A new report from the United States Consumer Financial Protection Bureau (CFPB) – an organization focused on enforcing laws to protect consumers – shows that the bureau is aware of and monitors major online video games filled with them In-app purchasesdigital currencies and shady third-party markets that these games become Pseudo-banks and casinos for children.
Online video games have been around for years featured microtransactions, in-game currencies, trading digital assets and sometimes even the ability to “cash out” your winnings. And like these games – like Fourteen days, Roblox, And League of Legends– have brought in millions upon millions of dollars, this has led to publishers investing more and more in payment processors and other financial services. All of this is more like a bank than a video game, but these companies and games don’t have to play by the same rules as financial institutions. And the US government noticed.
The CFPB’s new report on the video game industry
On April 4th The CFPB has released a detailed new report about banking in virtual worlds and video games. While the report doesn’t signal that the CFPB plans to take action or recommend any immediate plans, it does show that the consumer-focused bureau is aware of how video games have become online banks for many children.
“For many young people today, playing may be something very special Introduction to financial activities“says the CFPB. “For example, gaming provides young people with the opportunity to learn about making money, managing assets and making purchases. Gambling companies could look at young players as an opportunity to acquire lifelong customers early on.”
The CFPB warns that these younger players are more vulnerable to advertising and monetization tactics, such as pooling currencies to disguise their value. The CFPB also says people regardless of age can use these online games as banks, even if the companies don’t directly encourage the behavior.
“Many gaming companies also claim that their gaming assets have no monetary value, are irredeemable for fiat currencies, and that their environments operate as closed markets,” the CFPB writes. “However, these markets can actually be quite porous and gaming assets can have significant value, even outside of the game itself.”
The CFPB explains that games allow users to purchase assets and currencies with real money, and while most games do not allow these digital items to be turned over and sold to other players, a Third-party ecosystem Numerous shady websites and apps have emerged that facilitate such transactions outside of the game. This means that digital assets in a game are treated like currencies, and the current exchange rate of some items is publicly tracked online.
The report also points out that digital in-game items can become currencies within the games themselves if the community agrees, citing as an example that plastic chairs have become a popular form of payment in an online game.
“In the virtual world of Habbo Hotel, Items are exchanged between players via the in-game market,” the report said. “Plastic chairs were originally developed to furnish virtual apartments. Over time, these chairs gradually became the currency of the game. Prices in the market would be quoted in plastic chairs, and the exchange of plastic chairs would allow players to purchase goods or services within the game.”
Games are like banks, but they lack security and regulation
Because assets are worth real money and can be sold and exchanged for real money using third-party services, video game accounts can be just as valuable and important to players as their bank accounts. But as the CFPB reports, most video game companies do not have bank-level security or protections for user accounts. And when a player’s account inevitably gets hacked or stolen, game publishers don’t do much to help.
“In complaints to the FTC and CFPB, multiple players reported hacking attempts, account theft, fraud, unauthorized transactions, and loss of access to in-game currencies and virtual items, but received limited redress from gaming companies,” the CFPB writes. “Gaming companies often take a ‘buyer beware’ approach and place the burden on individual players to avoid these scams and phishing attempts.”
“They may suspend or suspend the accounts of players suspected of fraud or phishing, but do little to provide redress for the victim. For example, stolen items on Steam are not returned, in part due to market incentives. Steam says the value of its virtual items “depends at least in part on the scarcity of those items.” As more instances of the item are added to the economy, the value of every other instance of that item would decrease.’”
The report also documents that players complained that their accounts were terminated when they attempted to seek recourse through their banks or credit card companies. If this happens, players will be stripped of their valuable account.
“If a player loses access to his account because he is accused of violating a game’s terms of use or because a game is discontinued altogether, game publishers declare that they are not obliged to compensate players for their lost assets or to give them the money “to give back what they have invested,” the CFPB explains in its report.
The report’s conclusion states: CFPB states that due to “limited consumer protections,” video game accounts are more vulnerable to financial loss due to theft and fraud.
“Consumer protection laws apply to banking and payment systems that facilitate the storage and exchange of valuable assets,” the bureau says. “The CFPB oversees non-traditional markets in which consumer financial products and services may be offered, including those products and services provided by or in connection with proprietary gaming platforms.”
It will be interesting to see if game publishers and companies like Valve pay attention to this report and try to improve security and provide better support to their users. If not, the U.S. government could become more involved in regulating what is becoming a Wild West of online video game banking and currencies.
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