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As virtual worlds continue suffering through legal growing pains, both mainstream press and the blogosphere are covering virtual law more often. There are a number of errors that pop up in these stories with surprising regularity. Here, in the opinion of VB’s editor, are the top five fumbles.

Fumble #5: “The cases are settling, so the lawsuits will stop!” For better or worse, this is pretty silly. First, about 95% of all lawsuits settle — that’s just how it works. Second, only one of the three major virtual law cases last year actually did settle outright (the Bragg case) and since Bragg got his virtual land back and is, once again, a Second Life resident, you have to figure he did fine in that deal. The other two cases (Eros v. Leatherwood, and the six-creator lawsuit against Thomas Simon, aka ‘Rase Kenzo’) in fact ended in formal judgments of liability (albeit, respectively, by default and consent). These are all, in some sense, plaintiff wins, and wins encourage lawsuits. In reality, three things will dictate whether there are more or fewer suits in the future: (1) the number of people using virtual worlds, (2) the amount of money at stake in actionable claims, and (3) the availability of effective in-world dispute resolution tools.

Second Life JailFumble #4: “People shouldn’t go to jail for negligence!” This usually shows up as an outraged response to an article where a lawyer says that a company or individual could be held “liable” for something fairly innocuous. Generally, all the lawyer is saying is that the person or company might be subject to civil liability — a lawsuit. There’s no prison for people who breach contracts or, in most cases, for executives who act negligently, just a loss of money and some bad press following a videotaped deposition, hundreds of interrogatories, and a lengthy trial… of course, some might argue that fate is actually worse. [Addendum: criminal negligence exists, though it is not usually what "liability" is referring to here. See comment #2.]

Fumble #3: “Real life law doesn’t apply to virtual worlds!” This argument pops up less and less now, largely thanks to the three fairly high profile lawsuits that concluded last year, discussed above. You still see it in the comments following mainstream articles about virtual law, however, and not infrequently in “whoa, dude,” blog posts too. It’s just a knee-jerk reaction to the fact that virtual worlds appear game-like. The law, of course, is widely applied to the “virtual” already — consider domain names, websites, electronic books, file sharing services, and more. These spaces are no different.

Fumble #2: “The contract says it’s not money, so the law doesn’t apply!” Two people cannot privately contract to change the law. Consider this case: an employer and an employee sign an agreement that the employee will be paid $2.00 an hour, well under the federal minimum wage, but include language that “the payment of this amount of money shall represent a full payment of minimum wage under federal law.” The clause means nothing, because employment law isn’t concerned with what these people privately agreed — the employer is still on the hook for the violation. Similarly, users of virtual worlds have TOS agreements with the provider that say that the provider does not have to buy back the currency, and that under the agreement, the currency represents merely the right to use the service. That does not mean that the currency, in fact, has no value from the standpoint of criminal law, tax law, securities law, or any other area that invites analysis of value.

Ginko ATMFumble #1: “If no one’s been convicted, it must be legal!” This is by far the most common fumble analysts make regarding questions in virtual law. It is fed by the (admittedly appealing) idea that virtual worlds are “just different.” It is nonsense. Consider this: nobody has figured out how to kill with a blue laser beam yet. If someone does so though, it would be completely reasonable to say that the act is illegal even before a jury finds a defendant guilty of that particular method of murder. Juries evaluate facts, the law is what it is. The fact that people just recently figured out how to defraud each other using prim-based ATMs, in-world messages, and avatars, doesn’t change the fact that the underlying fraud is, itself, illegal.

[Edited 1/14/2008 re: Comment #2.]

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44 Responses to “Commentary: Top Five Virtual Law Analysis Fumbles”

  1. on 14 Jan 2008 at 5:50 amcyn vandeverre

    I think these need to be posted on every Orientation Island, Ben!

  2. on 14 Jan 2008 at 8:40 amJulynn Lilliehook

    As to Number 4: That’s not exactly correct in my opinion. “People shouldn’t go to jail for negligence!” Yet people do in real life every day. Criminal negligence is prosecuted in homicide and lessor crimes. In the context of the virtual world, criminal law has not arrived…yet.

    Intesting observations…this grows more complex each day.

  3. on 14 Jan 2008 at 9:53 amBenjamin Duranske

    Julynn is completely right — leave it to the virtual law school Dean! ;) Criminal negligence certainly does exist. However, the crimes subject to this (fairly low) culpability requirement tend to be the kind that impact human welfare, (e.g. manslaughter, child endangerment). Off the top of my head, I can’t think of any white collar crimes that require mere negligence for criminal prosecution, though I bet there are at least a couple, maybe regard to environmental standards. In almost every case I can think of related to virtual worlds, the kind of negligence people are talking isn’t the kind that leads to criminal prosecution. Good point though — I’ll make an edit in the post above.

  4. on 14 Jan 2008 at 11:02 amTaran Rampersad

    And the international aspect is pretty interesting.

    Consider this news story:…22gambling.html


  5. on 14 Jan 2008 at 11:37 amTaran Rampersad

    Case in point: Antigua vs. US on gambling:

  6. [...] with Arbitrage Wise from WSE competitor SL Capital Exchange on the Linden banking policy. Update 4: This post pretty much refutes the whole fictionality argument – fascinating [...]

  7. on 14 Jan 2008 at 9:33 pmHenri DeCuir

    Really great post, Ben. I agree with “Cyn” that this is something worth replicating and archiving elsewhere.

    I’m curious about what you think about a further trip down your point #2. Going beyond whether the contract between a virtual-world provider and an end-user applies to a valuation of virtual currency between two individual end-users: what happens if, after we do accept virtual currency as having real world value (as, and I believe accurately, hinted at in your 2008 predictions), that provider decides not to let its end-users cash in their chips, as it were?

    That is, will a substantial real world acceptance of virtual currency ultimately invalidate a TOS provision that the provider does not recognize any real value of the virtual currency? Although I guess at such a point it wouldn’t really matter if they were unwilling to buy back currency (since there would be a real world value to it, it wouldn’t be hard to find buyers), it does create interesting problems caused by basically saying that a non-soverign entity is suddenly in control of printing money. Could we envision that, given real world acceptance, the provider would lose some of his freedom to alter or destabilize the economy at will?

  8. on 14 Jan 2008 at 11:22 pmTaran Rampersad

    Henri – dunno about what Ben will say, but it could be said that a currency in a synthetic world is a privately issued currency – like frequent-flier miles or subway tokens.

    And as far as value – if someone creates a currency, be it seashells, electrons or ounces of peanut butter – once that currency is used, I think it is pretty easy to demonstrate that there is at the least barter value to other currencies.

    Of course, if someone uses ounces of peanut butter, someone else will be selling milk.

  9. [...] Commentary: Top Five Virtual Law Analysis Fumbles | Virtually Blind | Virtual Law [...]

  10. on 15 Jan 2008 at 12:46 pmBenjamin Duranske

    @7 – I think what you’re remembering is my prediction (it is probably the longest-shot one, but my personal favorite) that a provider will offer a true currency pegged to the dollar (and will pledge to buy it back at face value). In that situation, I’d expect that the provider would keep 100% reserve in relatively liquid, secure investments and should, if responsible, be expected to cover all demands of depositors. To the degree that it did not, the account balance of users would be considered a corporate liability in bankruptcy proceedings and evaluated for priority against other debts.

    A company doing this could charge a conversion fee both directions, could make interest on its users’ assets, could sell/rent land (server space) to users, could charge for some social networking features, ability to customize, identify verification, etc. I see this as a far better long-term solution than issuing a steady stream of virtual currency and saying it is “real money” on one hand, but refusing to buy it back on the other.

  11. [...] Virtual law Doing my usual tag-surfing routine, I was pointed to this article by Ben Duranske, who is the most published person on virtual-law questions out there — at least that I know [...]

  12. on 15 Jan 2008 at 2:58 pmTaran Rampersad

    @10: Have you considered a small country using its own currency in a synthetic world? There are tangible benefits for small nations to do so.

    Its one of the things I’m playing around with as an idea…

  13. on 15 Jan 2008 at 3:01 pmBenjamin Duranske

    That is an incredibly cool idea, and I could see how it could be a huge benefit to a small country’s economy.

  14. on 15 Jan 2008 at 3:48 pmTaran Rampersad

    Yeah. And it comes with national regulation, which isn’t ideal but certainly fits with trade agreements, et al. Then we could deal with *real* bureaucracy!

    Hmm. So, we see it has a downside. :-)

  15. on 16 Jan 2008 at 11:31 amAshcroft Burhham

    Interesting article, but I think that the approach to nos. 2 and 3 are a little simplistic, because it does not fully engage with the relevance of virtuality (as the “Leave those Orcs alone” article suggests).

    I don’t suppose that anyone but the very stupid actually believes that national laws are literally suspended in respect of people who are at the time using virtual worlds: I imagine, if one were to ask the people in question whether, for example, people conspiring to commit real-life murder using virtual worlds as a medium of communication were doing anything illegal by national laws, a very considerable majority of them would answer in the affirmative.

    The issue is not whether national laws miraculously go away when people are using virtual worlds, but whether laws apply to virtual things in the same way as they apply to the things of which those virtual things are virtualisations.

    To take a simple example, it would be absurd to suggest to a group of people playing Monopoly that, because they are playing a game, the laws of the land do not apply, and they are free to assault each other with impunity, or because Monopoly money is not real money, if I take all the Monopoly money from your Monopoly set without your permission and refuse to give it back, I have not done anything wrong. However, it would be equally absurd to suggest that the law applies to Monoply money in the same way as it does to real money: the person playing the banker in Monopoly does not need a government licence, nor could one be convicted of fraud just by cheating during the game.

    So, the point about Linden dollars not being real money is not that the Terms of Service provide that real-life law does not apply, and therefore it does not (in fact, the Terms of Service say no such thing), which would be obviously absurd, but that, whatever Linden Dollars are, they are not legally identical to an ordinary currency. Linden Dollars are not, for example, legal tender: no merchant is required to accept them in payment.

