Virtual currency & online 'gambling'

Danger781

Did a quick search but failed to find anything useful about this. If you have heard of a game called 'Counter Strike: Global Offensive' this should be easy enough for you to understand but I will trying to explain it as simply as possible. CSGO is online first person shooter. A feature of this game is the ability to collect 'Weapon skins' which can give each of your guns a unique design. These guns can be bought and sold on the steam community market so each skin has a value attached to it. These skins can be dropped in-game or you can buy them using 'steam wallet' virtual currency (Which you buy with real money). Since the implementation of weapon skins multiple sites have popped up giving you the ability to 'gamble' and 'bet' these skins on professional teams and casino-style games. As an example these are some of the most popular sites available:

• csgolounge.com - This site offers you the ability to place your weapon skins as bets on professional games. Odds are offered based on the proportion of value against each team.
• csgojackpot.com - This site offers a game where you are given a number of tickets based on the value of your bet. The more tickets you have the higher chance you have of winning. Whoever wins at the end of the round gets the entire pot of skins.

There are other variations of these sites. Some allow you to deposit your skins in exchange for virtual currency, which you can then use on similar style games as above, casino-style games like slot machines etc. So I guess this leads me to my questions..

1. The entire system is based on virtual currency with virtual items. Obviously each website will retain a certain cut of these items for themselves which I guess can be considered 'Profit'. As in let's say 'John Doe' trading as 'John Doe game development' how would tax work when everything is based on virtual currency where the value of the items fluctuate so much?
   
2. It is possible to sell these skins for real money. People are willing to pay in PayPal for skins and websites such as 'OPSkins' work as a middle man for the trade. Would the money made from selling these skins be considered 'Profit' and become taxable? What if you just develop it as a person without a business - Would it just be considered income?
   
3. What about the fact that this is technically gambling? Are there any sort of legal requirements etc for sites like these? How can they get away with these sites when a large percentage of their 'customers' are very likely under 18 years of age?

Danger781

Danger781 wrote: »

Did a quick search but failed to find anything useful about this. If you have heard of a game called 'Counter Strike: Global Offensive' this should be easy enough for you to understand but I will trying to explain it as simply as possible. CSGO is online first person shooter. A feature of this game is the ability to collect 'Weapon skins' which can give each of your guns a unique design. These guns can be bought and sold on the steam community market so each skin has a value attached to it. These skins can be dropped in-game or you can buy them using 'steam wallet' virtual currency (Which you buy with real money). Since the implementation of weapon skins multiple sites have popped up giving you the ability to 'gamble' and 'bet' these skins on professional teams and casino-style games. As an example these are some of the most popular sites available:

• csgolounge.com - This site offers you the ability to place your weapon skins as bets on professional games. Odds are offered based on the proportion of value against each team.
• csgojackpot.com - This site offers a game where you are given a number of tickets based on the value of your bet. The more tickets you have the higher chance you have of winning. Whoever wins at the end of the round gets the entire pot of skins.

There are other variations of these sites. Some allow you to deposit your skins in exchange for virtual currency, which you can then use on similar style games as above, casino-style games like slot machines etc. So I guess this leads me to my questions..

1. The entire system is based on virtual currency with virtual items. Obviously each website will retain a certain cut of these items for themselves which I guess can be considered 'Profit'. As in let's say 'John Doe' trading as 'John Doe game development' how would tax work when everything is based on virtual currency where the value of the items fluctuate so much?
   
2. It is possible to sell these skins for real money. People are willing to pay in PayPal for skins and websites such as 'OPSkins' work as a middle man for the trade. Would the money made from selling these skins be considered 'Profit' and become taxable? What if you just develop it as a person without a business - Would it just be considered income?
   
3. What about the fact that this is technically gambling? Are there any sort of legal requirements etc for sites like these? How can they get away with these sites when a large percentage of their 'customers' are very likely under 18 years of age?

If you were based in Ireland and profiting off something like this, you would start a private members club which would also be a company. This would get you around the gambling laws (not sure if you would need to but this is how casinos do it in Ireland).
Not really sure about tax and Bitcoin, one things for sure I would have my members using a paypal system with real money. All you need is the owners of another Tor drug marketplace to decide to disappear one day with everyones money and then suddenly the currency crashes and all your money cuts in half in the blink of an eye. Evolution Marketplace the replacement for silk road did that a few months ago.

Danger781

Nobody would be sending real money. All trades / transactions would be done via CSGO weapon skins. I just mentioned PayPal as it is possible to sell said skins / items via PayPal. Nobody would be able to run off with money.

I guess one potential problem is the debate on whether or not virtual items have a real-world value. As an example, let's say someone deposited €1200 worth of CSGO weapon skins on the website, and the account that is holding these items gets trade banned on Steam. This has happened in past with sites like CSGOLounge etc. If you were set up as a sole trader and someone decided to prosecute in an attempt to get their items back, what happens then? You are in possession of said items but have no way of removing them from the account while the account is banned. There are guys among the CSGO community that have inventories of items with values up to $25000...

These are just questions that came to mind today after playing around on one of these sites, not that I am intending in setting up a virtual gambling business with an economy based on colourful virtual weapons.

ironclaw

Danger781 wrote: »

[*] It is possible to sell these skins for real money. People are willing to pay in PayPal for skins and websites such as 'OPSkins' work as a middle man for the trade. Would the money made from selling these skins be considered 'Profit' and become taxable? What if you just develop it as a person without a business - Would it just be considered income?

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Depends how much you make but it would be an income and if you crossed the threshold, you'd need to be declaring it. Its basically commission based selling, you'd be taxed on your commission which is basically payment for a service.

If you are considering setting up a go between / market place, as El Rifle alluded to, you'd want to be watertight in your implementation. These forms of business attract a great deal of attention from the darker side of the hacking community.

As regards tangible 'real world' value, its up to the market place. Seeing as its unbelievable volatile like BitCoin, it carries inherent risk for all involved. It would be interesting to see a judgement but if the bottom fell out of the market, you're hardly going to be liable if you ended up in court. In fact, I doubt anyone would even bother to bring you there in the first place.