Blizzard Raid Inc?

There is a long-standing question of how law deals with virtual property. Is in-game theft theft? Does a raid produce wealth of a taxable value? And then there are the questions that come from RMT, since we can translate in-game values to US dollars pretty easily. (Last weekend’s math: a set of City of Heroes’ new purple enhancement recipes was worth ~$200 at the going consignment house/RMT rates.)

Have you ever wondered if having virtual gold could get you arrested? Last month, the US government raided a group that set up its own hard currency, under the claim that having any competing currency to the US dollar is a federal crime and a form of counterfeit (no word yet about attempts to enforce this on people using loonies and pesos). Unlike your raids from the weekend, this one came away with literal tons of gold, silver, and copper coins “medallions.”

At what point does in-game currency become a competing currency that the government will attempt to seize? We already have at least one example of meatspace prostitution for cyberspace gold. Second Life has been bobbing and weaving about its relationship to property, but Linden dollars are more or less fully convertible to US dollars, and Project Entropia has bragged about how its currency connects to out-of-game value. Most games even refer to their currencies as gold coins or dollars.

The Secret Service has not let “it’s just a game” get in the way before. Nor are the Lindens protected by operating outside the US. Note that the IRS considers barter and in-kind exchanges to be taxable income, so the raid could also be done on the grounds of tax evasion.

: Zubon

5 thoughts on “Blizzard Raid Inc?”

  1. The law in question requires both a) an intent to defraud and b) that the item be fake. USC Title 18 Chapter 25 is focused on counterfeiting and forgery, not monopoly money.

    RMT’d video gaming industries would have more issues with tax evasion and gambling than anything else. Tax evasion charges without obvious and direct taxable income are really impossible right now; “money” staying inside the system isn’t considered of value — or even owned by — the person holding it. Legally, any sort of income, whether from selling artwork in meatspace to selling cocaine to selling artwork in cyberspace, is supposed to be taxed as income. That said, I expect most of those with less than 1,000 USD annually going through virtual transactions to be relatively immune to prosecution even though they are breaking the law; it is very difficult to distinguish between barter and a couple of gifts at that level of money.

    Gambling charges would be possible, since no state allows unlicensed gambling. Right now the only federal regulations would involve either the Federal Wire Act (prohibiting interstate bets and wagers or tips on bets or wagers involving a sporting event or contest) or parts of 53 USC 5362-5364, but both could cover virtual transactions. Doing so would require that the interactions be found as “bets or wagers” rather than gaming, and that’s not quite a given even in Lindens; Second Life specifically prohibits/prohibited games of chance for this explicit reason (although it’s seldom followed).

    If these transactions are instead seen as barter, however — likely, given that most of them are visible as a time or skill factor as much as if not more than a luck factor — then they’re fairly free from legal scrutiny under the federal bans on gambling (although not all state bans on skill gaming).

    Gambling, so dangerous you can only do it for the government!

  2. I think the tax evasion issue will become real in the near future.

    If you inherit a valuable piece of antique furniture from your great-aunt (that had the Draino addiction, god rest her soul), you have to pay tax on its value, whether you sell it or not. I would think “But I don’t sell gold…it’s wrong!” isn’t going to cut any ice in that situation…if it has a verifiable value, then you’ll be taxed on it.

    This leads me to wonder this, however…if it comes to having to pay taxes on any gains inside MMORPGs, will that make the RMT option more palatable to players? “I’m going to have to pay taxes on it anyway, so what’s the harm in buying it?”

    Not that everyone would see their opinion changed by that, mind…but my wife is noted for frequently saying “I’m not paying real money for virtual things…that’s stupid.” She’s not changing anytime soon.

    I do think that in-game currency and items becoming taxable would cause quite a few players to leave the MMORPG genre’.

  3. It won’t become an issue. In games where RMT is not propagated by the company running the game, itself, all in-game possessions are owned by the company. It’s in Blizzard’s terms, for example.

    The other issue is that the bookkeeping would be ridiculous. If in-game currency is a form of income, then every loss is tax deductible, as is the cost of the subscription itself. That’s not somewhere tax organizations would want to go. They’d get more money by policing gratuity income for a tenth of the effort.

  4. Ridiculous book-keeping hasn’t stopped Congress before. When it comes to forcing other people to attempt impossible things, they’re one of the best.

    But you are right about ownership; in games where the players don’t actually take possession of items it would take a new and fairly interesting act of Congress to tax. The bigger concern is places like Linden Labs, where some degree of ownership is presumed for the whole series, or if World of Warcraft’s ToS isn’t carried out to the letter against RMT users and thus some degree of ownership ends up occurring.

    If that occurs, the IRS will have reason to consider it as items with a real world value which the user has de facto control of.

    And, of course, Congress can do whatever it wants regarding tax law, so if they want to kill the whole industry, it won’t be hard.

  5. In-game theft is not _theft_, it’s trespassing.

    The actual theft of in-game goods or services is not a criminal matter, it’s a civil matter, since you don’t have actual claim on the items that are stolen from you. However, in some cases, the in-game theft is accomplished by breaking the EULA. In which case the thieves are no longer legally able to access the game, right? So they’re trespassing on someone else’s property whenever they access or manipulate the in-game world after breaking the EULA.

    So they can’t be prosecuted for theft, or we’d all have to pay taxes on our in-game goods. However they can be prosecuted for trespassing and even sent to jail on that charge.

    As an analogy, it’s a bit like cutting a hole in the fence to get into an amusement park and then selling tickets for other people to get in too. Such a person isn’t “stealing” anything by operating the rides for their own benefit, but they are engaged in criminal trespass for profit.

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