    Another fallacy that deserves to be listed amongst those presented here is, “Linden dollars are called ‘dollars’, and they have an actual value, so they must be exactly like money”. That is not true: my computer has actual value, and can be exchanged for real currencies, but it is not money itself. If I set up a second hand computer shop, I would not be treated in law as a currency exchange.

    Having a practical value is a necessary, but not sufficient, condition for a thing to be money. Take again the game of Monopoly: if some of the players of the game became willing to accept real-life currency in exchange for Monopoly money because they valued their advancement in the game above the rate that they were paying for the money, would that automatically make Monopoly money real money? Would the players of Monopoly in that case fall under the laws of usuary if they lent Monopoly money to each other at a high rate of interest during the course of the game?

    The better view is that what one is buying when one is buying a virtual currency is radically different in character to what one is buying when one is buying when one purchases, for example, foreign currency: one is buying something whose value depends on the prevailing circumstances and norms operative within that virtual world, and dependent on the development and continuing existence of that virtual environment. The same applies to virtual “property”: it is radically different in character to real property in that respect. Indeed, part of the intrinsic value of the fact that it is virtual is precisely that it is something that one can use to operate in a closed, internal environment whose norms and prevailing circumstances are very different from those that prevail in in what might loosely be termed “the real world”: after all, if Linden Dollars were not worth more to people than the equivalent quantity of their national currency, nobody would ever buy any Linden Dollars.

    In other words, virtual currencies only have value because they are different in their function to non-virtual currencies, because they have a special value that real currencies do not have in specific virtual worlds whose norms as regards that currency are different from the norms prevailing in the outside world in relation to non-virtual currencies.

    SecondLife may not be a specific game, but it is a closed environment with internal norms and circumstances that are distinct from the norms that operate in the outside world, and the difference in those norms and circumstances is part of the whole point of SeondLife. One does not have to be a hard-core immersionist and believe that one must go as far as pretending that one is a completely different person and that the outside world does not exist when using SecondLife to recognise the value of internal norm-sets. To say that a virtual world must either be a game like Monopoly or a mere trading environment, like a sort of giant 3d eBay, is a false dichotomy: it is possible for a virtual world to be somewhere between the two, and that is precisely where SecondLife lies.

    For these reasons, it is seriously flawed reasoning not to take the Terms of Service seriously when they say,

    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.“.

    That is not a sham in the way that “It is hereby deemed that $2.00 per hour shall be a payment of the minimum wage” is because the Terms of Service, unlike the minimum wage agreement, accurately reflect reality: Linden Dollars, whilst they are real something, are certainly not real money (hence “fictional currency”), and, although in practice, they are valuable, they are only valuable because other people are willing to pay real money in exchange for them because having Linden Dollars is worth more to them than having real Dollars (etc.) for the reasons given above. Linden Dollars are just a right to use a feature of Linden Lab’s product of SecondLife because the internal economy is an inherent feature of the product of SecondLife, and a critical property of that feature is that it is an internal economy, not merely a part of the outside economy. In other words, SecondLife is not eBay.

    So, while national laws do not miraculously vanish when one is using SecondLife (or any other virtual world), so too do they not necessarily apply to virtual things in the same way as they do to the real things of which the virtual things are virtualisations. Indeed, if they did, it would in many cases obviate the point of virtualisation in the first place: if one needed a pilot’s licence to play a multiplayer flight simulator, one might as well fly real aircraft. While, therefore, the simplistic claims of “the law does not apply” are not strictly true, the oversimplified claims belie a more complicated reality, and are not the feats of absurdity that the original article implies.

  16. on 16 Jan 2008 at 12:02 pmBenjamin Duranske

    One of the things I love best about VB is that the articles sometimes generate comments that far surpass the original article.

    Here, Ashcroft uses my back-of-the-envelope post as a launching pad for a far more nuanced exploration of the issues. Readers, particularly readers who already understand the basics (and who thus are likely to find the points I raised here fairly obvious) are likely to find much more to talk about in Ashcroft’s comment than the original post.

  17. on 16 Jan 2008 at 12:04 pmTaran Rampersad

    @15: If I rob you of your frequent flier miles, will you be as upset as if I had robbed you of the money to take the flights and purchases to generate those miles?

    Legally demonstrable value still hinges on people, not words. No, it may not be ‘money’, but if it walks like a duck, talks like a duck and is called ‘duck’ by whoever owns it, then guess what?

    People will think it is a duck. And people will treat it as a duck. And then people will be disappointed when it doesn’t work like a duck. Who is responsible?

    Its all privately issued currency, you see, though most privately issued currencies do not seem to permit selling the currency for ‘real money’. Next time I’m in New York, I’ll try to sell back some subway tokens and see what happens.

  18. on 16 Jan 2008 at 12:04 pmAshcroft Burhham

    That’s very kind of you to say :-) I would be very interested in people’s comments.

