC Act regulates sweepstakes on TV and radio, telemarketing and mobile • Deceptive Mail Prevention and Enforcement Act • CAN-SPAM—Refer-a-Friend • Children’s Online Privacy Protection Act (COPPA) • Wire Act, RICO, UIGEA
#DigitalAdvertising Legal Framework, cont.
• State law • Many state laws have specific requirements on RULES: • Should be readily available to all participants and clearly set forth the details • Required disclosures in advertising: odds of winning, eligibility, deadlines, description and ARV of prizes, identity of sponsor • Some states require posting rules (e.g., MA, RI); some states also require posting of winners’ lists • Best practice to include liability disclaimers/releases • Registration and/or bonding • Sweepstakes over $5,000—NY and FL ($500 for RI) • “Amusement contests” in AZ • Most social media sites have their own rules, require special disclosures, prohibit gambling
#DigitalAdvertising Gambling
A person engages in gambling if he stakes or risks something of value (wager) upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome.
Trends: • Legalization of some online gambling in US and related regulation • “Free” sweepstakes sites—are they really free? • Regulation of free-to-pay conversion sites • Attempts to ban Internet cafes through legislation— VA, OH, MS, NC • Redefine definitions of “lottery” or “illegal gambling” to explicitly include electronic sweepstakes games • State AG regulations and guidance also address growth of Internet cafes • Practical and Constitutional issues with overbroadness? • Issues with taking a share of the “rake”
#DigitalAdvertising Issues in Gamification
• Rewards programs • Endorsements and Testimonials • Use of alternative platforms • Partnering, sponsorships and product placement • Native • Intellectual Property • CAN-SPAM and email marketing • Privacy • Virtual Currency • Kids • International
#DigitalAdvertising Marriott Social #Xplor with Hertz and Pepsi Integrations
#DigitalAdvertising Marriott Social Xplor
Legal/Practical Issues: • Registration and bonding required? • Importance of trademark knockout search and registration • Email and mobile marketing efforts: compliance challenges • Mobile app—need for carrier approval, compliance with TCPA requirements for express consent • Mapping out social media campaign • Implications of proposal to expand play to other countries? What are the issues when running an international contest? E.g., taxes, prize fulfillment, translation, registration • Privacy • Use of Rewards Program to appeal to core customer • Practical challenges posed by complexity of gameplay • Integrations/in-app brand marketing
#DigitalAdvertising International Considerations
Online gaming and sweepstakes law varies drastically across countries.
#DigitalAdvertising Alternative Gamification Platforms What are the implications of using mobile, social, video streaming?
#DigitalAdvertising What issues arise with product placements?
#DigitalAdvertising Everybody Wants to Play Words With Friends! CBS: Grammy Awards Words With Friends Starbucks: Created a mini game-in-game interstitial ad between moves in New Words With Friends. Progressive: Play Words With Friends with Flo
#DigitalAdvertising Can you get around problems by partnering?
#DigitalAdvertising IP and Right of Publicity: Heineken Instagram Game
#DigitalAdvertising Right of Publicity
• Game sponsors and developers featuring celebrities, athletes and even individuals in games (video, fantasy or “gamified”) may be vulnerable to law suits for right of publicity • See Noriega and Call of Duty: Black Ops; Lohan v. Rockstar Games; EA v. NCAA Football, No Doubt v. Actvision, EA v. Kirby • Is the use sufficiently transformative to merit First Amendment protection? • Heineken US Open Instagram Contest Photo Hunt—users had to follow series of clues in photo captions to reach final photo and comment special code. 20% increase in follower numbers in 7 days. But were there ROP issues? #DigitalAdvertising Is “free-to-play” really always free? What problems come from that?
#DigitalAdvertising Gamifying Charitable Donations: Zynga Poker Helping Hands
#DigitalAdvertising Zynga Poker Leagues Sweepstakes Rake mechanic used pre-promotion period for players to “contribute” towards a better Grand Prize.
#DigitalAdvertising Zynga Poker Leagues Sweepstakes, cont.
Excluded various states due to restrictions on poker and sweeps. U.S. only.
Points could be converted to sweeps entries at the end of season.
#DigitalAdvertising Amerifreight and the FTC
• Amerifreight offered a $50 discount to consumers who reviewed its services online, increasing cost by $50 if did not review • Consumers leaving review were automatically entered into a $100 “Best Monthly Review Award” • Advertised it had "more highly ranked ratings and reviews than any other company in the automotive transportation business“ • After settlement with FTC for Endorsements and Testimonials Rules violations: • TransportReviews.com now requires reviewers to disclose if they've received any incentives or compensation by checking a box. • On website: If you are submitting the review form for any reason other than because you are a nice person wanting to share your experience, you MUST check the box. If a company tries to tell you not to check the box and tries to explain their incentive does not apply, please contact us to let us know. The company is likely asking you to break our sites policies and federal law.
