109B. Analysis of CPCN Virtual Currency "Key Principles": Who is Affected and When?
Here I explain who is affected by the Consumer Protection Cooperation Network’s (CPCN) new interactive media regulation drive, and when this will likely affect them. In the next paper I will discuss how to come into compliance.
The “Key Principles” document is broken down into seven sections. It’s purpose is not to be a legal document, but to help explain how the upcoming “Digital Fairness Act” will affect developers in the EU. Once the DFA is implemented, I will do another series like this one analysing all of its elements.
The CPCN is not waiting for the passage of the DFA to start sanctioning developers. It would appear that they initiated enforcement action against the makers of Star Stable Online on the same day the Key Principles were released. That was March 21st, 2025. This tells me a few things:
The Key Principles document makes it clear that the CPCN does not need to wait for the DFA to go after developers. They can apply existing consumer protection laws immediately, though possibly they will be able to do that even more aggressively (with larger penalties) after the passage of DFA.
They are not obligated to warn you about what they are going to do to you. If they feel it is appropriate they will go after developers for anything that would violate any consumer protection law in “real space” even if it has nothing to do with digital currencies.
The action against Star Stable Online is meant to demonstrate the resolve of the CPCN in regards to #1 above. Further, it is being used as a test case to see how the Swedish developer (Star Stable Entertainment AB) will attempt to defend itself. The CPCN will use this experience to refine the DFA to make it harder to defend against, and to refine the language to make sure that the DFA can actually be complied with by industry. The CPCN does not want to wipe out industry, they just want to fulfil their consumer protection role.
This action is directed at a provider of a game aimed at children. Most existing laws, which came out of the 2013 ICPEN Panama summit where I presented evidence, are oriented to protect children. So the makers of children’s games are a natural first wave target for these actions.
The Key Principles document implies a change of direction that even I found a bit shocking: It doesn’t mention the word “child” or “children” until the 7th (out of 7) Principle section. I will explain the implications in more depth below. But to me this signals that the CPCN is not seeking to protect children specifically with the DFA. The DFA will protect all consumers. This makes sense given my 2013 testimony, but it is a huge expansion in regulatory reach, at least for the gaming industry.
The language of the Key Principles is broad enough to include Dating Apps, which I’ve been describing publicly as games since at least 2016. Match Group hiring Bernard Kim, the CEO of Zynga, as their CEO reinforced that Match Group also recognizes that their products are games. The addition of virtual currencies to Match Group products ensures they will be affected by the DFA. As I anticipated this regulatory broadening, that’s why I changed the name of my substack to include Dating Apps and I’ve been producing a lot of related content with the goal of elevating Dating App meta design to the same level as the rest of the interactive media industry.
As a Developer, Who is Your Target Demographic? Does it Matter?
The focus of the 2013 ICPEN Summit was protecting children online. Regrettably since they waited so long to find a group that was ready to cooperate on regulatory action, all of the worst case scenarios I described at the end of my presentation in Panama came to be. In particular, that means that the technology has evolved to threaten all consumers, not just children.
But not all consumers are the same. Some are more vulnerable than others. This is exactly the focus of Principle 7 (P7) of the “Key Principles” document. P7 takes up page 7 and 8 of the 8 page document, so it’s the most important section. Don’t be fooled by its placement at the end. This section is titled “Vulnerable consumers”. This is the first place, on page 7, that the word “child” is used. While children are identified as a vulnerable group here, I must emphasise that the DFA will be written to protect ALL vulnerable consumers.
Whether a consumer is vulnerable or not is not a measure of their iron will. It is merely a technological hurdle. For instance, with my technology (which I guard intensely), ALL humans become vulnerable. This is because I rely heavily on neuroscience and all humans have particular “back door” weaknesses. Whether the CPCN believes me or not, they do seem to believe that this technology will exist or soon exist by the time the DFA is passed. Given how strictly they have followed my published advice on protecting consumers, they do seem to believe me.
