South Korea’s Supreme Court Decriminalizes Real Money Transactions in Online Games

As many unlucky MMORPG players can attest, most subscription-based online games come down hard on players caught purchasing in-game currencies with real money. World of Warcraft bans players caught buying game gold, and and Everquest does much the same.

Now a new legal decision by South Korea's Supreme Court could be changing the balance of power decisively in favor of consumers.

Pixels and Policy investigates.

The Rise of Real Money Transactions

It's been standard practice to either discourage or ban real money transactions (RMT's) since the rise of subscription service MMORPGS like World of Warcraft. In an RMT, the consumer exchanges real world currency for in-game cash, loot, or leveling. This is the kind of behavior encouraged by freeform worlds like Blue Mars and Second Life, but in a closed-world MMORPG, it can ruin the experience for others by devaluing the virtual economy.

Many MMORPG developers explicitly ban the use of RMT's through clear language in their End User License Agreements and Terms of Service. For example, if you're nabbed conducting RMT's in World of Warcraft, you can kiss all of your hard work goodbye, since you'll be facing an account forfeiture. Developers are serious about protecting their creations from the destabilizing influence of outside markets: the MMORPG Guild Wars banned over 5,000 accounts per week in 2008 due to RMT violations.

Just how big a market is the RMT industry? According to an article in the excellent Virtual Economy Research Network, illicit trading in virtual currencies is a nearly $2 billion market, thanks in great part to mass circumventing of EULA's by Asian gamers. In fact, Asian gamers are so addicted to RMT's that one banned gamer actually sued NCSoft – developer of the South Korean hit Lineage – to have the ban overturned. Another gamer in China successfully sued the developer Shanda for removing his virtual toolkit and banning the player for RMT abuse.

The Law Gets Involved

As it turns out, the case against NCSoft and Lineage had legs. The gamer involved played what appears to be a rudimentary version of arbitrage with the Lineage II economy – buying currency low on one market, selling higher on another and reaping the profits in the margins. When NCSoft administrators were informed, they froze the gamer's in-world assets, effectively crippling his nascent business. The case reached all the way to South Korea's Supreme Court, which handed down a decision a few days ago.

In a landmark ruling, the South Korean Supreme Court effectively decriminalized the RMT market and voided NCSoft's EULA banning real currency transactions and the intermingling of real and virtual currencies in their games. Edward Castronova of Terra Nova asked a very good question in his post announcing the decision – what does this decision mean for the United States? More than you might think.

South Korean games are big business in the United States. New MMORPG's like Aion, as well as more established titles like Guild Wars are produced by the South Korean company but have a large and growing market in the United States. Does the South Korean Supreme Court's decision also void out the portions of NCSoft's EULA for American and European players, since the company is based in South Korea and bound by the order that it alter the EULA and Terms of Service?

The South Korean Supreme Court was shrewd in not explicitly legalizing the RMT trade, but it also declawed some of the main ways developers were deterring the practice – mainly confiscation of virtual goods, which was deemed unlawful, and bans/suspensions of accounts. This also raises new and interesting questions. Among them: If developers no longer have the means to police their own worlds, what does this mean for future MMORPG development?

As long as virtual worlds make use of "rarity" and artificial scarcity to determine the hierarchy of their weapons, armor and magic wands, outside players will be able to put an informal "price tag" on the value of the labor endured to obtain the item. The South Korean Supreme Court's decision may, it seems, reach far beyond the borders of South Korea. Whether that's a good thing or not remains to be seen.

7 thoughts on “South Korea’s Supreme Court Decriminalizes Real Money Transactions in Online Games”

  1. This is an immense decision. Ultimately, this is an arms race that governments are bound to lose. NCSoft can just have monsters start dropping ridiculous amounts of gold, and then just make new items all no-transfer. It’s amazing to me that a government can legislate the rules of a game.

  2. Whether the South Korean game companies decide to change their game’s EULAs or not will depend on various factors:
    * Is it illegal in the US to convert virtual money to real money?
    * Are most of the US and Intl players ok with the idea of a legal RMT (initial reactions say: no)?
    As I mentioned in my article, it’s best to sit this one out as I’m pretty sure the game companies are more of in dizzy state of mind than we are.

  3. Pretty much every source reporting on this court ruling is actually improperly assessing the decision. What those two men were charged with was not for violation of the EULA but rather for a South Korean law designed to control gambling. Gambling for real money is restricted in South Korea and the law was created to prevent people coming into a club and buying tokens, gambling with those (which is legit) and then exchanging them back for cash when they leave.
    This ruling has no bearing on whether RMT violates the EULA or whether the EULA is a valid legal agreement. It is the (rough) equivalent of a US court ruling that MMOs do not constitute online gambling because the items are ‘randomly’ dropped. This merely removes the criminal charges for an act the original law was not intended to cover, however any civil action is still legit.

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