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The Lawbringer: Legal gold sales? Not a Blizzard's chance in Hell

Welcome to The Lawbringer, wow.com's weekly feature on the intersection between World of Warcraft and the Law. I am a third year law student acting as your crossing guard and trying not to get run over myself.

As an introduction to our promised discussion on gold farming, I wanted to address an idea that's been circulating in the WoW blogosphere. There has been some talk that Blizzard could solve the problem of gold farming and hacked accounts in one fell swoop by simply selling the gold themselves. It's an attractive idea on its face, as some feel as though Blizzard's current ban on Real Money Transaction for gold ("RMT") is nothing but an ill advised Prohibition. Permit people to buy gold through Blizzard, the argument goes, and the keyloggers, site spoofers, hackers, and spammers will go back to the rock from under which they came, just like the Mafia disappeared after alcohol sales were permitted in 1933. Oh wait...

The obvious problems have been pointed out before, including: rich brats will have more advantages over folks with jobs and bills; inflation will cause Azeroth to resemble Zimbabwe, the Weimar Republic, or -- God forbid -- Norrath; players will be forced to pay up to stay competitive; WoW-clone MMOs will follow Blizzard's lead, leaving players with few refuges from RMT markets; Blizzard devs will be "encouraged" to design the game around acquiring and spending more gold; players who can't remember website names will still think "www.l3g!t-w0rlduvw0wcr@ft-g0ld.c0m" is Blizzard's website and download keyloggers, etc. Some don't believe this parade of horribles is enough to discourage Blizzard from creating this quixotic market. To the doubters, let me add some legal issues that would affect Blizzard and players, namely: property rights, taxation, and investment advice.

Any of that sound like improvements to you?

The Current Situation


Let's begin by first examining the current legal situation. We, as players, are in a contractual relationship with Blizzard. This contract is composed of two documents, the End User License Agreement and the Terms of Use, that define the rights, responsibilities, and privileges of each party. So let's see what the documents have to say.

The End User License Agreement states:
2. . . . You agree that you will not, under any circumstances: . . . C. exploit the Game or any of its parts, including without limitation the Game Client, for any commercial purpose, including without limitation ... (b) for gathering in-game currency, items or resources for sale outside the Game;
And just in case you missed it, the Terms of Use state:
2. . . . You agree that you will not, under any circumstances: . . . B. exploit the Game or any of its parts, including without limitation the Service, for any commercial purpose, including without limitation ... (b) for gathering in-game currency, items or resources for sale outside the Game;
So, Blizzard is quite clear about this--you are not allowed to sell gold. Why not? Well, let's start with the fact that you don't actually own "your" gold.
4. Ownership.
A. All title, ownership rights and intellectual property rights in and to the Game and all copies thereof (including without limitation any . . . objects, . . . character inventories, . . .) are owned or licensed by Blizzard.
Missed it? Here it is again:
Ownership.
All rights and title in and to the Service (including without limitation any user accounts, . . . objects, characters, . . character profile information, . . . ) are owned by Blizzard or its licensors.
So right now, gold sellers are selling to you what belongs to Blizzard, not the poor sap they "stole" it from. If Blizzard was to sell gold, you would pay money to buy something that would still belong to Blizzard. Now, as a premium service, it doesn't cause any legal issues per se, but it edges Blizzard closer to the line that Linden Labs is walking with Second Life.

Linden Lab's Market

Now, as we've already covered, Linden Lab has the LindeX®, a market to exchange dollars for Linden Dollars ("$L") (Get the impression that Linden likes the look of his name?) As a result, all the business tycoons of Second Life are playing with currency only one exchange away from "real" money. However, Linden has this clause in their Terms of Service:
1.4 Second Life "currency" is a limited license right available for purchase or free distribution at Linden Lab's discretion, and is not redeemable for monetary value from Linden Lab.
You acknowledge that the Service presently includes a component of in-world fictional currency ("Currency" or "Linden Dollars" or "L$"), which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, in any general or specific case, and that Linden Lab will have no liability to you based on its exercise of such right.
If Blizzard were to set up a BlizzX, they would likely have similar provisions in its terms of use. Here's the thing -- we don't know if this clause could be enforced. This provision was challenged by Marc Bragg, a Second Life user who had his account banned for allegedly using an exploit to buy land. As discussed a few weeks ago, the case never made it to trial; after losing a pretrial motion to have the case moved to arbitration, Linden Labs settled the case. In his opinions, however, the judge did suggest that Linden Lab's advertisement that "you own your stuff in Second Life!" contrasted sharply with the above provision. It is entirely possible that a judge may find such provisions are improper -- that if the gold is bought like real money and is spent like real money, it can't just be appropriated like Monopoly® money. He may find that gold is a virtual property to which we, as players, have ownership rights. In which case, our relationship with Blizzard and our gold will radically change.