You can see here that the CPCN is taking the contents of my Compassion in F2P (2013) paper very seriously. This was, in terms of developer comments, my most controversial paper. Here I argued that those developers that were targeting adults with various cognitive vulnerabilities were essentially harming people with disabilities. This would include conditions that we normally wouldn’t think of as “disabled”, like narcissists and sociopaths. But we can and absolutely do target these individuals. It was happening back in 2013 which is why I made it public.
I got flooded with responses from developers that argued that compassion had no place in any business and that it was every man/woman/child/etc for themselves. While the original source article on Game Developer has been restored, all the comments have been deleted. The comments were more important than the article.
Basically they were saying that it is the natural order of things that the smart people can prey on the less smart people. Or the weaker people. This is a slippery slope and if you make that okay, you could go all the way and become a serial killer (or engage in genocide, which is the same thing). In an industry that is infinitely scalable, if you design your product to prey on people you can theoretically prey on the entire planet. If you believe me, that’s not theoretical. It’s already happening.
To fully explain this I need to create a new construct:
Four Cognitive Classes of Games
Class 0: The game is made entirely without features designed to exploit psychological weaknesses. A board game or an offline single player retail game would be examples. Games with subscriptions and no premium currencies or microtransactions also fall in this category. So original World of Warcraft would be Class 0. Modern WoW is Class 1.
Class 1: Your game uses layering or comic sans that not only make children automatically vulnerable, but make them more vulnerable. The presentation I gave regulators at the 2013 ICPEN summit showed the 25 continuous screens of the tutorial of Marvel Superhero Squad Online, with each screen PACKED with multiple examples of explicitly Class 1 UI elements. Any adult would be shocked to be treated like this, and the adult version of the game by the same developer, Marvel Heroes, had almost zero Class 1 elements beyond premium currency. Clearly parents don’t play these games with their children, and can’t be trusted to protect their children.
Class 2: Your game targets adults with specific cognitive weaknesses. The most obvious example is games with gambling elements that target people who have gambling addictions or predisposition to such addiction. This is the specialty of the casino industry. Gambling is a big deal here in Australia. I met with a PhD studying gambling here soon after I arrived. She was lavishly dressed. She claimed that children should not be protected unless a causal link could be proven showing harm. This is the argument the tobacco companies used. You can’t create such proof because it is unethical to conduct experiments where you know you will be harming children. This PhD is a key member of the regulatory body that protects gambling consumers. With this level of infiltration, regulation is just not going to happen unless its designed to benefit large operators.
Class 2 games can also target other personality quirks like narcissism, sociopathy, depression, etc. Some of these are so scary that I’m afraid to write about them for fear of encouraging these models.
Class 3: Your game is designed to make all humans vulnerable. It uses science to give consumers what they are missing, so they rapidly become dependent. I vaguely describe the process in my The Rise of Game Neuroeconomics paper from 2014 . While I didn’t come right out and say it, I had already successfully deployed the tech by then, and this paper is over 10 years old. That’s why my games make over a billion dollars each. It’s not luck. It’s science.
Because I fear weaponization of the tech, I designed the games to fail if tampered with. Which of course the owners of the game attempted to do after I left. I described how that all went down 3 years ago in this podcast. I build safety systems into all my Class 3 games. Weaponization would involve finding those safeguards and removing them. That’s easy to do if you understand the science. This is why I wrote I’m Dying to Play , to explain how any Class 1, 2, or 3 game can cause fatalities in dependent consumers without safeguards.
The same applies to social media, and billions of dollars are being spent to raise social media to Class 3. You will note that other than LinkedIn, I don’t use social media.
Class 3 games are very difficult to detect if you don’t know what to look for. They can be disguised as Class 0 (essentially invisible). My most advanced designs, which I describe here, appear to be Class 0 and would completely fly under the radar of the DFA. Thus I’m unaffected by the DFA and actually can be trusted to self-regulate. Since my games are also Healthy Games, player health can improve by playing them as long as the safeguards are not removed. It is reasonable to assume I will get a regulatory exception. My projects could even get subsidized.
Currently investors have the impression that the more unhealthy a game is, the more money it will make. They likely got this impression from the gambling sector. They don’t fund healthy games. Thus I personally benefit, along with all consumers, if the CPCN purges all Class 1 and 2 games from the economy.