  19. on 16 Jan 2008 at 12:06 pmBenjamin Duranske

    Personally, I don’t disagree with any of it, although I do think that it is easy to overstate the degree to which a court will look to the TOS in doing an analysis of value and suspect Ashcroft and I may be approaching that from different backgrounds. I have no idea how much weight contracts are given is in the U.K., but I have found that small print is fairly suspect in U.S. courts.

  20. on 16 Jan 2008 at 12:34 pmTaran Rampersad

    Linden Lab’s ToS for Second Life is not Law anywhere in the world. It is subject to Contract Law in any part of the world that deems it necessary. This is the same trouble the internet has, and any virtual world will inherit this trouble from the Internet. Some will claim that Second Life is a ‘walled garden’, but if anyone can sign up for a free account then it is *not* a walled garden.

    Further, as Benjamin has noted previously, there are many things markedly missing in the Terms of Service which would dilute the Terms of Service contract itself. Gambling, banking… and then there is plenty of demonstrable evidence that Linden Lab does not have some things in the ToS but ‘prosecutes’ and penalizes people – one case was settled on this already and it is quite possible that there are more around the corner.

    The trouble with these corners is that there are as many as there are interpretations of Contract Law.

  21. on 16 Jan 2008 at 2:39 pmAshcroft Burnham

    Ben, the point of the comment was that what the Terms of Service state about Linden dollars isn’t “small print” at all: it is the very essence of what a virtual currency is, in principle. The term that I quoted is not disclaiming what would otherwise be the case, but restating what is a necessary and inherent feature of a virtualised currency in a virtualised environment.

    In other words, it is not the Terms of Service that make virtual world internal currency fundamentally different to outside-world currency: it is the nature of virtual worlds themselves. The people who are playing Monopoly and are prepared to buy Monopoly money from each other with real money to advance in the game are not making Monopoly money into a real currency, and they have no formal contract with the person who owns the Monopoly set at all.

  22. on 16 Jan 2008 at 2:52 pmBenjamin Duranske

    I understand, but I suspect that juries, and many judges, would take a more practical approach.

    Big screen, end of the courtroom, displaying a virtual world. A prosecutor puts up an expert witness, an economist, who buys $10 worth of the virtual currency. He then spend $2 of his stake on stock in the defendant’s company on one of the virtual world stock exchanges. He then puts the other $8 worth of it back in his bank account. This all takes about 2 minutes.

    The prosecutor then puts up the screen that says, “You can make real money in the virtual world, that’s right, real money!”

    The expert says, “It appears to me that I just bought $2 worth of virtual stock, and the defendant over there just got $2 in capital for his business.”

    Is a jury really not going to find that the defendant raised $2 for his business?

    I’ve never liked the MS Flight Simulator comparison much — as I think we’ve hashed out here before. ;) To me, the difference is that I’m not flying a real plane — therefore, I don’t need a pilot’s license. On the other hand, I am buying and selling “real money” in Second Life — so I do need a banking license. I believe I recall that we have a fundamental disagreement on this point.

  23. on 16 Jan 2008 at 2:55 pmAshcroft Burnham

    Taran, the whole point of my comment was that virtual currencies are only valuable in so far as they are treated differently from real currencies. That they have value (and, therefore, as a necessary consequence of that, that people will be upset if they lose it) does not detract from that, as I explained in the original comment.

    Similarly, a person might be equally upset that a person cheated in a game of Monopoly and “stole” a quantity of Monopoly money from her or him than that a person stole a few pence/cents of real money: that does not make Monopoly money real money, or justify people in thinking that it is.

    To answer your question: if people don’t understand what virtual currency is for, and incorrectly believe that it is something radically different from what it really is, then the people who make the mistake are exclusively responsible for the consequences of that mistake.

    Incidentally, as in no. 21 above, I never claimed that the value of the Linden Dollar “hinged on” words: the Terms of Service merely reflect what the inherent nature of virtual-world specific currencies is in any case.

  24. on 16 Jan 2008 at 3:18 pmTaran Rampersad

    @23: I’m telling you that the Terms of Service is worth its weight in words. People have been ‘punished’ for things not in the Terms of Service. You can’t ride the high horse and take the low road at the same time. Doesn’t work.

    As far as ‘virtual currencies are only valuable in so far as they are treated differently from real currencies’, I have yet to encounter a currency that is not virtual, or, more properly, synthetic. Credit has value – enough so that credit reporting agencies make money by mining reports on people. And credit is something people seem to be interested in. There are even laws about it. Funny how that works.

    Subway tokens. Frequent flier miles.

    If people cannot cash out money, then I might agree with you because then they would obviously be game tokens. Even WoW tries to maintain that to some degree, as does EQ and Asheron’s Call (if it is still around). There is no official exchange. But we’re talking about something that *does* have a currency exchange. We’re also talking about a synthetic world that allows copyright to be owned by users.

    Are you really going to tell me that people would sell their ‘real’ property (copyright) for ‘virtual’ currency? I hope not, because that would be where my part of the discussion ends. While I do not agree with copyright laws and trade agreements related to them, I do not believe in diluting the value of creator rights – and that seems to be exactly where you are heading in this context. I wipe my hands of that.

