IMGL Magazine July 2022

Seattle conference report

people’s money, lawyers can help build confidence among investors that a company represents a sound investment. There is a process of de-risking a business which is a valuable one to startups and their backers. Early legal advice before too much investment is made in things like coding also avoids waste. As a business starts to trade it will soon need access to payment services which, for apps, for example, can require a legal opinion as to legality. The big emerging space is in novel products like freemium and NFT-based games. The kinds of revenues which these platforms are achieving dwarf those of sports betting and they will surely attract scrutiny as they grow. If freemium games were to become tomorrow’s loot boxes then investors risk losing a great deal of money and legal support when it comes to structuring and growth strategy may pay dividends. This is particularly vital when companies consider expansion from one vertical to others. There may be good reasons why this strategy makes sense but it may cause a company to stumble inadvertently into a space which is regulated very differently. Risk of European contagion in digital services regulation The final area tackled in Seattle was so new that legislation has only just passed. The subject was introduced as something which will shape not only Europe’s digital landscape but that of the entire world and panellists freely admitted to not knowing completely what they were talking about. The session was the first at an international conference to tackle the topic, but it is certain not going to be the last. The subject is the wave of new regulations affecting digital services being enacted by the European Union. The Digital Services Act (DSA) was adopted only in mid- April and is a regulation with similar far-reaching effects to the GDPR. The DSA is just the first in a series which includes the Digital Markets Act – regulating gatekeepers like Google and Facebook; the Digital Governance Act – e-privacy legislation which may turn GDPR upside down; the Data Act – defining an obligation on companies operating in the EU to share its data freely with competitors and others; the Data Governance Act; and the Artificial Intelligence Act. The package is the outworking of President of the European Commission Ursula Von Der Leyen’s ambition for a European digital decade which she aims to use to cement European leadership as regulator of the digital space especially the policing of harmful content. As with GDPR,

Van Der Leyen expects other jurisdictions to line up behind its efforts. The principle underlying the DSA is that what is illegal offline will now be illegal online. The agreement in Europe allows member states to define what is illegal adding potential complexity to the situation. Platforms will be held accountable for the risks their services can pose to society and citizens and the penalties will be bigger than GDPR: up to six percent of annual global turnover. The legislation which comes into force at the latest on 1st Jauary 2024 will give companies like Facebook, YouTube and Google a great deal to think about as it will for companies in the online gaming space. Some of the sub clauses include the banning of advertising based on religion, ethnicity, sexuality etc.; on obligation on large platforms to make the working of their algorithms transparent to users; online marketplaces will be obliged to keep information about traders and partners on their platforms to facilitate identification of illegal or irresponsible traders. Again the level of fines for non- compliance are going to be serious. So, based on what we know, what we witnessed with the rollout of the GDPR what are the likely impacts in Europe and elsewhere? 1. There will be an intial period of confusion with late responses and over-reaction to the rules. Implementation is likely to see wrinkles ironed out over time (like GDPR) but meanwhile a great deal of energy and resource will be consumed by companies and their legal teams 2. The big social media platforms are going to be held accountable for the content they serve up to consumers. Identifying and policing illegal or harmful content runs completely counter to their business models and the cost of compliance is likely to be prohibitive. Without any amendment to the DSA this will mean either that platforms dumb down their European services or they leave the market altogether 3. The provision for member states to define what constitutes illegal content is likely to throw up anomalies whereby things which are currently legal will be outlawed and this would impact gaming. For example, Maltese-based operators currently trade perfectly legally in countries like Hungary. If, as seems likely, Hungary were to declare such content illegal, then they will be in breach of the DSA 4. In the US, freedom of speech is much more constitutionally established, added to which platforms have immunity from liability for content posted on their

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