Legal to have an online credit based system?

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TommyGG

Free Member
Sep 14, 2011
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  • #1
    We phoned up the FSB lawyers on this one and they couldn't give us an answer which was a shame.

    A summary of our website and proposed system:

    - We have an online arcade for user submitted games
    - A new visitor will come to our website and play games
    - Some games will allow 'in app purchases' to unlock additional levels or items
    - If a visitor wishes to unlock these levels or items, they buy credits from us. £10 for 1000 credits, 1 credit = 1p
    - They spend the credits in various games
    - Once an author has collected a certain number of credits they request a cashout
    - Authors cut is 70% of the purchase value of the credit (they receive 0.7p per credit)
    - We send the correct amount to the author via Paypal

    Our question is simply is this sort of system legal?

    The FSB lawyer mentioned on the phone that we might run into issues with money laundering. For example, someone could set up a game that charges a lot of credits. They then buy a lot of credits via credit card and spend them in their game. They then cashout the credits to their Paypal account.

    Thanks for any advice.
     
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    Scott-Copywriter

    Scott-Copywriter

    Free Member
    May 11, 2006
    9,605
    2,673
  • #2
    Find a lawyer who specialises in this sort of thing and pay them.

    Are you really going to either go ahead or reject this business model based on what some strangers on an internet forum tell you?

    Advice on this forum can be very useful, but when it comes to make-or-break legal matters, you have to be absolutely sure, and you won't get that from a business forum.
     
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    andygambles

    andygambles

    Free Member
    Jun 17, 2009
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    Scarborough
  • #4
    I have been involved in similiar set-ups (I am not a lawyer). It can become complex. Because you then have the issue of VAT. The individual users may not be VAT registered but then you could go over the limit.

    You can simplify it by basically you sell all the credits and as far as the customer is concerned they just deal with you. The author of the game then has to invoice you for their share when they want it.

    This leaves you liable to refunds/chargebacks etc. Simple reselling set-up.

    Alternative is you could act as an agent Where you are billing but purely for someone else so the purchasing contract is between the end user and the app developer. But you still have to manage chargebacks/refunds. This is more complex.

    Personally in both cases I worked with option 1 was chosen. With terms and conditions that allowed for fund holds for so long to cover chargebacks and certain service levels that had to be achieved.

    Most solicitors didn't want to get involved in option 2.
     
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