Whether Blizzard likes it or not, it's going to become a bank
By gkhan 18 Comments
I'm fascinated by the legal implications of Blizzard real money auction house, and after thinking it through today, I can't imagine any way that they could do this and not run afoul of banking and stock market regulations. In the story about the real money auction house, Blizzard makes it very clear that they have no interest in becoming a bank, and is rigging the system so that you can't "store" money on their servers, and cash out at any time. This is the quote from the Jostiq article:
If there's a legal issue at all, it's likely in the "cash out" option. Blizzard is transferring some of the responsibility to the third-party provider and, in order to do that, players will need to choose, right away at time of sale, whether they want to keep the money in Battle.net, or take it out to cash with that extra percentage fee going to the third-party provider. Any money left in the system needs to stay there. Players won't be able to cash it out at any point in the future, except by buying Blizzard products and services. "We're not a bank," says Pardo. "We don't want to deal with all of those additional regulations. So that's going to be the responsibility of our third-party payment provider."
Here's the thing though: even if they don't allow you to cash out the money that you've stored, this story makes it reasonably clear that you can decide to cash out something every time you make a sale. And if you do that, you can totally cash out your money any time you want!
Lets say you've made a bunch of sales and chosen not to cash them out, but instead keep them in the system. So now you have $100 in the Blizzard system, and you want to cash out. Here's what you do: you buy the "Chicken Sword of the Penguin" (or whatever), an awesome weapon that currently sells on the market for about $100 or so. You then immediately turn around and sell it, and choose the cash-out option. Presto, you've cashed out your $100, minus fees and such.
Blizzard could stop this by issuing some sort of "Bind on purchase" policy whereby you can't resell stuff you bought. To my mind, this would be problematic from a game play perspective: if we assume that you can buy stuff from the auction house that are basically "commodities" (potions, crafting agents, etc.) that can stack, how the hell are they going to make sure I don't resell that? If I buy 25 potions from the auction house and then stack it with 25 I already have, can I not sell those 25 potions at the auction house? Can I only sell 25 of them? How are they going to keep track? There's also the issue that by doing this the auction house will function less like a real market because you can't do stuff like arbitrage (i.e. buying something cheap and then selling it for more money, or "Hey, this Chicken Sword of the Penguin is really cheap right now! I bet that in a week it'll cost much more, I'd better buy it now"). Not being able to do that will make the market more inefficient and a whole lot of things will be priced incorrectly. Imagine the situation where you spend real money to buy something expensive, and the next day it costs a fraction of what it cost the day before. Wouldn't you be pretty pissed? Wouldn't you demand that Blizzard do everything it can to make sure that their market is able to price things correctly? There's any number of situations like this where I imagine people could have solid ground for a lawsuit.
And even if they solve all these problems, the fundamental "banking" problem still exists. Even if you couldn't cash out your Blizzard account, the very fundamental idea here is that they are going to store monetary value, which you can then retrieve. The fact that you can't cash it out in real US dollars seems almost irrelevant to me, since you can cash it out in items, items which has value. Storing money is hugely problematic, regardless of how you take it out. Even if this hits some loophole in current banking regulation, there's NO WAY that the SEC or the U.S. Congress is going to completely turn a blind eye to it.
This is not to mention the whole issue of basically creating a commodities exchange. I suspect that legally that's less problematic, since this is basically just eBay for Diablo stuff, and people are allowed to sell stuff to other people without to much of a hassle. Still though, the "storing money" problem is still there, and unlike something like eBay, this place is going to have a monopoly on selling these goods, no one else is going to be able to trade them. That seems very problematic to me.
No way are they going to legally get away with this. Even if they are able to exploit every loop-hole in the book, this is going to get them in a whole heap of trouble, if not from current laws and regulations, then from new ones. Millions of dollars, maybe tens of millions of dollars is going to pass through this thing every day and the government is not going to just ignore it. Nor should they.