Online social casinos gain in importance thanks to COVID-19
Social casinos can build brand recognition while casinos and gaming manufacturers are shuttered
In a world of shut-off slot machines, empty hotel rooms and shuttered casinos, concerns are beginning to arise as to how to keep patrons engaged with a brand. Online social gaming services that provide “freemium” online casino games is one solution to fostering and maintaining patron loyalty and brand recognition.
Currently, customers log on to online social casinos where they can play an array of virtual casino games. Social casinos are typically designed so customers are awarded free virtual chips when they create their account and may obtain additional chips by winning games, via free chip replenishment or by purchasing additional chips. While social casinos provide customers with the excitement of playing their favorite casino games, customers do not, however, win anything of value tied directly to the outcome of the casino games. By removing the element of prize, the social casino offering is generally permitted under both state and federal law.Unsurprisingly, more and more casinos and gaming manufacturers are utilizing social casinos to complement their land-based offerings.
The importance of social casinos, however, has been amplified by the recent public health mandates that require isolation and social distancing. Through social casinos, casinos and gaming manufacturers alike can deliver their product straight to customers who are cooped up in their homes. Among other things, social casinos can be used to maintain brand awareness, build loyalty to games, gauge interest in new game designs and promote loyalty programs. Consequently, social casinos can serve as the perfect tool to keep customers engaged and excited to return once the land-based casinos reopen.
Most important, casinos and gaming manufacturers need to pay careful attention to how they create the prize element of their social offerings. What constitutes a prize is rarely uncertain in the physical realm. That is, the awarding of cash, cars or merchandise are all clearly items that have value. In the online world, however, what constitutes something of value is far murkier and may lead to allegations of gambling. For instance, does awarding virtual chips or virtual avatars to the winners of a game constitute a prize? Online operators using the prizeless gaming model must take precautions to ensure the virtual items awarded based on gameplay within a platform do not have value.
In short, operators may disseminate their online casino games to persons in the U.S. via social gaming offerings under existing laws. The key is adequate preparation to avoid legal issues. Operators must comply with federal law and the laws of all the states where they will accept users—simply complying with the laws where the operator has its offices or houses its servers is insufficient. As gambling laws vary from state to state, operators would be wise to conduct thorough research on each state before launching a product.
Provided the operator conducts the necessary due diligence and offers a compliant social gaming product, the operator is well-suited to maintain brand loyalty and keep their customers engaged with their product all while practicing social distancing.
Karl Rutledge, Glenn Light and Mary Tran all work for the Commercial Gaming Group at Lewis Roca Rothgerber Christie, where Rutledge is a partner and chair, Light is a partner and Tran is an associate. The Lewis Roca Rothgerber Christie national gaming practice supports casino operators, suppliers, state and local governments, communities, businesses, non-profit organizations, tribal governments and others in addressing casino gaming law including Native American and riverboat casinos, racinos, interactive and mobile gaming, poker and interstate horse racing. Visit www.lrrc.com for more information.