#DigitalAdvertising Virtual Currency and Games
What is virtual currency? • US Treasury – “a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency” • European Central Bank – “a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community” • European Banking Authority – “a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically”
#DigitalAdvertising Types of Virtual Currency
• Fully-closed loop • E.g., World of Warcraft Gold • Partially-closed loop • E.g., Farmville Farmcash • Convertible • E.g., Linden dollars for Second Life; BitCoin • Centralized • Single repository/administrator; purchaser of centralized VC transfers real $ to entity that credits purchaser’s account with VC • E.g., Linden Dollars • Decentralized • No central repository/authority for managing currency; usually obtained by purchase on open market or completing tasks to aid in operation of currency • E.g., BitCoin
#DigitalAdvertising Using Virtual Currency in Games and Promotions Key Question: Does the form of virtual currency you are using have a real world value?
#DigitalAdvertising Virtual Currency: Tax and Other Legal Implications
• Is virtual currency property? • Bitcoin – according to the IRS, it is property • Do you need to collect sales tax on it if you sell it? • State-by-state analysis • Escheatment issues • Transferability – what about accounts/unused amounts? • FinCen rules • Money services business and money transmitter regulations • Watch for state rules regulating VC • E.g., NY Dep’t of Financial Svs rules re: cryptocurrency like Bitcoin
#DigitalAdvertising Gamification Tips and Takeaways
• Gamification done right is an effective tool -- generates buzz and encourages interaction • One size does not fit all--game should have a strategic purpose • Gamification for sake of gamification does not necessarily work • Planning is important—and Legal should be involved from the beginning • Mobile approvals can take time • Geographic scope should be carefully considered from the start • Consider: • Laws (not just sweepstakes and gambling laws but also CAN-SPAM, mobile marketing, IP) • Consider whether there are additional regulations that apply because of audience (e.g., children) or tools and techniques used (e.g., virtual currency) • Platform rules • Your own program terms!
#DigitalAdvertising Fantasy Sports – Managing Legal Risk • Fantasy Sports Industry. • Unlawful Internet Gambling. Enforcement Act. • State Gambling Laws. • Federal Gambling Laws. • Regulatory Environment. • Legislative Environment. • Civil Action Environment.
#DigitalAdvertising What are Fantasy Sports?
• Simulation of owning and managing a professional sports team. Fantasy sports team owners build and manage a team roster of real players via drafts, trades, waiver claims & setting lineups. • Fantasy team owners compete against other fantasy team owners in a fantasy sports league. • Fantasy team performance is determined by real player statistics during the ongoing season that fuel the fantasy league’s scoring system. • Football, Baseball, Basketball, Hockey, Golf & Racing. #DigitalAdvertising History of Fantasy Sports.
• 1920s. All-Star Baseball. Historical Data. Player Cards & Spinner. • 1961. Strat-O-Matic. Historical Data. Player Cards & Dice. • 1980. Rotisserie Baseball. Glen Waggoner and Daniel Okrent play in a fantasy baseball game using MLB statistics during the ongoing season. • 1980 – 1990. USA Today/Baseball Weekly. Grass roots growth to 500k plus participants. • 1990 to 1997. Software. Growth to Three Million. • 1997 to Present. Internet. Fuels explosive growth. Commisioner.com. Rotosports.
#DigitalAdvertising Fantasy Sports Today.
• 57 million fantasy sports players in 2015. • 43 Million fantasy football players. • Fantasy sports has grown at 7% to 10% a year for the past 3 years • 3-4 billion dollar annual fantasy related revenue. • Over 4 billion total economic impact within sports industry. • 84% Play in Traditional Fantasy Sports leagues. • 21% Play in Traditional and Daily Fantasy Sports Leagues. • ESPN.com. Yahoo! Sports. CBSSports.com. NFL.com. • FanDuel. DraftKings.
#DigitalAdvertising Fantasy Sports Game Formats • Rotisserie. • Head to Head. • Commissioner Games. • Free Games Prize/No Prize. • Entry Fee Prize Games. • Initial Player Allocation. • Draft. • Auction. • Salary Cap. • Tier. • Game Duration. • Season Long Fantasy Games. • Daily Fantasy Games.
#DigitalAdvertising Fantasy Sports Demographics. • 66% Male • 51.5% Not Married • Average Age: 37 • College Degree or More: 57% • Years in Fantasy Sports: 9.51 • Hours Consuming Sports per week: 17.89 • Hours Consuming Fantasy Sports per week: 8.67 • Favorite Fantasy Sport: Football (73%) • Fantasy Sports Players that Pay League Fee: 60%
#DigitalAdvertising Unlawful Internet Gambling Enforcement Act. • Unlawful Internet Gambling Enforcement Act of 2006. Prohibits those engaged in the business of wagering from knowingly accepting funds in connection with the participation of unlawful Internet gambling. • Fantasy Sports Exemption from the Federal Unlawful Internet Gambling Enforcement Act. • Prize Value established in advance of the game and not determined by number of entrants/fees. • Winning outcomes reflect the knowledge/skill of participants and determined predominately by individual statistical results in multiple real world sporting events. • No winning outcome based on outcome of score of any game or combination of games or on any single performance of an individual athlete in a single real world event. • Predicate violation of State or Federal Gambling Law.
