Why is eBay banning the sale of online-game virtual assets?

Massive multiplayer online games (MMOGs) like World of Warcraft and EverQuest claim millions of players around the world. All of these people pay to play, and they spend their time collecting valuable points, artifacts and countless other goods that serve three primary purposes: They make the player feel happy; they allow the player to trade or sell within the online-game marketplace for other goods or services he or she wants or needs; they increase the value of the player's game character.

MMOGs have been around for years, and people spend countless hours online building up their characters' net worth. What they do with this value tends to stay within the game world itself; however, a more recent development has brought this virtual value into the real-world economy. In the last five years or so, "virtual property" has started showing up on online marketplaces like eBay, where it is sold for real-world money. The Web site IGE (Internet Gaming Entertainment) specializes in the sale and trade of virtual property and is where the majority of these transfers take place. The phenomenon has reached epic proportions, with the annual market for these virtual assets valued anywhere between $250 million and $900 million. This phenomenon now has a name: real-money transfer, or RMT.

With that kind of money changing hands, RMT was bound to get more more attention than it wanted. Governments have started to take notice of these sales (see Can the IRS tax virtual money?), and Korea actually outlawed third-party RMT in 2006. And the game makers, most of whom claim legal ownership of all virtual assets built into their games, have begun to contemplate how to manage this disregard for their terms of use. Because in most cases, it's the game makers who actually own these goods, technically speaking.

With the brewing controversy and possible ensuing regulation of the RMT field, it's not all that surprising that eBay has decided to ban the sale of these virtual assets in its marketplace. Arguably, one of eBay's longstanding rules already bans these types of trades, stating, "The seller [of digitally delivered goods] must be the owner of the underlying intellectual property, or authorized to distribute it by the intellectual property owner." So if Sony has, in its terms of use, already established itself as the intellectual property owner of all assets acquired in EverQuest II, then it was simply a matter of eBay deciding to define online-gaming assets as intellectual property.

So is that the reason for the ban? eBay says it is acting to protect its users and maintain the integrity of the marketplace. No doubt, the sale of virtual assets could lend itself to higher rates of fraud than the sale of tangible assets. There's also the issue of what seems like the inevitable government regulation of RMT, which would make eBay's life even more complicated than it already is. Government regulation of any type would require new tracking and accounting schemes on eBay's part to manage whatever taxes or record-keeping a government agency would require of virtual-asset sales. But an interesting move on eBay's part may offer a clue to the overriding reason for the ban: Second Life property is exempt. And what's different about Second Life? EBay says it's exempt from the ban because there is significant doubt as to whether Second Life is a "game," falling back on creator Linden Labs' insistence that Second Life is a "virtual world," not -- definitely not -- a "game." But the difference between a virtual world and a game is a rather difficult one to quantify. The quantifiable distinction, it seems, between Second Life and, say, World of Warcraft, is that RMT is legal in Second Life. It's encouraged. It's built into the game. There's no way that Linden Labs is going to sue eBay for being a profit-making platform for the sale of virtual assets acquired in its, um, world.

If eBay's ban is in fact an attempt to avoid the rash of lawsuits that is likely to unfold in the coming years over virtual-property rights, then RMT appears to be at an interesting crossroads. Sites like IGE are still up and running and facilitating the sale of virtual assets at a breakneck pace. But with government regulation and potential legal action on the horizon, the future of such third-party platforms is uncertain. Sony, for one, has made a move to capitalize on RMT instead of making expensive attempts to end it, launching a site called Station Exchange for the legal sale and trade of goods acquired in EverQuest II. If they're smart, other game makers will follow suit instead of spending millions to fight the inevitable.

For more information on virtual property, RMT and related topics, check out the following links: