Banking in video games and virtual worlds

"Over the past several decades, U.S. marketplaces have seen a shift from traditional brick-and-mortar commerce to online marketplaces. Consumers increasingly conduct commercial activity online, typically relying on the infrastructure developed by banks and payment systems using fiat currency. For instance, consumers today primarily use debit or credit cards or other similar methods when conducting online transactions. Virtual currencies are steadily becoming an important part of the online commerce ecosystem. One prominent example of this trend is transactions that occur in games and virtual worlds.

Billions of U.S. dollars (USD) are spent each year in gaming and virtual worlds, where consumers buy gaming assets1 using fiat currency and then use those assets to make purchases in-game. Some games also allow consumers to convert gaming assets back to fiat currency. These marketplaces and the infrastructure that supports them increasingly resemble traditional banking and payments systems. Yet operators of gaming and virtual worlds do not appear to provide the kinds of customer protections that apply to banking and payment systems.

The Consumer Financial Protection Bureau (CFPB) is monitoring non-traditional markets where financial products and services may be offered, including the use of virtual currencies in games and virtual worlds. This report examines:

The evolution of the gaming industry and the revenue shift from one-time purchases of games to smaller payments made during game play. The systems that enable fiat currency to flow into and out of games and virtual worlds and make it possible to assign and extract considerable value from gaming assets both inside and outside of the game. How video games and virtual worlds act as electronic platforms that enable players to store and transfer valuable assets. Recent activity by companies to leverage gaming assets and their value by providing services that increasingly resemble traditional financial products, like loans and proprietary payment systems. The CFPB is also monitoring a number of concerning issues regarding gaming markets. These issues include, for instance, the recourse (or lack thereof) for players who incur financial losses due to theft, scams, or other criminal activity. Other issues include the proliferation of both fraud and money laundering facilitated by the two-way flow of money on these platforms, as well as the ability of gaming companies to collect an immense amount of sensitive consumer data, including data that is not only used to enhance game play but also to manipulate prices and monetize gaming in other ways. Ultimately, this activity raises questions about gaming companies' compliance with applicable law, including federal consumer financial protection laws.2

The ability to leverage, store, and transfer valuable assets within gaming markets and the collection and use of player data to inform that market may create significant risks to consumers, especially young consumers. The CFPB expects that emerging trends in the gaming market, as detailed in this issue spotlight, will be of interest to policymakers and other government agencies with responsibilities related to the issues uncovered.

The gaming industry The gaming industry has evolved rapidly, and gaming assets, such as in-game currency and virtual items, have become increasingly valuable alongside that evolution. Beginning in arcades, gaming originally relied on a one-time payment model, where players would pay a few cents for the opportunity to collect power pellets or purses. The industry soon shifted to home computers and consoles, where players would pay a fixed, up-front cost to play a game from beginning to end, collecting gold coins or power-ups along the way. Today, game revenue is no longer based solely on such one-time purchases. The highest revenue-generating games mostly profit through small, one-off payments known as microtransactions that are made throughout the lifetime of a game.3 The industry continues to trend in this direction, with many games changing to a free-to-play monetization model.4

Moreover, gaming is no longer constrained to just playing with people in the same room as you. Online gaming has made it possible for players to join virtual worlds with millions of other players. These types of games can include massively multiplayer online role-playing games (MMORPG) games like World of Warcraft, Runescape, and Final Fantasy, which usually involve players working together to accomplish a specific goal and collect objects, experiences, or territories. There are also platforms like Second Life, Roblox, and Fortnite that offer immersive, community driven, free-form virtual worlds.5 Recent market trends, including the development of augmented, virtual, and mixed-reality headsets- also known as AR/VR/MR headsets- point towards shifts that continue to blur the boundaries between the offline world and immersive, virtual worlds.6

For most of these games, a key part of game play is having an asset, item, or currency and using that currency to buy virtual items and services within the game. For virtual worlds, items purchased are typically cosmetic in nature and used to individualize players' avatars. Players generally earn or buy in-game currency, essentially converting fiat currency to in-game currency. Most of these games have in-game marketplaces where assets can be bought, sold, or traded. As a result, gaming companies are using gaming assets and proprietary marketplaces to replicate everyday activities online, including financial payments.7

