Trading cyber money offline is illegal?

Of all countries, it angers me that Korea thinks offline trading of cyber money is illegal. According to the wire service Yonhap,   a local court in Busan fined two 30-somethings for trading Lineage cyber money with real money, saying they violated gaming laws. Judge Lee noted that the law forbids offline trading of cyber money, and that that would apply to regular games, not just online gambling sites. It would not have been a problem, the judge said, if the exchanges were made on an individual basis, but these men were doing it for business purposes. This implies that only people who shed blood sweat and tears (and vast amounts of time) playing online games have the right to “fairly trade” their virtual goods offline.

The ruling was somewhat outrageous, because these two people had been using cyber item broker sites such as Item Bay or Item Mania to buy cyber items at a low price and resell them at a higher price. In doing so, they had made about $20,000 in about two months. It wasn’t like they are employing people to play games or running a program to generate for auto game-play (both of which have been done in the past). They did what was legal and typical of anyone who plays the market.  Smart guys.

The government tried to explain the rationale of the court, saying that the current game law only supports sales of cyber items that are acquired through “normal means.” Buying those items on an eBayisque site and reselling them is not “normal,” an unnamed  government official said in the Yonhap article.

Naturally, the broker sites are not happy about the verdict, because the court’s interpretation could very well make them illegal. Gamers are interested in seeing how things will develop, especially because this was the first time a court made a ruling on offline trading of game items. Being a country where online gaming is a quasi national pastime, there is naturally a huge market for cyber item sellers and brokers. According to the Korea Game Development Institute last year, the market for that kind of trade is estimated to be about $700 million in Korea, not including individual trading and the black market, because the figures are based on tax reports filed by the broker companies.

When they first developed Lineage in 1998, NCsoft had no idea cyber items would be traded for cash offline. They realized it was a huge market when people were not only trading hard-to-obtain “items” for hard cash, but also game characters– for people who wanted to play at high levels but did not want to spend hundreds of hours developing their character. A similar problem happened in World of Warcraft, released by Blizzard in 2001. Blizzard had less trouble with the offline sales of cyber items, by making rare items acquired through quests non-transferable. However, that did not solve the problem of offline sales of in-game gold; although it tried to address som companies in the U.S., it has little jurisdiction over numerous gold farms in China, where people are paid to sit at a computer and play games to obtain cyber cash.

Why can’t we leave everything to the market to decide? For Korea, there is also the more complicated issue of online gambling falling under the umbrella concept of trading cyber goods for real cash than playing a fair game. In Korea, gambling is only allowed to foreigners with the except of one casino (tucked away in a remote mountainous location). Gambling on the Internet is also illegal unless all of your cyber earnings remain in cyberland. In addition to local web sites, the government makes sure Internet service providers block addresses of foreign gambling sites.

Of course, the matter of offline trading of cyber items has many people worried– not just gamers, but also the government, which is in an uncomfortable position because it is trying to nurture the game industry as a major driving factor for the economy while trying to clamp down on gamblers. A year ago, it amended laws on “game industry promotion” in which it attempted to create a basic framework to block cash exchange for gambling purposes and “other new types of digital property.” (That is quite ironic, given the fact that digital property and copyright was almost rendered useless in Korea because of its 99% broadband penetration and average household Internet speeds at 100mbps.)

Do we have to exercise so much control over online games? Why should game makers have entire control over their games? Second Life gives the perfect example of how the seamless exchange of cyber money and real money can fuel a virtual economy. But I think that is exactly the point. When the government talks about trying to boost the local economy, they are thinking of how to make things better for gaming companies. So Linden Lab would be a great example that shows how a virtual economy could be actively linked with an offline one without the game company itself making much profits.

It’s great that the government is trying to help out the game industry, but it really shouldn’t be making laws to snub the free market. They made a mistake and made a law so general when they were only trying to stop people from online gambling so now that it can be applied to almost anything. It’s only slightly comforting that Korea’s law system, unlike Western systems, is not entirely based on precedents because this ruling was obviously a bad precedent.

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