#DigitalAdvertising State Gambling Laws
• General Definition of Gambling under State Law. • (1) seeking a prize or reward. • (2) by betting, wagering or risking something of value. • (3) on an activity decided, in whole or in part, on the basis of chance or on a contingent event over which the bettor exercises no control.
#DigitalAdvertising State Gambling Laws
• Issues to navigate with state gambling statutes. • Skill Analysis. • Gambling Statute includes games of skill with exemptions for certain types of games. • Bet or Wager Analysis. • State has expressly deemed fantasy league games to constitute unlawful gambling.
#DigitalAdvertising State Gambling Laws
• Dominant Element Skill Test. • Distinct possibility of exercising skill with sufficient data to make an informed judgment. • Opportunity to exercise this skill, and the general class of participants must possess this skill. • Standards of skill must be known to the participants and must objectively govern the result. • Skill Controls the Final Result. • Proximate Cause. • Majority of states apply the dominant element skill test.
#DigitalAdvertising State Gambling Laws.
• Material Element Test. • Game involving skill and chance may be deemed a game of chance if chance plays a material element in the determination of the winner. • Amount of chance that is deemed material to the outcome of the game is unclear. • Alabama, Alaska, Hawaii, Missouri, New York and Oregon.
#DigitalAdvertising State Gambling Laws.
• Gambling law definition includes games of skill. • Exemption for skill games in which prizes are awarded to only participants. • Distinction between bet or wagers placed on outcome of contest in which person is not participating verse person participating. • States with broad gambling definition that have dominant factor skill exemption include, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Michigan, Oklahoma, Texas, Virginia, Wisconsin and Wyoming. • States with broad gambling definition that do not have express skill exemption include, Delaware, Hawaii, Nebraska, South Carolina and South Dakota.
#DigitalAdvertising State Gambling Laws
• Arizona. Value to obtain a benefit on a contest of skill. No distinction for person placing a bet not participant and no exemption that would cover fantasy. • Iowa. Making a bet in any game of skill or chance for any sum of money. • Louisiana. Conducting as a business any game where a person risks something of value in order to turn a profit. • Montana. Fantasy league is illegal unless the prizes equal the total amount collected. • Washington State. Washington State Gaming Commission declared fee-based fantasy sports games are games of chance and illegal. • New Jersey. Backgammon is gambling as dice plays a material role. • Tennessee. Risking anything of value for profit whose return is contingent upon chance.
#DigitalAdvertising Federal Gambling Laws.
• The Interstate Wire Act. Prohibits use of wire communications for transmission in interstate commerce of wagers or information assisting wagers on any sporting event or contest. • Illegal Gambling Business under the Organized Crime Act. Prohibits any gambling business in violation of state law involving 5 or more persons and has been in continuous operation in excess of 30 days or has a gross revenue of $2,000 in any single day. • Travel Act. Prohibits Use of any facility in interstate commerce with intent to promote/engage gambling in violation of state/federal law. • Wagering Paraphernalia Act. Prohibits sending any record in interstate commerce for use in wagering on sporting events. • Professional and Amateur Sports Protection Act (PASPA). Prohibits any state or person from operating gambling scheme based on one or more games in which professional or amateur athletes participate. Statute grants standing to NFL. MLB. NBA. NHL. NCAA.
#DigitalAdvertising Regulatory Environment.
• Advisory Opinions. • Enforcement Jurisdiction. • Florida Attorney General. • Washington State Gambling Commission. • Kansas Racing & Gaming Commission. • Michigan Gaming Control Board. • Nevada Gaming Control Board & Gaming Commission.
#DigitalAdvertising Legislative Environment.
• Maryland, Vermont and Kansas have all recently passed bills exempting fantasy sports from gambling code. • Iowa, Louisiana, Montana, Washington, Michigan considering bills to exempt fantasy sports from states gambling code. • California & Texas considering bills to license and regulate fantasy sports. • Pennsylvania and Indiana considering bills to authorize daily fantasy sports play at casinos. • Massachusetts considering bill to authorize state lottery to offer daily fantasy sports. • Energy & Commerce Committee of the US House of Representatives intends to conduct a hearing on fantasy sports and federal gambling law.
#DigitalAdvertising Civil Action Environment.
• Qui Tam Gambling Recovery Claims. • Humphrey v. Viacom/SportsLine. 2006. • Langone v. Kaiser/FanDuel. 2013. • Court does not rule on Skill/Chance analysis. • No bet or wager. • Entry fee given unconditionally. • Prize for set amount to be won by one of the contestants. • Defendants did not compete for prizes. • Element of “risk” is lacking. • Deposit Bonus Class Action against FanDuel & DraftKings. • Insider Information Class Action against FanDuel & DraftKings.
#DigitalAdvertising