Market participants Recent estimates value the global gaming industry at $249.55 billion in 2022.8 Global revenue for video games is expected to reach $321.1 billion by 2026.9

The gaming industry consists of many large, established companies such as Microsoft (including Activision Blizzard), Sony, Valve (Steam), Epic Games, Roblox, and Electronic Arts. Collectively, these companies earn billions in global revenues.10 The largest gaming companies typically own blockbuster games or popular virtual world platforms. For instance,

In 2023, Microsoft purchased Activision Blizzard- creator of popular games such as World of Warcraft- for $75.4 billion.11 In January 2024, Microsoft announced it made $7.11 billion from gaming that quarter, exceeding earnings from flagship products like Windows.12 In December 2023, the immersive, virtual world platform Roblox averaged 71.5 million active daily users globally.13 That year, the company made approximately $2.8 billion in revenue.14 Some of the most successful gaming companies have increasingly sought to provide players with a one-stop shop experience that integrates playing, distributing, and storing games, as well as game assets, in one place. For example,

Valve owns Steam, a digital distribution service and storefront where players can play and buy games, as well as trade gaming assets for additional fees.15 Sony originally joined the gaming industry as a console manufacturer in partnership with Nintendo. However, in 1994, Sony developed the PlayStation, the first gaming console that used CDs instead of cartridges. Sony's console continued to evolve over the years adding a digital media entertainment service and virtual marketplace, allowing players to purchase and store games.16 Recently, Sony changed its PlayStation store model to prevent digital download codes from other retailers, making it the sole digital game distributor for owners of its console.17 Games backed by large companies are so influential that some industry observers have suggested the odds of lower budget games breaking through in the market are shrinking.18 At the same time, large technology companies, with their vast resources, have been increasing their footprint in this space. For example:

In 2014, Amazon acquired the market's leading video game livestreaming service Twitch.19 The U.S. AR/VR/MR market size was valued at $4.39 billion in 202020 and large technology companies have bet big on creating games and headsets to fit this technology. Meta released its Meta Quest headset and VR game, Horizon Worlds, in 2018 and then subsequently invested $15.9 billion in the technology.21 Meanwhile, Apple launched its Vision Pro headset, which advertises the ability to transport users to stunning game play environments and exciting new places in 2024.22 Apple's headset also integrates Apple's phone payment system with features like sending and requesting money through Apple Pay,23 and facilitating online shopping.24 Gamers in the U.S. American consumers spent $56.6 billion on gaming in 2022, including hardware and content, like game purchases and microtransactions. According to research, the typical gamer skews slightly male,25 even though the number of female gamers has been steadily increasing recently.26 Research has shown that players typically average 12.8 hours a week gaming across multiple platforms and most often play video games on their phones, gaming consoles, PCs, or laptops.27

For many young people today, gaming may be their introduction to financial activity. For example, gaming provides young people the opportunity to learn about earning currency, managing assets, and making purchases.28 Gaming companies may view young players as an opportunity to create lifelong consumers early. An estimated 76 percent of children in the United States play video games.29 The most popular virtual platform among young people in the U.S. is Roblox,30 which, as previously mentioned, averaged 71.5 million active daily users globally in December 202331 and roughly 58 percent of those users were under the age of 16.32 Its popularity is largely due to the ease in which players can invite friends to join…different virtual worlds or games on the platform.""33 Research has shown that today's young people primarily turn to video games and virtual worlds to socialize with friends, rather than the draw of playing a game.34 Harnessing the appeal of socialization, technology and gaming companies have expressed their intention to market VR headsets- and as a result community driven, free-form virtual worlds- to children as young as 10 years old.35