I don’t know how I could be more honest with these disclosures than I have been here. I benefit from regulation because I self-regulate already and thus my tech is 10 or even 20 years ahead of the competition in a regulated environment. Regulation protects me from unfair competition which is part of the purpose of regulation, to protect good faith actors in an economy from unfair competition from bad faith actors.
How/When the CPCN Will Target Your Game
Class 1: If your game is Class 1, you will be targeted first. That could mean immediately. You are considered highest risk to public health so don’t expect mercy. You already got 12 years (2013 to 2025), that’s a lot of mercy.
The CPCN will identify you as Class 1 because you said you were by saying that your game is made to be played by children. And…you use systems that are incompatible with children like premium currencies linked to microtransactions. Single player offline retail games are Class 0 and unregulated.
Probably Class 1: If your game is not specifically for children, but can be accessed by children, you are in this category. Highest priority examples would be games with Comic Sans like Supercell and King games. Secondary companies would include RIOT and other anime style games. Game companies in this category I would expect to come under threat within 6 to 15 months, with the high priority examples moving to the front of the queue. Of course limited funding and political/lobbyist backlash (which will be fierce) could slow things down. If fines are large enough, funding for the CPCN won’t be an issue.
Note that Match Group dating apps could be in the “Probably Class 1” group unless they raise their authentication levels to reliably remove children. I’ve already said in my related articles that this needs to happen. Because dating apps are an awkward area that the CPCN is unfamiliar with, this would likely get pushed back to “Class 2” below.
Class 2: If your game is Class 2 you will likely not be targeted until the DFA is deployed. That gives you ~15 months.
The CPCN will identify you as Class 2 because you use gambling mechanics (including gacha and premium loot boxes). I talk a lot about this here where I showed that USA “regulators” were actually promoting children’s gambling.
They might also identify you because you use Pay to Win mechanics which can specifically target narcissistic or sociopathic players, in addition to children. These are still “vulnerable consumers” as defined by the CPCN.
Class 3: I’ve disclosed two Class 3 games here. Games using the Large Spectator Cohort (LSC) model use a premium currency for gifting. This includes Twitch bits. I think it is unlikely that the CPCN intends to ban Twitch, but in theory they could. I think it is more likely they would create an exception. But there are no microtransactions in the traditional sense.
The Persistent Social Network model relies on a subscription, again with zero microtransactions. There are potentially over 100 “currencies” in the game but none can be purchased from the developer, and are earned in game. So they are not premium currencies and are game elements. These are already exempt from the DFA.
Note that these are both Web2/Web3 bridge games but could be modified to be Web2 only.
Web3 Games: If your game is Web3, I would expect that you will not be targeted until the passage of the DFA. After the passage of the DFA, I would expect Web3 games to be “high priority”. Note that since the DFA protects all consumers, being adult-only will not protect you from regulation. “Tokens” are premium currencies taken to a higher level and thus considered high threat by the CPCN.
Thus the only surviving Web3 games would likely be my Web3 games. This is not a coincidence, they are designed to be consumer friendly and pass any regulator hurdles. These games have a hard time getting funded though because investors are not focusing on healthy games or consumer friendly games. They like Tokens because they are essentially unregulated securities but much more liquid than securities.
The SEC recently tried to investigate major Web3 players (because their tokens act like securities and may not pass the Howey Test) but the investigation was interrupted. The interruption meant no ruling on legality was rendered so the sector is still vulnerable to future USA regulatory action. Crypto businesses were the biggest contributors to the last presidential cycle for both parties so this was anticipated. This won’t deter the CPCN, however. If a trade war breaks out, that’s just going to make it more likely that the CPCN goes after Web3 developers that don’t clear the DFA. Perhaps that’s why some of my competitors are already investing in my games.
Some of the actions against a competitor, competitor backing us financially. I’m not endorsing this association, since I try to avoid any ethical taint. I’m just pointing out that it is happening.
In the next paper I will go over the first six sections of the Key Principles document and explain what you can start doing now to come into compliance.