Real money trading — the black market of online gaming

Real money trading (RMT) may not be something you read about in your high school economics class, but it’s something every massively multiplayer online (MMO) gamer encounters every day.

If the buying and selling of virtual goods using real money isn’t something actively encouraged by the game itself, you at least hear horror stories about gold farmers causing prices of in-game goods to go up, or find eBay auctions of in-game items for crazy-huge sums of money.

Earlier this month, the topic of real money trading in massively multiplayer online games made some ink when a South Korean Supreme Court acquitted two Lineage gamers of criminal charges related to selling in-game currency for actual money. At issue in that case was whether or not the gamers had violated a South Korean law against unsanctioned gambling; but by clearing them of the charges, South Korea effectively legitimized RMT in MMOs.

Don’t quit your day job to take up Epic Gear brokering in World of Warcraft just yet, though; RMT is still a sore point for many game developers. In particular, you’ll find that games like WoW frown on RMT within their End User License Agreements (EULA) or Terms of Service documents. People who violate those pieces of paper may not go to jail — but Blizzard can sue the pants off them for breach of contract (not to mention ban your account altogether).

Rutgers University law professor Greg Lastowka explains the legal side of the RMT issue as a case where first, the game developers have to decide how vigorously they want to regulate RMT and second, where players might consider violating the game’s EULA because RMT really pays off.

“Most game companies are concerned about the trade of real money for virtual property because they see it as a potential way of creating liability for them,” Lastowka tells GamePro. “If [fraud] occurs in a virtual world, the game is in the middle, the game company has to be dragged into litigation. So if players can have property rights and legal claims to their virtual property, I think that scares game companies for the most part.”

However, as long as there is no criminal law on the books with a country’s government — like the anti-gambling statute that sparked the South Korean case — it’s all on the game companies to go out and find people who violate their EULAs by engaging in RMT.

This is apparently quite the pain in the ass. Scan eBay auctions right now for Epic Gear in WoW (a game that explicitly bans the sale of in-game items for real money), and you’ll find dozens of in-game things for sale, even fully leveled characters ready to be handed over to the highest bidder. Even without Blizzard responding to our request for comment on this story, we can just imagine how much of a headache it would be to keep track of every auction site and track back every contract violation to the actual perpetrator and then sue them for breach of contract in whatever country they’re based.

Lastowka sympathizes with game developers’ plight. “Many companies decided that they weren’t going to vigorously go out and try to shut down people who are trading real money for virtual property,” he said. “The can say ‘we don’t care whether or not you trade virtual goods for money’ and in a way with Ultima Online, Electronic Arts basically turned a blind eye to those kinds of trades.”

This attitude among game developers is where RMT turns into a gray area instead of a clear-cut contract violation. “If the company says you’re not allowed to do this while you’re on our servers and then they do it, they’re liable for contract violation, right?” Lastowka says. “But some lawyers think that breaching contract in some situations can be socially beneficial. That’s called ‘efficient breach.’ Real money trading is not illegal in the same way that the government says you can’t sneak into someone’s house and steal their stuff. That’s clearly illegal — but [RMT] is not criminal. It’s only illegal in the sense that you could land in court if [game developers] decide to sue you and most of them won’t.”

Finding RMT’s place within MMOs gets more complicated than EULAs and lawsuits, though. Game developers have to consider whether or not it might actually benefit their company to allow RMT — and then take a cut of the virtual transactions. Lastowka explains that this is what’s going on with Live Gamer in all Sony Online Entertainment games. By moving in as a third party that operates like an online auction site behind the scenes within all microtransaction-based MMOs, Live Gamer is basically engaging in a one-way RMT exchange that benefits both it and SOE — and the user as well, because it’s clearly stated that nobody will sue them or ban their account for paying money to own better items.

A game company could go even farther with RMT and build it directly into the game for users to control. This is how Second Life and Eve Online have always handled virtual transactions; and both companies are enormously proud of the economies that have grown up in-game around RMT.

Linden Labs sent us this statement when we requested comment on their reaction to the South Korea ruling: “Real money transfers have always been acceptable in Second Life. Linden Lab released this morning that Resident cash outs for 2009 were $55 million USD — an 11 percent growth over 2008. More than 50 people earned more than $100,000 USD each and the top 25 accounts earned a combined $12 million USD.”

All that money is certainly nothing to sneer at; but it’s also something a developer has to work hard to keep track of. We caught up with Eyjolfur Gudmundsson, Lead Economist at Eve Online developer CCP; as far as we can tell, he’s the only full-time economist whose job it is to monitor an in-game economy. Even before CCP brought Gudmundsson on in 2007, the Eve Online economy was growing at an amazing rate as users latched onto the RMT mechanics built into the game.

“All that you needed to make [the economy] work was to get as many people as possible into the game world so that people could specialize,” Gudmundsson explains. “They actually managed to do that early on. In 2004, they already had 50,000 people online. Today with more than 330,000 subscribers we can say with full confidence that this is an economy that is driven by the players. In economic terms, we can say that the players make the decision on what to produce, for whom to produce, and when to produce it. These are often stated as basic principles of economics and that decision is made by the players, not by CCP.”

Gudmundsson says that the economy in Eve Online follows basic economic principles, even though there aren’t real-life economic constraints like the need to buy food for your character to survive. For example, if the player base shoots up, but there aren’t enough in-game resources to accommodate them, prices go up; if users get more efficient at mining resources to the point where there’s plenty to go around, prices go down.

“The problem I have seen with real money trading to date is that it is often or in most cases it is related to using exploits, hacking, using illegal methods to acquire these items in games,” Gudmundsson explains. “Therefore, [RMT] has gotten a really bad reputation.”

Issuing a blanket ban on RMT, however, isn’t something Gudmundsson sees as entirely practical for an MMO developer or even a government to enforce. Not only is it “one hell of a monitoring problem” to keep up with every transaction that goes on both inside and outside of a game, he says, but RMT is sort of something that comes with the MMO territory.

“In general, players tend to exchange items between them,” Gudmundsson says. “If you design a game that has at least two individuals within that game and those individuals can exchange items — I give you this and you give me that — you can rest assured there will be a market developed whether you like it or not.”

Instead of RMT being a legal issue or a financial incentive for MMOs, Gudmundsson says it should be a game design issue. “You have to think about it if your world is supposed to be an open world or a closed world,” he says. “In an open world, you exchange and [trade] items but since it’s an open world, you are restricted [by] real life regulation.”

A closed world game, however, doesn’t have to use real life rules because it’s not supposed to be real life. “It’s like going to a theater,” Gudmundsson explains. “You’re living in an alternate universe. And therefore it’s important that those worlds be kept apart, that they can work and function by themselves. The restrictions would then be that those games cannot exchange the items outside of the game, even though players can still exchange with in the game — this is completely different. So when people are thinking about these game transactions, they have to make a distinction between open world on the one hand and closed world on the other.”

Ultimately, defining and regulating RMT all comes down to the game developer on the legal side, the financial side, and the gameplay side. With rulings like the one in South Korea this month attracting the attention even of gamers who can’t balance a checkbook, turning a blind eye to RMT might not be an option anymore.

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Jim Love, Chief Content Officer, IT World Canada

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