How many World of Warcraft Dollars to the Won? South Korea Prohibits MMORPGs from Banning All Forms of Virtual Currency Exchange

A recent decision from the Korean Supreme Court has ruled that MMORPGs may not prohibit exchanges between in-game and real-world currencies, at least in certain circumstances.

To describe the Korean case in brief: a player got caught engaging in online arbitrage with the in-game currency, and lost his account. He then sued the makers of the game and prevailed, with the Korean Supreme Court striking down the terms of Lineage’s user contract that prohibited such in game activity.

Although it is the “RMT trading has been legalized!!” headline that is getting all the attention, it is the Court’s willingness to engage in reformation of the MMORPG’s contract terms that is the truly significant aspect of the case. The Court is not simply permitting virtual currency prohibition — it is actually prohibiting a virtual world from setting its own fiscal policy. In effect, the Court is requiring that virtual money be treated the same as sovereign-backed currencies, at least in this one respect.

Many games won’t be happy about this — but for others, it will be an unexpected and extremely welcome boost. Whether a MMORPG embraces the creation of its own thriving e-economy or not depends upon the character of the game world. As Pixels and Policy explains,

It’s been standard practice to either discourage or ban real money transactions (RMT’s) since the rise of subscription service MMORPGS like World of Warcraft. In an RMT, the consumer exchanges real world currency for in-game cash, loot, or leveling. This is the kind of behavior encouraged by freeform worlds like Blue Mars and Second Life, but in a closed-world MMORPG, it can ruin the experience for others by devaluing the virtual economy.

One aspect of the Korean case that was relevant to the ultimate decision was whether or not virtual currency speculation is a game of skill or a game of chance. The court ultimately decided it was a game of skill, because it was the players themselves engaged in the arbitrage. Had there been proof in the case that the players were using bots or macros to carry out their economic activities, the Court seems to be saying it would have reached a different result.

However, even having a real player at the controls doesn’t stop some aspects of economic activity on MMORPGs from being extremely similar to a casino-style game of chance. From the Journal of Virtual Worlds Research [PDF] (yes, it actually exists),

From the provider’s perspective, the only costs that matter are base-value costs. Taxation and markup can be ignored, as these are merely transactions between players. Our estimated payout percentage of 95% implies that the provider (MindArk) retains, on average, 5% of the money spent on mining activities, thus returning to the player 95 cents (minimum 91 cents) for $1 played. From this perspective, the activity of mining is comparable to slot machines, where a spin costs a certain base-value and there is a long-term average payout (of 95%, in this case).

-Susan

Addendum: Also thought I’d point out yet another example of a reporter for the New York Times doing research for an article by reading blogs or web boards, this time for a NYT Magazine article on Chinese gold farmers. For all the griping traditional media does about how inferior blogs are, and how blogs are merely parasites on bigger media, they sure do scrounge up a lot of their own material from the internet masses.

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