  25. on 16 Jan 2008 at 3:43 pmAshcroft Burnham


    the point that I am making is that the alternative approach is a thoroughly impractical approach, since it fails to understand what, in practice, virtuality is about: what it is for. That one can make real money in virtual worlds does not mean that the virtual currency is itself real currency: the same applies to the Monopoly money example.

    As to your example, there is no doubt that the demonstrator has invested the equivalent of US$2.00 in the hypothetical defendant’s business, but that is just another demonstration that the virtual currency has practical value, which, as discussed above, is not the point.


    real money may be synthetic, but virtual money is virtual in a very different sense. The sense in which virtual currencies are virtual is addressed in my original post, which analysis you have not referenced.

    People do exchange their real property, whether it be their real money, or their intellectual property rights, for virtual currency. You must accept this, too, if you believe that currency in games such as World of Warcraft are virtual, since people are frequently prepared to buy them with their real money, whether or not this is prohibited by the creator. Virtual currencies have real value: it is just that their value is different in character to the value of the real currencies for which they were exchanged. If that was not the case, there would be no reason for people to part with their real currencies to obtain virtual currencies in the first place. There is no conceivable distinction in principle between people exchanging money for virtual currencies and people exchanging intellectual property rights for virtual currencies.

    If you choose to make the continence of any discussion contingent on me agreeing with you about whether people would exchange real assets for virtual currencies (even though your own position on the point, as noted above, is somewhat confused), then that is a matter for you, but that does not alter the underlying reality of the issue, as outliend above.

  26. on 16 Jan 2008 at 3:58 pmTaran Rampersad

    “If you choose to make the continence of any discussion contingent on me agreeing with you about whether people would exchange real assets for virtual currencies (even though your own position on the point, as noted above, is somewhat confused), then that is a matter for you, but that does not alter the underlying reality of the issue, as outliend above.”

    As outlined above, and in your response, you are basically stating that any copyright being bought and sold is not being done for money, which is counterintuitive. If you think you must agree with me to participate in the discussion, you are wrong. You must agree that copyright has value, and your rhetoric does not provide for that. It is worth its weight in words.

    Good day. :-)

  27. on 16 Jan 2008 at 4:05 pmAshcroft Burnham


    I have never claimed that copyright does not have value, or that people, when exchanging their intellectual property rights for virtual currencies, are not receiving value for them: as I have written now numerous times, virtual currencies do have real value: it is just that their value is fundamentally different in character to that of real currencies, and that fundamental difference is what makes them valuable in the first place.

    If you think that the reality of virtual world intellectual property transactions is counter-intuitive, then your intuition is wrong. Intuition is, after all, a very long way indeed from being infallible.

  28. on 16 Jan 2008 at 4:21 pmTaran Rampersad

    I’m sorry, Ashcroft, I truly am – but what you are saying is a deck of cards. Common sense is repulsed by it. Now you can tell me that I am wrong all day, and I welcome that.

    This is an academic discussion. Lets revisit it when the first legal precedent is in hand, shall we? I’ll BET you a prim that the case will decide the way common sense goes, not the way that a fabricated virtual house of virtual cards goes. Your mistake, so I am on the record here, is confusing ‘virtual’ with what is really ‘synthetic’. That mistake causes lots of people confusion. I’ve put my money on the table in Second Life, I’ve even written an ebook for O’Reilly about it. I am a creator within Second Life, and outside of it, and if you wish to demean the value of the creations by demeaning the currency by which they are purchased, that is your right.

    It is your right to be wrong, even in an intelligently overcomplicated way.

    I am done here. Further conversation along these lines is only trolling, and that is not something I am willing to do.

    Really – good day.

  29. on 16 Jan 2008 at 5:24 pmAshcroft Burnham


    merely claiming that your argument is right because it is “common sense” is no argument at all; that is just another way of saying “I’m right because I say so”. You have not addressed the substance of the arguments as to why the value of virtual currencies is different in character to the value of real currencies, nor explained why you think that I am confusing virtual and synthetic, especially when I have already pointed out that, while real currencies may be synthetic, virtual world currencies are virtual currencies in the same way as Monopoly money is where the players of Monopoly are willing to pay real money in exchange for advancement in the game.

    I still do not understand why you think that the value of virtual currencies being different in character means that it is less than the value of real currencies: as I explained above, precisely the opposite is true. Why you keep making reference to my explanation of an analysis of the value of virtual currency as “demeaning” the value of intellectual property in virtual worlds, therefore, is entirely unclear.

    I am not sure the relevance of the reference to “trolling”, which is usually taken to mean making a personal attack, rather than merely politely, if firmly, challenging the correctness of a person’s opinion. Do you think that I am making a personal attack on you, or that you are inclined to make one on me?

  30. on 16 Jan 2008 at 5:34 pmBenjamin Duranske

    I think neither of you are trolling and I appreciate it. Thanks, as always, for keeping the discussion at VB focused on ideas.

