If you are like one of the millions of modern gamers, you may feel a sense of pride in the value of the in-game items you have accumulated across your adventures. But does that sense of value make your gaming accounts like a bank? The Consumer Financial Protection Bureau (CFPB) released a report on April 4, 2024, that signals it believes your game account may be valuable enough to be treated more like a bank account. The CFPB’s report states that it is “monitoring markets” to determine what further action they may take on these non-traditional markets.
Video Game Virtual Currencies and Digital Assets
The CFPB has specifically targeted in-game currencies and digital assets like skins that it believes hold significant value. For non-gamers, most games now include “microtransactions” that allow players to buy in-game items with in-game “premium” currency – usually purchased with real-world fiat currency (e.g. USD). For instance, a player can pay $10 for X amount of in-game currency, which can then be used to purchase premium items or other virtual in-game perks (such as a “loot box” which gives the user randomized items).
While different game marketplaces can have varying degrees of complexity based on the in-game framework (e.g. peer-to-peer transactions, currency exchanges, NFTs), most modern games at least utilize some basic form of the microtransactions.
Enter the CFPB, whose recent report expresses concern with these digital currency markets functioning—in the CFPB’s view—like financial institutions.
The CFPB Report
While the report did not outright claim that these digital marketplaces should be treated exactly like banks, it did lay the groundwork for future action. The report focuses on a few key findings:
- Gaming assets have become increasingly attractive to investors in recent years, enticing traditional payment processors and banking companies to the virtual-currency and digital-goods market.
- This rise of value in this market has led to increasing reports of hacking, account theft, and fraud. The CFPB claims that these games lack adequate consumer protection safeguards that exist in other financial settings.
- Additionally, the CFPB is concerned about the collection and monetization of data about users – which the CFPB claimed may raise privacy concerns that are separate but perhaps related to the banking concerns.
Despite the privacy concerns noted, the report focuses most of its analysis on the value of in-game items through various transaction models in video game markets. Importantly, the report distinguishes between games where in-game currency can be bought with fiat currency, but not withdrawn as fiat currency (“on-ramp” only) versus games where in-game currency can be bought and withdrawn in fiat currency (“on-ramp” and “off-ramp”).
Tension With Current Gaming Caselaw
The CFPB’s report, while not pointing to any relevant law or statutory authority directly, appears to be laying the groundwork to claim that these virtual currencies and digital goods could have legal intrinsic real-world value.
Such a claim could have far-reaching implications in both the gaming and financial regulatory sectors, but the claim would be at odds with recent gaming caselaw. Specifically, the “on-ramp” and “off-ramp” distinctions are important to help define what a “thing of value” is as it pertains to gaming laws such as UIGEA or similar state law.
In 2018, the Ninth Circuit made this distinction in Kater v. Churchill Downs Inc., stating that virtual chips had no intrinsic value unless they could be converted back to fiat currency (in CFPB terms, it would require an “off-ramp” to have value). Recent cases in the Northern District of California have continued to follow this rule when ruling that in-game currency and digital purchases like loot boxes are not a “thing of value.” See e.g. Mai v. Supercell Oy (N.D. Cal. 2023); Taylor v. Apple, Inc., (N.D. Cal. 2021); Doe v. Epic Games, Inc., (N.D. Cal. 2020).
Kater importantly noted the existence of gray markets (markets in violation of terms of service for a specific game) using fiat currency for these kinds of digital items did not itself mean that the digital items had legal value. In other words, the exitance of a grey market is not dispositive to show digital items are a “thing of value” under current caselaw.
In contrast, the CFPB report specifically pointed to these grey and third-party markets to show value since users could access a third-party “off-ramp.” The CFPB also noted that while most games do not have official “off-ramps” to convert game currency to real-life currency, some games do.
While the CFPB did not address this body of caselaw—or any relevant legal standard—it is likely that these kinds of legal distinctions about the “value” of digital goods and currencies will need to be made should the CFPB decide to take further action. The potential implications from the CFPB’s findings here should be closely monitored given the tension with current gaming caselaw.