Problems with Owning Gold

So what happens in a world where we own our gold? First, obviously, Blizzard's lawyers will be busy rewriting our EULAs and TOUs. Who wants Blizzard redirecting money for game development to the lawyers? (And I see the lawyers in the crowd are the only ones with raised hands.) Next problem: the kind of crazy judge who says that players deserve property rights in their gold is the same kind of crazy judge who would still make Blizzard responsible for safeguarding it. So now, when some moron visits www.ub@r-ch33p-w0w-g01d.c0m and downloads a keylogger, Blizzard would have to convince a jury pool that the little innocent mama's boy in the witness chair was not a helpless victim of the evil foreign gold farming company taking advantage of big bad Blizzard not investing in account security. Who thinks this is a good use of Blizzard's resources? (I see the lawyers are again raising their hands.) So us owning our gold means less money for Blizzard to make new toys. Sound like an improvement?

Taxation

Next problem deals with our relationship to our government. (I'm speaking to the Americans here, but this isn't only an American issue.) The idea of taxing MMO generated revenue has been tossed around for a while. For the record, the IRS says that when one sells gold, an account, or power leveling services, one does owe taxes on that income. Whether non "cashed out" gold is subject to taxes has been a gray area, with the IRS declining to step in yet. It's certainly with the purview of the government to tax such an "income" source. Here's what the IRS says on the matter:
[A] person is generally subject to tax upon finding or earning money or treasure, winning a lottery, prize or award, stealing property, or trading one piece of property for another, potentially leading some to conclude that transactions involving virtual property are or should be subject to tax.
The report then goes on to explain the reasons why IRS may choose not to subject our phat loot to taxation, including the difficulty in valuing the property we have accumulated in game. This issue goes away in the presence of a Blizzard sponsored exchange. If we assume an exchange rate of $5/1000 gold, I have "earned" a grand total of $50 in the last year. Now this may seem like couch money, but for some people, that total comes up to be a substantial amount of money. Furthermore, perhaps you have seen this graph:

As you can see, the people in charge of government spending have the fiscal discipline of drunken sailors of teenagers with daddy's credit card. (Nobody lends money to drunken sailors.) Do we really want to tip them off as to an easily valued income source, no matter how insignificant?

Investment

Finally, if gold is treated as players' property, then Auction House PVP become a real life investment, just like playing the penny stocks. Which means that gold selling guides become investment advice. Which means the Securities and Exchange Commission now can get involved. Which means that people who give AH PVP advice, like our very own Basil Berntsen, would have to file a Investment Advisory Registration, including full disclosures on their own investments on the AH Commodities Market. Is this a path we really want to go down?

Let me explain again -- No, there is too much. Let me sum up: gold selling could radically change our relationship to Blizzard, forcing them to spend more money on non-game development. It would likely prompt a government desperate for cash in taxing our now easy to value virtual wealth, and it would subject the people who help us increase that wealth to ridiculous SEC rules. And this is on top of the complaints that everyone has already mentioned about the idea. This is why I predict that the odds of Blizzard setting up a gold exchange are less than a Blizzard's chance in Hell.

Stay tuned next week, when we look at a novel theory for attacking gold farmers -- tortious interference in contract.

The Lawbringer is provided for your entertainment and is not legal advice. If you have a real legal problem, contact a real lawyer. If you have general questions about law or law school, shoot me an email at lawbringerjd@aol.com or tweet me @wowlawbringer.

Filed under: The Lawbringer

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