  31. on 22 Jan 2008 at 3:21 pm^^

    I have some questions about virtual law and mmorpgs, and I’m not sure this is the best place to post them. Please feel free to move or copy my questions elsewhere. I tried emailing Lessig several months ago, but I got a generic response that made it seem like he thought I was asking for personal legal counsel regarding an impending suit. I don’t have the means to sue anybody: I just want some broader legal insights to share with other players in the virtual world I inhabit.

    I’ve been playing an MMORPG called Granado Espada. I’m a US citizen, but I play on a Singapore server. The player population is International, immediately complicating any legal questions. I have three primary questions.

    1) The game publisher sold a “Limited Edition” game box that included a free character with impressive stats (i.e. to enable more power/success at the game). Many people bought the expensive Limited Edition just so they could get this character. After many people had bought the Limited Edition, the game publisher reduced the stats of the character to make it no better than characters that could be acquired in-game. The game publisher said buying a virtual item is like “buying stock” that can lose value at any time. The players, however, see reducing the stats as changing the terms of the contract instead of the contract losing valuable. How would a lawyer view this?

    2) Granado Espada’s cash shop offers many “surprise boxes” for real money. Many of the items they produce are worthless. Is this the same as gambling?

    3) Are the game publishers liable for allowing (or exploiting) large-scale interference with the in-game economy caused by botting and gold farming/selling?

    4) Are game publishers liable when they conduct Events unfairly (Events provide items with game advantages to the winners)? For instance, what if game developers announce an art contest, but then choose the winners randomly (allowing people who plagiarized other entries or who didn’t post any art at all to win). I also played another game where each Event offered a “most powerful” weapon. Recipes for the weapon required cash-bought items plus the previous Event weapon – i.e., a Pyramid Scheme of escalating costs (This was Tantra, Philippines server).

    5) Is it legal for game developers to run a population Pyramid Scheme. For instance, rewarding players who recruit three more players who all “top up” – i.e. spend real money – on their accounts. This was also done by Tantra PH. Singapore GE fortunately hasn’t gone there yet.

    6) Are game publishers liable when unnannounced game maintenance cuts into time in a premium (real money paid) time-limited area?


    7) Singapore GE announced they would have a subscription pay-to-play (P2P) business model. Before this would be implemented, they offered a couple “bonus” months of free play. When the free play was supposed to come to an end, many people paid for subscriptions (some for years in advance). I payed for a year not only for myself, but for a friend who didn’t have a credit card. The day before the conversion was supposed to happen, the game publishers announced they had changed their business model, and it would now be free to play. By waiting until the last possible minute to make this announcement, the game publishers tricked many people into buying long-term subscriptions. These subscriptions were sold via third-party vendors (such as so no refund was offered. Instead the game publishers converted (at their exchange rate discretion) the subscriptions into points to use in the cash shop. This was not fair to people who would not have bought that much cash shop credit normally, and who only paid that amount of money in anticipation of P2P.

    Situation #7 especially seemed like a deliberate scam. Yet the players had no recourse except fussing a lot on the forums. The Game Moderators just make fun of all the complaining players and their ‘diarrhea of the mouth’.

    I think a legal analysis of the above situations would be more helpful than an actual lawsuit. No one who loves to play a game wants to see it go under because of legal entanglements. However, perhaps if faced with some scenario analysis, game publishers might voluntarily rethink their attitudes toward virtual property.

    Are there any lawyers who would be willing to evaluate the practices of Singapore GE, or at least examine the issues on an abstract level (on a blog that players could link to). Also I was wondering if any law students out there would consider researching these issues for a thesis.

  32. on 24 Jan 2008 at 11:32 am^^

    A new wrinkle is the Singapore Granado Espada will now start selling cash item “surprise boxes” (real money gambling) that may contain “elite items” (the strongest armors in the map). The Granado Espada PR people are saying this is to make sure more players can access an upcoming map.

    If these elite items turn out to be rare in terms of box contents, then it’s misleading to suggest that this is to help more players access the high level map. If many people spend money on these boxes before discovering elites are rare, then Singapore is going to get away with a scam again.

    If elite items are common drops, then this will significantly change the in-game economy in sGE. The economy was already inflated beyond the means of anyone who was playing fair because of the influence of gold-farming bots and influx of real-money-bought gold into the game. An economic reset is a good idea. However, because sGE initiated this “reset” after handing out even higher level rare weapons during an unfair Christmas event (mentioned in my previous vote), and some “super elite” equips were already placed on the highest level maps and special “missions” (where botters and other cheaters have been able to access them for several weeks) – then these cheaters will STILL have an unfair advantage even if regular elite items become more widespread.

    Finally, there seems to be insider trading regarding these new elite-containing boxes. A week before these new cash items were announced, the price of a rare in-game item called “red jewel fragment” dropped to a fraction of its normal price (from around 80 million to 5 million). These red jewels can drop in THREES from the new cash shop elite boxes. Some people clearly knew about the new cash shop elite boxes before the other players, and they exploited the information gap.

  33. on 28 Jan 2008 at 1:49 pm^^

    I left out another important question about consumer rights raised by the practices of Singapore Grandado Espada.