Young people may be especially vulnerable to tactics used by gaming companies to induce spending and monetize gaming, as their financial habits are still forming.36 In 2019, the Federal Trade Commission (FTC) raised concerns about loot boxes,37 including the effectiveness of disclosures prior to purchase, the design of loot boxes promoting compulsive spending, and potential risks to young players. The FTC also noted that the gaming industry has taken steps to self-regulate loot boxes.38 Nonetheless, in 2022, a study found that American youths' consumption of loot boxes is on the rise39 and additional research suggests that loot box usage by children or teens can potentially lead to problems with gambling later in life.40 Internationally, regulatory efforts have focused on disclosing the odds of loot box rewards and including 'gambling-like mechanisms' in age-rating decisions.41 Within the U.S., efforts have been mostly focused on industry-wide self-regulation rather than specific policy interventions.42

Monetizing player data While playing games, companies collect a great deal of data and information on the player. The collection of this data is often marketed as beneficial to the player and their game play, as it can be used to provide a unique and personalized experience.43 However, this data can be used to monetize game play in a manner that may take advantage of players' proclivities to entice more spending.44 This data is also often sold, bought, and traded between companies.45

Types of data collected As players move through a game, game publishers track their behavior. This behavior can include financial data like purchasing history, spending thresholds, and how a player responds to personalized incentives like dynamic price updates. It also includes non-financial data, like how players interact with characters and the amount of time spent on tasks.46

The technology used to operate mobile games or render virtual or mixed-reality environments collects an immense amount of sensitive player data. Gaming consoles, mobile phone gaming applications, and gaming platforms often track lifestyle and behavioral measurements like location data and interactions with games and devices,47 as well as details obtained through integrations with social media platforms.48 Viewed as a whole, this data can be used to generate an accurate portrait of a player's offline identity, including their daily routines, home address, places of employment or worship, and who they connect with while playing.49

Similarly, AR/VR/MR headsets track a player's movements and physical behavior to render a VR scene used to interact with virtual environments. This data includes biometric data such as posture, eye gaze, gestures, facial expressions, voice, heart rate, and interpersonal distance. Eye movement, pupil response, and gait analysis are considered especially sensitive.50 Researchers have associated eye-movement tracking with ADHD symptoms51 and Alzheimer's,52 and this data collection poses medical privacy risks for that reason. The headsets generally also use audio, visual, and inertial sensors to detect the position and movement of a user or device relative to its surroundings. These sensors collect information about the user's physical location, including the size of the room they are in and data on passive bystanders that happen to be within range.53

How gaming companies make money on player data Microtransactions and discriminatory pricing Optimizing game play based on player data is commonly referred to by industry experts as dynamic odds.54 Gaming companies have been using behavioral, biometric, and personal data to manipulate prices and the availability of goods or services on a highly individualized level.55

For example, if player data shows that a player is unlikely to spend money on microtransactions, their odds of earning- rather than buying- rare assets will increase. This practice helps advertise rare assets to players that do spend money. Where data shows that a player is willing to participate in microtransactions or pay more money to keep playing the game, the game will increase their prices and decrease their chances of earning rare assets.56

While some gaming terms of service state that prices of in-game items may be determined by factors that are not disclosed to the player- such as an algorithm that considers the player's available funds and cost sensitivity- the availability, value, and quality of goods, including those in the user's account, may change at any time.57

Dynamic odds impact the perceived value of gaming assets when their availability, price, and/or scarcity within the game is individualized and therefore the real value is obscured from the player. This use of data gives a misleading impression to the player about the fairness or neutrality of these opportunities.

Advertising In addition to microtransactions, players often pay with their time and attention. The gaming industry uses player data and algorithms marketed as artificial intelligence or AI to target ads to specific audiences, making them more effective for advertisers and profitable for game publishers.58 For example, games can combine individual player location data, as well as data like birth date, age group, and gender with statistical location-based demographic data to provide advertisers with an array of audience targeting options including age, gender, family, and economic status.59 Game publishers can also use player behavior to make targeted ads more effective. For example, games can present non-skippable ads at certain intervals within the game when a player is highly motivated to continue playing. Sometimes, the player can pay to get rid of these ads. Other times, the player will have to watch the ad to keep playing or get a reward like in-game currency.60

