Introduction
The gaming phenomenon has long since become a multibillion-dollar industry that far transcends entertainment, powered by digital assets, in-game currency and peer-to-peer banking. All of which leaves us with a central legal question as the line frays between playing for fun and playing to commerce: Just when does an in-game virtual product translate into real cash? And the answer matters greatly for licensing, consumer protection, taxation, AML compliance and, as we consider ahead of launch ex-ante securities regulation.
Recent regulatory changes have intensified these questions. India’s Promotion and Regulation of Online Gaming Bill, 2025 prohibits online money games and allows the government to ban errant platforms. Meanwhile, the European Union has been ramping up scrutiny of in-game virtual currencies via the Consumer Protection Cooperation (CPC) Network and the proposed Markets in Crypto-Assets Regulation (MiCA), requiring transparency about exchange rates and consumer rights. “In the absence of a centralized federal framework, the United States has seen aggressive enforcement (by entities such as the Federal Trade Commission) against opaque monetization practices,” Whitelaw says.
This article deciphers these changes, specifically what the new gaming regulations mean when it comes to monetary equivalent and digital assets within games. It considers international developments, common grey areas, case studies and provides guidance (for operators) and good practice advice (for regulators).
Why the ‘monetary equivalent’ question is key
At its heart is whether an asset is money or mere play, as the classification determines its legal destiny. If an in-game currency or token is determined to be a monetary equivalent, the following feder / state regulations would apply:
- Regulation of gambling: whether results dependent on chance can become convertible goods.
- Payment-system rules: whether the asset serves a medium of exchange other than being used for entertainment.
- AML/KYC duties: whether or not digital objects may be used to launder cash and/or bypass the conventional banking system.
- Tax: when and if virtual earning becomes taxable.
- Consumer-protection requirements: if children or other vulnerable users are lured into making deceptive or costly “dark patterns”-based purchases.
In other words, it categorizes gaming companies as harmless entertainment companies or financial intermediaries with lots of heavy regulation. It is this binary that has also proven to be the most contentious frontier of gaming law.
Global regulatory shifts
The prohibition of online money games in India (2025)
The Promotion and Regulation of Online Gaming Bill, 2025 India witnessed a tectonic shift. It bans real money games on the Internet, and a central Online Gaming Authority will make sure laws are being followed. Critically, the bill eliminates the previous “skill versus chance” conversation by according the two identical footing when real money is on the line.
The law came as concerns had reached a boiling point over gambling addiction, suicides that could be traced back to debt from fantasy sports and exploitative unregulated gaming platforms. Enforcement includes the authority to block websites, freeze bank accounts and levy criminal penalties. That means for operators that any ‘withdrawable’ in-game currency, regardless of whether the game mechanic is skill based, could face a ban.
European Union consumer-protection reforms
Even the EU, which has not banned outright, has increased consumer protections. In 2024-25, the CPC Network brought in Key Principles on Virtual Currencies in Games stipulating that:
- Transparent pre-contractual information regarding exchange rates and price of goods.
- Loot box and randomized reward transparency odds.
- Refunds Unused virtual currency under certain conditions.
- A ban on “dark patterns” that push players, especially minors, into unwanted purchases.
The EU has MiCA (Markets in Crypto-Assets Regulation) it can fall back on because in-game assets tokenized when transferable, pegged to real-world assets or sold with a view to providing an investment return. As such, game tokens like stablecoins or NFTs are inside a perimeter of regulation.
United States enforcement landscape
Unlike in India or the EU, the US does not have a single law like this; instead, it depends on agency enforcement. The FTC has zeroed in on deceptive monetization tactics, like hiding odds behind loot boxes or marketing aggressively to kids. Class actions have emerged as well, with complaints claiming violations of state law such as deceptive advertising or illegal gambling.
States like Washington and California have tested gambling laws against the loot boxes. While courts are frequently loath to compare cosmetic loot boxes and gambling, the calculus shifts when the value of tokens or items can easily be exchanged for cash on secondary markets.
Core legal ambiguities
Convertibility
The single most important determinant is convertibility into fiat.
As a general rule, if a token is redeemable for cash (in the sense of withdrawal into PayPal), it will almost always be deemed money by regulators.
If it is part of the game and locked (used just for making something look different), it’s probably not taxable.
The confusion comes in when third-party marketplaces allow for time-delayed conversion, whether that’s through selling a rare skin on the webpage of a black-market lottery, or on some other online forum where you can turn skins into cash. Court decisions and regulators differ on whether such unofficial convertibility does or does not count.
Fungibility and substitutability
Fungible and homogenous tokens (all coins are the same) bear more similarity to currency. That’s not to say that non-fungible projects (such as NFTs or unique skins) couldn’t still face regulation if the commodity in question has a stable-ish market value
Secondary markets
Secondary trading platforms blur the line between play and commerce. Although the company’s official game doesn’t allow for player withdrawals, grey markets bring real monetary value. Operators are then charged with enabling money laundering or illicit wagering should they not have heightened measures to prevent such activity.
