Skill Gaming: CapEx moving to the Internet, with important changes

Capital Exchange has seen activity in its stock market simulation game frozen since the November 1st enforcement of the Lab's Skill Gaming Policy
Capital Exchange has seen activity in its stock market simulation game frozen since the November 1st enforcement of the Lab’s Skill Gaming Policy

As regular readers know, I’ve been reporting on the Skill Gaming Policy changes, including the situation involving the stock market simulation game Capital Exchange (CapEx), operated by Skip Oceanlane.

Since my last report in December 2014 there have been a number of updates from Skip on the matter to keep CapEx members informed of progress, of which the April 18th, 2015 is the most important.

If you are engaged with CapEx, and you’ve not already done so, please ensure you read the April 18th update in full. What follows is a very high-level summary:

  • With as yet no confirmation or rejection of the CapeX Skill Gaming application by the Lab, the decision has been made to move the game to the Internet and away from Second Life
  • This does not mean, at this point in time, that CapEx is ceasing trying to gain approval as a Second Life Skill Game Operator (SLSGO)
  • A new website is being developed to support operations, and once available, all existing CapEx URLs ( and will redirect to it. It is planned to have this up and running in June, 2015; until it is officially announced, users are requested to keep using until otherwise directed
  • As a game of skill under United States law, the new Capital Exchange website will not be accessible to people reisding in the following state: Arizona, Arkansas, Delaware, Florida, Kentucky, Louisiana, Maryland, South Carolina, South Dakota and Tennessee
  • Game players will be able to register via the website, with the option to connect to a virtual world avatar if they choose to do so – but it won’t be mandatory
  • A valid e-mail address will be required for registration with the new website – players who have not entered an e-mail address against their current CapEx details are asked to add one now, to ease transition. Instructions on doing so can be found in Skip’s update
  • The Linden Dollar will be replaced with the new CapEx Dollar (CD$). The value of the CapEx Dollar will initially be pegged at 250 to the US Dollar, in order to ensure stability with existing stock values
  • The new website will operate using HTTPS, and will be connected to a merchant account linked to VISA to allow payments using major credit cards
  • The initial means of cashing-out will be via PayPal. The cash-out fee is liable to be “significantly” less than the current 3.5% fee with the Linden Dollar
  • Future options may include the ability to support additional currencies – GBP, the Euro, etc., and other virtual currencies such as Bitcoin, Litecoin, etc.
  • At a future date yet to be determined, the CapEx Dollar will be freely traded on a currency exchange, and CapEx may may allow multiple currency exchanges to free float CD$
  • Should Linden Lab grant CapEx authority to operate in Second Life as a Skill Game, the Linden Dollar may be accepted, and thoughts to how this might be done have been given. However, it is currently Skip’s intention to operate CapEx without support for the Linden Dollar
  • There are significant changes coming to CapEx ATMs and funds held through them (see below)
Skip Oceanlane - moving CapEx to the web and away from SL. Projected launch date: July 2015
Skip Oceanlane – moving CapEx to the web and away from SL. Projected launch date: July 2015

The new service currently has a projected start date of July, 2015.

An important aspect of this news is that all existing CapEx ATMs are to be withdrawn from Second Life on Sunday, May 10th (unless CapEx gains authorisation to operate as a Skill Game in SL before then). Users can opt to withdraw their L$ amounts held by CapEx ATMs ahead of that date, or can opt to leave them on deposit. L$ values will then be used to purchase stock in a yet to be named fund, and stock in this fund will eventually be able to be sold once trading restarts. In stating this, Skip goes on to note:

Now for you “old-timers” I already know what you are thinking – this is what was done when SL banks failed in 2008 at the old “SLCapEx” as well as a defunct fund at a defunct exchange called the “World Stock Exchange”. Deposits were converted to worthless stock, and no one ended up getting their Lindens back. Well this time, it will be greatly different. I will be maintaining a Buy Order at roughly 5% above the value of what was created/purchased. So anyone that wishes to “cash out” will actually make a profit, if they do not withdraw before May 10. It’s also an incentive for people to stay with Capital Exchange, and to continue playing the game. Note that I plan on adding assets to this fund, so it will be generating a monthly dividend.

Additionally, anyone reading news of Skip’s plans after the May 10th removal of CapEx ATMs  will have the option of contacting him any time up until May 31st for a refund of any L$ balance held by CapEx ATMs.

Skip concludes the update noting that details are still being worked out, but he wanted to inform people on the current state of play with matters. Again, if you are a CapEx member and have not already done so, please ensure you read his update directly. He is also keen to emphasise that this move does not spell an end to any CapEx presence in Second Life. The current headquarters for CapEx will remain, and Skip Oceanlane the avatar will still be active in-world.

One of the reasons for the extended delay in CapEx being granted authorisation by Linden Lab is the requirement for a state-by-state analysis of the game’s eligibility as a game of skill across 40 states, which seems to have been something of a miscommunication between the Lab and CapEx’s attorneys.

Under the initial versions of the Skill Gaming FAQ released by the Lab between July 9th and August 29th, the precise nature of this require was not made clear, with versions of the FAQ only stating, “a discussion of both federal and state laws and their applicability to your games,” was required – implying that applicants only had to obtain a Reasoned Legal Opinion (RLO) that their game is skilled based for the state in which they reside and under federal law. This is very much how the wording was seen by legal experts discussing the matter in August 2014.

However, the FAQ requirements were clarified in September 2014, and this update appears to have been missed by CapEx’s attorneys, or the revised requirement was not specifically and clearly requested after the change to the FAQ had been made, leading to the current situation.

Whether this is a reasonable request or not is not something I cannot debate; I am neither a lawyer nor do I understand how US laws relating to on-line gaming operate; I also have no insight into the process skill gaming operators have to go through in order to be able to operate on the Internet, or how other Skill Gaming applicants handled the requirement. However, that  CapEx is now planning to move forward regardless of any decision on the Lab part has been well received by those offering feedback on the announcement.

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