Ultimately, this vast accumulation of data from consumers raises questions as to whether proper privacy regulations are being adhered to and whether consumers are fully aware of how their data is being used by gaming companies and across the industry. Without the right privacy protections, the data collected from gaming and AR/VR/MR headsets may be used to inform predictive models, including those marketed as artificial intelligence, and to adjust prices and game play or drive revenue growth.61

Examining the value of gaming assets Gaming companies are using gaming assets and proprietary marketplaces to replicate everyday activities online, including financial activities. In-game currencies can act as mediums of exchange that players can use for all sorts of in-game transactions, such as person-to-person (P2P) transfers or buying and selling in-game goods and services. These assets may be treasure keys, or gold pieces, instead of USD, but their use is functionally the same. And like the offline world, game economies experience supply, demand, and fluctuating prices.

Many gaming companies view their assets as virtual, licensed content or a preloaded currency that can only be used in their proprietary virtual world. Many gaming companies also claim that their gaming assets have no monetary value, are irredeemable for fiat currency62 and that their environments function as closed markets. However, these markets can actually be quite porous and gaming assets can have considerable value, including outside of the game itself.

This is largely due to the two-way flow of money that makes it possible to assign and extract monetary value from gaming assets. Several games provide on-ramps of fiat currency into their systems by allowing gaming assets to be purchased with USD. And, although they're not the majority, some prominent games allow players to extract fiat currency (cash-out) directly from their platform63 or enable third-party systems that facilitate a cash-out process.64 Most games do not currently enable a cash-out process themselves, but third-party systems have emerged to facilitate the conversion of some gaming assets to fiat currency through various means.65 The estimated value of these assets is even tracked on public websites that show the current exchange rate of various gaming currencies to USD.66

In-game and virtual currencies In some of the most popular video games today, players generally earn or buy in-game currency, essentially converting fiat currency to in-game currency. In-game currency is then used to buy goods and services as a part of game play, including virtual items.67 Game publishers determine the conversion rate of fiat currency to in-game currencies and the prices of virtual items, as well as the supply.68 Figure 1 below shows the various cash-in and cash-out relationships of gaming and virtual world markets.

Figure 1: The possible flow of fiat currency in individual gaming markets69 A diagram of four flowcharts showing the relationship of fiat currency to individual gaming markets. The first flowchart shows that closed gaming markets have no relationship to fiat currency. It is not used to buy fiat currency and cannot be withdrawn. In a closed market, in-game currency is stored on the player's account and used to purchase virtual items and services on the gaming platform. The second flowchart shows games can have on-ramps of fiat currency, meaning players can convert fiat currency to in-game currency that's stored on their account and used to purchase virtual items and services on the gaming platform. The third flowchart shows that games can have on-ramps and off-ramps of fiat currency, meaning players can convert fiat currency to in-game currency that's stored on their account and used to purchase virtual items and services on the gaming platform. In-game currency can then be withdrawn as fiat currency. The fourth flowchart illustrates crypto-asset related virtual worlds as an example of a platform with on-ramps and off-ramps of fiat currency.

Second Life, a large and popular online virtual world70 owned by Linden Lab that was released in 2003, is an example of a game with both on and off-ramps to convert fiat currency. In Second Life, Residents use the Linden Dollar (L$), which can be purchased both in-world and from Second Life's official Linden Exchange (LindeX) using fiat currency. Linden dollars act as money, as the player can use it to buy and sell virtual items, tip, or pay other Residents,71 and buy original services.72 All Second Life accounts have both a Linden Dollar balance and a USD balance, and players can convert Linden Dollars back to USD by selling Linden Dollars on the Linden Exchange. The USD account balance can be withdrawn or used to pay for Second Life services like subscriptions or fees. The USD account balance is managed by Tilia, a licensed money transmitter and subsidiary of Linden Lab. The USD account balance can be withdrawn using PayPal or Skrill. During withdrawal, a 5-percent fee is taken from the transaction total and the first withdrawal typically takes about 30 days.73 Between 2011 and 2013, third-party websites allowed trading between Linden dollars and Bitcoin.74 In 2021, Second Life reported the average number of daily users to be 200,000 users across 200 countries and a GDP equivalent of over $600 million,75 more than some small countries.76

