How are MMOs with real money economies allowed to operate?

Question

A lot of Massively Multiplayer Online games include a form of "premium" in-game economy that may be purchased with real money (cash) by the player, usually for the purposes of faster progression in the game or cosmetic upgrades. For example, there are Gems in Guild Wars 2 which are originally purchased with cash (but may then be traded in-game using the game's normal currency). Taking the example a step further, Hex: Shards of Fate (an online-only trading card game with similarities to Magic: The Gathering) has a "platinum" currency which may only be purchased using cash via the game's store, and is the only way of purchasing new booster packs of cards in the game. The developers have expressed that they want players to feel that their collection of digital cards has real value and the in-game auction house facilitates trades of cards, the rarest of which are trading for amounts in platinum valued up to about $100 each. The terms and conditions for the game state (as many other games do), and I'm paraphrasing here, that items within the game may not be traded for outside of the game for real currency. Not only does this make monetary sense for the developers, but I assume this is also to avoid a stack of legal troubles around money laundering and gambling/gaming laws in different territories.

However, Entropia Universe (wikipedia link) has as its key feature an in-game economy which is tied directly to US dollars, and specifically allows players to "cash out" of the game and back into real money. They have even gone so far as to produce bank cards which withdraw from the game and have now formed an actual bank to regulate trades.

My question is why are there not more games which take this approach of a game economy tied directly to real money? I understand that the economy needs to be carefully designed and balanced to avoid over-inflation (in-game) or other exploits leading to in-game currency being "created" from nothing, but the bigger concern seems to me to be the legal issues this would create. Given the amount of random chance involved in the game is this not effectively gambling? If so, how does Entropia Universe allow worldwide users without kicking up a storm of trouble from different regional authorities and governments? Surely this is exactly the kind of thing which is banned in certain US states (I am not a US citizen) or other countries. Is it because the game is based in Sweden and their more permissive laws allow for it? If so, do the laws of the country in which the player resides not take precedent?

Answer 1

I can see at least two defenses.

1. Game of Skill Defense. Already mentioned in the comments.

2. Entertainment Defense. One could claim the game itself is a form of entertainment and, therefore, all funds spent while playing the game are for entertainment purposes only vis-a-vis the game itself. And not any alleged gambling within the game. Consider the fact that the gambling rewards, after all, (i.e., mining stuff) are limited to being used inside the game and have zero utility outside the game. Ergo, all payments are strictly for entertainment purposes.

Answer 2

To start with, in the US, the general principle is that everything not explicitly illegal is allowed. MMO with real money linkages are generally not illegal, therefore they are allowed.

In the US, it is gambling/lottery and money laundering that gets the governments attention. Fill out the proper money tracking paperwork and pay your taxes and I expect most governments in the US will not care. I could be wrong, but I not see any laws to prevent this (at least on a surface read).

What has stopped many MMOs in the past has not be government prohibitions, but their own corporate legal counsels that have been worried about property rights. If they own everything, then you are out nothing when things get changed, lost, nuff'ed. All money spent is like putting quarters in a video game machine. But, if you buying something, then other parts of trade law may come into place. From what I understand about EU laws, the laws in this area much more consumer friendly (guaranteed refunds, fitness for purpose, required warranties, etc). For a "simple" game played for "fun", all of these would not matter.

The rise of the real money sites is a different way to make money, as there is a small group of people (few %) that will spend large amounts of money (100-1000's of dollars) to be better. For digital goods, this can be very profitable when done right.

But IANAL, this is from memory of law & econ blogs that talked about this issue years ago.

Answer 3

So the MMO I most associate with this schema is Eve Online which has a scheme where you can buy in game items (specifically the item in question allows for additional subscription time) with real world money and than trade those items in the in-game economy for in game currency (ISK) which can also be used to buy game time. This allows for a dollar to ISK conversion but to avoid banking laws ISK cannot be sold back to the game creator for real world currency. This is just a tracking metric people like to use as Eve is all about it's economy.

Eve has in the past had several events that are thought to have lost upwards of $100,000+ ISK during the course of the engagement and this loss is calculated to translate to individuals not in the know of the game. It's also stressed that many of these items were wholly funded with ISK gained from in game operations and thus were not paid for with real world currency, but some players can buy top line ships for a good amount of cash.