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Challenges & Risks

Distribution

According to estimates from gaming research company Newzoo, ~2.8BN gamers play games on mobile phones compared to ~1.4BN on PC and ~0.9BN on consoles. Centralized control over mobile distribution platforms, such as the PlayStore (Android) and App Store (iOS), could pose a challenge for the peer-to-peer and user-centric vision of blockchain-based games.
For example, Apple has historically charged development studios a ~30% distribution fee on primary sales of game assets. This has resulted in long-standing disputes with game developers such as Epic Games over the fairness and legality of such practices. However, Apple recently settled a long-standing class-action lawsuit with US app developers. Following the settlement, developers will be allowed to promote alternative payment options via email to gamers, thus potentially circumventing the hefty commissions charged by the App Store.
Developments in mobile game distribution like these will be important to track over the coming years. Blockchain-based games ultimately aim to give developers and gamers full control over in-game experiences and economics, which stands in stark contrast to the platform-controlled nature of mobile gaming today.

Regulatory and Legal Compliance

Blockchain-based video game developers and users are subject to the same patchwork of laws and regulations that govern activity for all operators in the digital assets industry. And depending on the specifics of the individual games, they may also be subject to gambling laws and other gaming-specific regulations.

Tax Compliance

In 2014, the United States Internal Revenue Service (“IRS”) issued a notice that digital assets (“virtual currencies”) are treated as property for federal income tax purposes. Accordingly, all transactions, regardless of their size, are subject to capital gains tax. To date, the IRS has not taken a formal stance on the tax treatment of NFTs.
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Distribution
Regulatory and Legal Compliance
Tax Compliance