    Singapore GE sells time-limited (i.e. one day) passes to special “premium dungeons.” They reduced spawn/drop rates on the free-to-play maps in order to induce people to buy passes to premium dungeons (Forbidden Territory and Ancient Territory, also known as FT and AT).

    The clock on these passes does not stop if the game is disrupted. Therefore if GE goes down for maintenance, players lose the time on the passes that they paid for. GE’s regular weekly maintenance is 8+ hours, a serious chunk out of a 24 hour pass. After several people complained of being ripped-off GMs warn people not to activate premium passes before regularly scheduled maintenance.

    However, GE also does “surprise maintenances”. For instance, this week maintenance was moved from Thursday to Tuesday (Singapore time). This will be an 8+ hours maintenance since it replaces the regular one. Because this maintenance was not announced in advance, a number of people will lose time on Premium Passes they had activated, and there are already complaints on the forum.

    One time when this happened, the GMs gave free premium passes to the entire population as compensation (instead of reimbursing only the people who had activated their passes). For the last surprise maintenance, no one was reimbursed. I’m not sure how many incidents there have been, because I haven’t personally been affected by this problem yet. There is no word if there will be a reimbursement program for this surprise maintenance.

    I feel some distinction should be made between virtual items obtained in-game and virtual items directly purchased from a Premium Shop (or Cash Shop) for real $$$. Players should have property rights in what they buy from the Premium Shop. There is no “intervention to stop cheaters” excuse for depriving players of those rights. Changing the value of an item purchased directly for cash is stealing from the customer.

    I mentioned the case of “nerfing” a Premium-purchased character above (Emily the Sage). I purchased a Limited Edition box so I could have the capabilities of that character and even paid for International Shipping (since the code for the virtual item was packed with non-virtual items like the game boot-disk). I felt robbed when the code underlying my virtual item was changed. The disruption of passes to Premium Dungeons is the exact same issue. People are paying real money for access to the Premium Dungeon service (again, often young people using allowance money with no resources to defend their rights at all), and GE’s game publisher thinks it can just take away what people paid for at will because the item is virtual and its just a game no real world authorities will take seriously. >(

  34. on 28 Jan 2008 at 2:03 pmTaran Rampersad (Nobody Fugazi)

    @33: I’m no lawyer, so I cannot discuss legal recourse (especially in Singapore), but one thing has been known to be very effective in the past when it comes to these things.

    Email. Weblogs. Boycott.

    I look at it this way. If I give you a dollar because you promised me something and you do not fulfill your end of the agreement, you fooled me once. You got me. I was a sucker.

    If I then give you another dollar, I’m being foolish to expect a different result.

    Email, weblogs, etc – they can magnify this. Your point on children and allowances is not lost on me at all – and if they cannot afford a lawyer, then they have to seek other recourse within the limits of the Law.

    Or, as short as humanly possible: Vote with your feet.

  35. on 28 Jan 2008 at 7:41 pm^^

    Voting with your feet is especially tricky when it comes to MMORPGs. A business entity provides the virtual venue, but the attraction is the voluntary community inside the venue. The business entity knows that part of their profits come from crowdsourcing, so a lot of their influence engineering and addiction-mongering is about facilitating attachments within the community.

    Once those attachments are in place, it’s really hard to walk away. If you vote with your feet, you’re not just protesting a corrupt business, you’re walking away from friends and family. That’s why it’s laughable to see someone threaten to quit the game on the forum: everyone, including the business entity, knows its just a hollow threat. The only thing that pulls people away is another game that they sample long enough to build an alternative community.

    Often the decision to jump games is made by a community as a whole. Whole groups attempted to jump to HellGate London, though apparently this was a disaster and some server error caused everyone’s characters to be wiped. Then they sheepishly came back to Grandado Espada.

    By the time people quit in droves, it will probably be too late for the business to recover. It’s a shame because Granado Espada had incredible advance buzz in Asia, and it really does offer a rich gaming experience.

  36. on 28 Jan 2008 at 8:00 pmTaran Rampersad (Nobody Fugazi)

    A MMORPG full of broke kids whining about being broke does not sound very attractive to me, but I’ve been told my standards are too high. At some point, one could hope, that the kids start trying to take control of their lives. Blaming other people for your problems seems so… 1990s. Or was that the 1980s? Its all a blur. Maybe the 1980s. Yes, thats when people were paying psychologists to blame their parents for everything. Somewhere after Kramer vs. Kramer as I recall.

    I digress.

    If people cannot or choose not to take enough control of their lives to put the brakes on, then I don’t see who would lobby for any Law.

    I have a Tom Bombadil perspective. Sorry.

  37. on 28 Jan 2008 at 8:25 pmBenjamin Duranske

    I’m not commenting on the thread here (though I will say that I think one of VB’s contributors is working on an article on the game in question) but I have got to point out that I am, right now, reading the LOTR trilogy for the first time, and I instantly have a much better understanding of Nobody Fugazi after the Bombadil reference. Such is the power of Tolkien.

