108A. Origins and History of CPCN's New Virtual Currency Regulations in the EU [Updated 27-03-25]
The new laws being finalized in the EU essentially make ALL Games as a Service illegal in their current form in the EU. Here I explain why/how this law was created and what the source materials are.
[Correction: The advisory document released by the CPCN on March 21st 2025 is not yet associated with finalized laws. It is a forewarning about a series of laws collectively called the “Digital Fairness Act”. The DFA is expected to go live in 2026. However, the CPCN is not waiting for DFA to be finalized, they are going after companies immediately. Thus various legalities are not as clear as they could be. Due to this zeal/exploration on the part of the CPCN, I am treating the conditions in the DFA as “live” because the CPCN is treating them as live by extending existing consumer protection laws to met out sanctions. I apologize for any confusion. I will continually update all the papers in this series as information becomes available.]
In 2013 governments and consumers were increasingly feeling uncomfortable with how children were being exploited in online games. Things had already started to heat up when parents sued Apple over their child-predatory app store policies in 2012. When Apple settled that case in early 2013, this put a lot of attention on how the world’s largest companies were exploiting children in online gaming. I would later estimate the damage caused by Apple to be at least 10 times what they claimed but I was not included in the lawsuit so claimants had to settle for a reduced pay-out.
I did however deem the public was ready to find out what game developers were really up to. I began to explain the situation in detail:
Source Materials
Systems of Control in F2P, May 16th, 2013
https://www.gamedeveloper.com/business/systems-of-control-in-f2p
https://raminshokrizade.substack.com/p/27-systems-of-control-in-f2p?r=31om3k
Monetising Children, June 21st, 2013
https://www.gamedeveloper.com/business/monetizing-children
https://raminshokrizade.substack.com/p/28-monetizing-children?r=31om3k
The Top F2P Monetisation Tricks, June 26th 2013
https://www.gamedeveloper.com/business/the-top-f2p-monetization-tricks
https://raminshokrizade.substack.com/p/26-the-top-f2p-monetization-tricks?r=31om3k
Secrets of F2P: Threat Generation, October 6th, 2015
https://www.gamedeveloper.com/business/secrets-of-f2p-threat-generation
https://raminshokrizade.substack.com/p/41b-secrets-of-f2p-threat-generation?r=31om3k
These papers and links are going to be critical for the industry going forward because they explain the intentions of this CPCN regulation in detail. Without that knowledge, it is unlikely developers will have the ability to come into compliance. The wording of the regulation is extremely vague and broad to allow the CPCN to reject all the tricks we have used in the past to bypass regulation. We can only blame this on ourselves.
Thus if you are a game developer involved in monetisation, management, or investment in any way you are going to want to familiarize yourself with the materials in the first 3 papers from 2013, and the “Premium Currencies” section from the 4th (2015) paper. In that latter case I explain how industry was trying to avoid previous regulation with premium currencies, and closing this loophole is a key goal of the new regulation.
Note that all of these sources were deleted from the internet in December of 2023. This is what prompted me to recover the papers with the help of the community and relocate them to Substack. They have mysteriously returned to the internet recently. I have no knowledge of why, and will decline to speculate. Thus the substack links are provided along with their original links.
How I Was Recruited by Regulators
The Top F2P Monetisation Tricks went globally viral and ultimately was translated to 25+ languages by the community. Almost right away, in July of 2013 I was contacted by the UK Office of Fair Trade (OFT). They told me that they were particularly interested in my Monetising Children paper and acknowledged that I was the only source in the world for that information at that time. I’m not sure that has changed in the last 12 years.
I was working secretly for Microsoft and 2K at the time as their first game economist. Wargaming was attempting to recruit me and I alerted them to the OFT contact. At the time Wargaming was a very pro consumer company and they were 100% behind my assisting regulators and making consumer friendly games for them. Wargaming agreed to fully fund my attendance at the Panama ICPEN summit in September of 2013 as a condition of my hire. It cannot be understated how generous this was on the part of Wargaming as the West was very anti-regulation and still is.
When I arrived in Panama I met the team that had summoned me over dinner the night before the summit. The vice president of Disney was also with us at the dinner and out of fairness I warned her that I would be presenting about one of her company’s products. She didn’t seem concerned and I felt like she considered me unimportant.