Exchange-rate opacity
Multiple-tiered currencies are served in a variety of games (e.g., purchasing gems may be used to buy tokens to unlock loot boxes). Costs are also designed to be difficult for the untrained eye to penetrate; you have to peel through them, layer by layer, in order to uncover what you’re actually paying. Regulators, particularly in the EU, now demand that such effective exchange rates be disclosed to protect consumers.
Gambling classification
Money equivalents can turn a skill-oriented game into gambling in some regions. India’s 2025 bill clamps down on skill only until money enters the picture, and so destroys the distinction between skill and chance. This most certainly overturns decades of case law examining whether rummy, fantasy sports and/or poker included “substantial skill.”
Tokenization and crypto overlap
Tokenizing in-game items raises issues of overlap with securities, commodities or e-money regulations. For example, if a game gives its own NFT that promises its value will go up, securities law might apply. If it creates a USD-pegged stablecoin, then e-money rules apply. It’s this collision of gaming and crypto law that makes one of the slipperiest regulatory battlegrounds.
Enforcement realities and case studies
FTC settlements in the US
And in 2023–24, the FTC wound up settling with a handful of big publishers for their failure to disclose loot box odds and use of coercive marketing towards children. These cases also show that regulators are not waiting for new legislation — they are creatively using the consumer-protection laws they already have.
India’s gaming litigation
And even before the 2025 ban, Indian courts experienced a surge in petitions challenging state-level bans. Pitched was that, because fantasy sports involved skill, they should be exempt. The logic for those arguments is less compelling with the new federal law that expressly prohibited money-based games altogether.
European practice
The EU’s CPC deals against firms such as Epic Games (Fortnite) resulted in more transparent disclosure about exchange rates and refund policies. These capture a trend that has been gaining traction: regulators believe in-game virtual currency is the same as cash for consumer-protection purposes, if maybe not banking law.
Practical compliance strategies for operators
Navigating this fragmented environment requires operators to embrace proactive compliance. Key steps include:
- Value flow mapping: Determine every path through which a virtual asset can gain or lose value in the real world. Add in the grey-market routes, token bridges and player-to-player trading.
- Transparency of disclosure: Clearly disclose costs, probabilities, conversion rates and refund rights. Dark patterns should be eliminated.
- Non-convertibility design: To prevent monetary regulation focus on making the currency non-transferable and 100% aesthetic.
- Age gating and parental controls: The kids are the biggest victims. The risk can be managed through strong age verification and spending limits.
- ADL/KYC preparation: If you cannot avoid convertibility, institute banking-level controls as appropriate including a system for reporting on suspicious transactions.
- Terms of agreement: Include a clause preventing secondary sales and actually enforce this with some SSL configuration.
Policy recommendations for regulators
Regulators themselves need to take balanced approaches, securing consumers without stifling innovation. Recommended measures include:
- Clear taxonomy: Create classification of digital assets (cosmetic currency, social tokens, transferable tokens, investment like tokens) and the regulatory requirements attached.
- Proportionality: Instead of outright prohibition, apply graduated licensing or perhaps even sandbox systems to convertible assets. India’s ban could safeguard consumers while pushing activity underground.
- Sector-wide cooperation: Consumer, financial and gambling regulators need to work together in order not to have overlapping guidance.
- International cooperation: As digital markets are borderless, if definitions were harmonised across jurisdictions it would result in less regulatory arbitrage.
Hypothetical scenarios
To illustrate the ambiguities:
Scenario A: Cosmetic-only currency
A player purchases “stars” for the sole purpose of changing his or her avatar’s appearance. No cash-out, no transferability. This I am guessing, regulators see as entertainment and therefore only consumer law would apply.
Scenario B: Tradable NFT marketplace
One provides NFTs for rare weapons in a game. Players exchange these on third-party crypto exchanges for stablecoins. They may categorize it within securities, e-money or crypto-asset law. Operators face AML/KYC obligations.
Scenario C: Hybrid model
One is a game that can trade in a “gold” currency that cannot be withdrawn, but which can be traded to black-market third parties. Regulators vary: the E.U. may label it as transparency, India as banned gambling
The future horizon
It’s entirely possible that the next decade will bring closer alignment of gaming regulation and digital-asset regulation. Three trends are foreseeable:
- Tokenization goes mainstream: More games will tokenize items, further blending entertainment and investment.
- Consumer-first regulation: Transparency, fair play and the protection of minors will all still be central.
- Jurisdictional divergence: Countries such as India could stick to prohibitionist models, while the EU settles for disclosure-heavy frameworks and the US uses litigation.
It means that the gaming industry needs to be ready for global compliance fragmentation, designing on a product-by-product basis and with flexibility in mind.
Conclusion
The question of money equivalents and digital assets exemplifies the tension between innovation and protection in the digital economy. New gaming regulations, from the broad band in India to transparency rules in the European Union, share a common impetus: when digital assets masquerade as money, they should be regulated as money.
The way forward for operators is to design with legal foresight—knowing the small features of a product (like its transferability or cash-out opportunities) can drastically change how an asset is legally classified. For regulators, the goal is to define terms, guarantee proportionality and harmonize between industries so as to not suffocate innovation.
In the end, the line between play and finance will always be fluid, but clear legal frameworks can ensure that gaming develops responsibly — in a way that protects consumers and at the same time keeps creativity alive in one of the fastest-growing industries on the planet.