  38. on 28 Jan 2008 at 11:02 pm^^

    //A MMORPG full of broke kids whining about being broke //

    Coincidentally there was just some speculation about how many working adults were participating in Granado Espada, and the guess is 30-40%. So I guess quite a few might be capable of taking legal steps if they had to.

    There were enough adults to advocate for and support GE’s original subscription model. I was personally willing to pay for customer service and bot control. However, the business model just shifted to pay-to-play: a great victory for the whiny broke, but not promising as far as the future development and maintenance of this particular virtual world.

  39. on 28 Jan 2008 at 11:55 pmTaran Rampersad (Nobody Fugazi)

    Yeah, I hate to sound cold – and I don’t mean to bypass Law here (it is what the site is about), but… some people are so interested in Utopia that they forget the grim reality of what is actually happening to them.

    I honestly can’t see going in front of a judge – just me – and saying, “I keep handing them money and they won’t give me what they promised!”. Once, yes, but…

    An odd thought came to me – well, not too odd – about this as I wrote that last paragraph. Something like the Better Business Bureau might be what synthetic realities need. Something that people shopping for a synthetic experience can go to for information and to review complaints from others. Its a thought that should probably be fleshed out more; I’m a bit tired right now.

    About a day ago I posted about how human rights and avatar rights are connected – the MacArthur Foundation had something in SL today about it, but I didn’t think much of the premise. But here’s the rub: If your avatar is getting screwed over financially, the human is too. And a human does have rights, as you say.

    I honestly don’t know what to say. Second Life has a similar problem with policy and Landbots – automated software clients that buy mistakes people make when people sell their land, or glitches involved related to latency. It bites people over and over and over, but Linden Lab does nothing – it cost over $10,000 US in the prominent cases in one week last year. I even wrote about it in my ebook in Second Life (which is not a bestseller, btw!), I write about it in the blog, so do others… people still go right back into it. So what do you do? You feel that something should be done. You ask hard questions, you tell people, and… then what? After a while, you insulate yourself emotionally and decide that you are no longer going to try to save the world from itself. Or you get lucky and find that one thing that can change the minds of either the legal entity in charge or the people using the world.

    Two words: It sucks. :-)

  40. on 29 Jan 2008 at 9:12 pm^^

    The company that runs Singapore Granado Espada did offer free Premium Passes to replace the ones that were disrupted and to foster some general good will. Unfortunately there are so many unresolved problems that the occasional freebie isn’t going to go very far.

    I agree that something akin to the Better Business Bureau is the way to go. Singapore actually has a similar consumer protection organization called CASE. However, I’ve been unsuccessful in organizing fellow players to put together a group complaint – they’re afraid any sort of outside pressure will lead to GE shutting down all together. I tried filing a complaint myself over the Emilia the Sage issue, but CASE never replied: probably because I’m not a citizen of Singapore, and I wasn’t physically in Singapore when I was cheated.

    IMHO, the gaming companies themselves need some real world infrastructure support. Even in large alliances, they haven’t taken down the botting underworld. However, real world government and law-enforcement agencies don’t take issues of virtual worlds seriously.

  41. on 29 Jan 2008 at 9:48 pmTaran Rampersad (Nobody Fugazi)

    Well, its the “better mouse killer” trap. I forget the details, but someone was selling something that killed mice better than everything else. You sent some money, they sent you a kit which (as I recall) included a block of wood and a hammer. the block of wood with a big X on it, marking where you place the mouse and instructions on how to use the hammer.

    It really wasn’t fraud. It was taking advantage of people’s gullibility. Now, this may have been an urban legend, BUT… the point is that if people are willing to spend their money on it, there is literally nothing you can do… except save yourself.

    Suspended disbelief in groups is such a dangerous thing.

    I also view it as an abusive relationship. The wife is beating the husband, or vice versa, and the other won’t lodge a complaint because…. their spouse might LEAVE them. From the outside, this is generally a good idea. From the inside, it isn’t so.

    Fortunately, the officers of the Law can usually come in and do something if there was a criminal act. Unfortunately, that can be too late, especially if the abused one keeps running into that door and breaking things.

  42. on 30 Jan 2008 at 5:00 pm^^

    The abused wife analogy is exactly right: the desire to preserve relationships can outweigh a sense of self-preservation.

    By the way, I spoke too soon about Singapore GE making amends for game disruption. After telling everyone that the unscheduled extended maintenance would replace the regular weekly maintenance, they decided to go ahead and do the weekly maintenance, too. I’m sure that caught many people by surprise after they had already activated their compensation Premium Passes: leaving them with a disruption that should be compensated all over again. I seriously doubt the gaming company will offer such compensation twice in one week.

    Of course neither of these maintenances are about accomplishing what the customers want (such as getting rid of all the botters). Instead they are about putting in place the mechanism for an “event” that exchanges *elite* weapons for items bought from the cash shop (re: indirect cash purchase of elite items). I totally saw this coming!!!! Check my first comment in this thread, question #4.

    That’s a big, flashing red signal the end is near for this particular MMORPG. And it just emerged from Open Beta a couple of months ago. :(

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