The Summit
At the ICPEN summit I gave a short neuroscience lesson about childhood brain development then showed them Zynga’s “Dying Bambi” which I described in detail in my 2011 Zynga Analysis paper that I wrote at the request of 2K leadership. Not reading that paper cost global investors $700 million USD (over $1B in today’s dollars) when Zynga did their IPO. Thus that paper was the first to put me on the map:
I correctly predicted a regulatory response back in 2011 but Zynga continued to operate FrontierVille until 2015. Most of my presentation focused on 25 slides that I captured from the tutorial of Disney’s Marvel Superhero Squad Online (Gazillion Entertainment, 2011). If regulators were horrified by “Dying Bambi”, they probably needed resuscitation after seeing the brutal exploitation of children in the Disney game. I will use some examples from that game to explain what the regulators are going to be looking for in the other papers in this series. Disney would not pull the plug on that game until Disney had to go before regulators in 2017:
This was one of the most brutal studio closures in history. Gazillion was a very profitable studio. No one there had any warning, and they were all terminated immediately on Thanksgiving 2017 with zero severance pay. It’s possible that even today they don’t know the real reason they were fired. Clearly Disney made a blood sacrifice to EU regulators to seal the 21st Century deal after the EU reminded Disney of their defiance back in 2013, which I detail below:
Immediately after my presentation at the summit, the Disney VP gave her presentation. She argued that Disney was an ethical company that put the welfare of children ahead of profits and that regulators should trust industry to self regulate. You could feel the regulator rage building. When the senior regulator from Germany stood up and started asking her questions, she demonstrated why she’s VP: She threw down her translator and ran to the exit and flew out of Panama. She looked like she was in her 60s and she sure could move fast when the moment required it.
Dozens of regulators came up to me and thanked me for my courage to present here. I just nodded and smiled.
Everyone knew my Western career was over, including me.
No one warned me that Disney would be there, I had not planned that confrontation. Of the ~70 member countries, the USA (other than Disney) and Chinese regulators were conspicuously absent. For the USA it was because they were intensely opposed to protections for children in gaming as you could see from the Apple lawsuit. For China, they wanted to regulate their own way and they would actually be one of the fastest countries to act to protect their children. They make a lot of games and were concerned about the safety of their people. Of course games that were being exported to the West didn’t have those protections built in.
Upon my return I was double confirmed to give two talks at the 2014 GDC on regulation. Both were cancelled the week of the conference without explanation. I was a regular on National Public Radio but that soon went silent also.
Why Did Regulators Take 11 Years to Act?
There was not a clear consensus on how much of the OFT plan to implement, and by which countries. I had expected regulation to take up to 5 years even though I warned that even more exploitative technologies were about to be deployed. I am sure that Brexit made consensus much more complicated. As you can see there has been a split and the UK is not part of the EU regulation despite this whole regulatory process having been initiated in 2013 by the UK OFT:
The ICPEN, which includes the USA and China, is very unlikely to come to an effective consensus on protection of children in gaming. Farming children is just too lucrative, lobbyists are very powerful, and tensions between the USA and China, and the UK and everyone, are just too high.
Still, the CPC Network’s regulation will likely affect the world as it represents a very lucrative market and game developers will not want to lose access to this market. They may try to create two versions of their games, one where children are protected and one where they aren’t. I suspect this might make the situation a bit too obvious to consumers and could create a backlash that would be worse than just voluntary compliance. The Disney-led case for self-regulation would be dead on arrival.
I see my role now, after I explain to industry and consumers what is going on, is to Shephard/demonstrate new business models that are EU compliant. I’ve been building these models for 12 years so I’m good to go as soon as industry demonstrates a willingness to come into compliance. Even some of my earlier successful titles are now out of compliance (like World of Tanks and World of Warships) but are much easier to repair than what competitors have made.
When your company gets a notice of sanction from the CPC Network, you have 30 days to come into compliance. I would not wait until that happens, that’s likely not enough time. If your metagame is heavily layered, it could be an almost impossible task in that timeframe. I will do my best to assist all companies in need but I advise you to plan ahead as there are thousands of affected products and only one of me.
I have to point out that what is good for consumers is also good for us. Being consumer antagonistic was never good for developers. That trend has been a blight on our craft. What emerges on the other side will be better than what came before for those that can adapt. I’m quite excited about the possibility to disrupt an industry that’s been failing for a while.