On the other hand, League of Legends is an example of a game that does not allow players to cash-out within the game, but third-party systems exist that enable the exchange of its in-game currency for fiat currency. The game has two main currencies: Blue Essence (BE), which has no cash-in or cash-out process, and Riot Points (RP), which is exclusively obtained for purchase via fiat currency. Riot Points are used in the in-game market to purchase various virtual items that work across all games made by Riot Games.77 League of Legends does not allow Riot Points to be cashed-out within the game, but third-party systems enable the exchange of Riot Points for fiat currency.78

Virtual items, such as skins or cosmetic items Virtual items, such as skins,79 are usually ornamental or cosmetic goods that have no impact on game play but have become a token of status and in some instances are considered immensely valuable by players.80 In general, virtual items are typically acquired through one of the following ways:

Earned as a reward in game play. Bought with USD or in-game currency as a microtransaction. Bought, sold, or traded through in-game, secondary, or third-party markets for fiat currency, other virtual items, or in-game currency. Won in a random chance loot box. Importantly, virtual items can sometimes be traded between players as an acceptable form of payment.81 For example, in the virtual world of Habbo Hotel, items are exchanged between players through the in-game market. Plastic chairs were originally designed to furnish virtual apartments. Over time, these chairs gradually became the currency of the game. Prices on the market would be denominated in plastic chairs, and the exchange of plastic chairs would allow players to buy goods or services within the game.82

Notably, the value of these skins or cosmetic items can be converted into fiat currency and certain skins reach surprisingly high value in virtual markets that allow P2P trading. The Steam Community Market is a platform-supported secondary market where players go to buy, trade, and sell items outside of individual games. Within the individual games, skins only have cosmetic use value, but on the Steam Community Market, these assets have exchange value,83 meaning skins can be bought, sold, or traded among players for Steam Wallet funds or other skins.84 This value can be so great that, in Steam's terms and conditions, they even acknowledge that proceeds from these sales or trades may be considered as taxable income to players and thereby subject to applicable laws.85

Although, the Steam Community Market does not directly facilitate a cash-out process to withdraw Steam wallet funds for fiat currency,86 there is an entire ecosystem of third-party markets that are enabled by Steam's application programming interface (API).87 These sites facilitate player-to-player trading and converting skins to crypto-assets or fiat currency, leading to even higher exchange values for some individual skins on these third-party markets, as well as the Steam Community Market.88 For example, the largest sale of a Counter-Strike skin occurred in 2023 on a third-party website for over $500,000.89

Third-party websites also facilitate a growing skin gambling industry that supports wagering skins, similar to casino chips, in virtual games such as blackjack, roulette, or craps.90 For example, a player's account balance can be made up of skins, conventional currency, and other forms of virtual currency that are then converted to that site's form of credit.91 Skins are then won or lost depending on the outcomes of the games.92 Third-party websites also facilitate skin betting on events like competitive gaming contests, also known as esports,93 and games between professional sports teams.94 Winnings can be converted to fiat currency or other forms of virtual currency and withdrawn for a fee directly to the player's digital wallet.95

Third-party systems convert gaming assets to USD Many third-party systems facilitate the buying, selling, and trading of in-game currency, virtual items, and even entire player accounts. However, third-party systems do not need to be enabled by a company's API to convert gaming assets back to conventional currency and at the time of this report, many games make it impossible to convert gaming assets back to fiat currency without using a third-party market or website.96 For example, third-party sites support the selling of game currencies for USD from games where an API doesn't exist like RuneScape, World of Warcraft, and others.97

To convert gaming assets these sites first connect interested buyers with sellers so they can then exchange assets within the game. The buyer then pays the seller through the third-party website and the seller can withdraw that payment in their preferred fiat currency directly to a bank account or digital wallet for a fee. Because these sites facilitate the transaction, players are able to exchange gaming assets for fiat currency.98

Figure 2: Markets available outside individual games A diagram of three flowcharts showing the markets that are available outside of individual games. The first flowchart illustrates platform supported secondary markets, such as the Steam Community Market, where players can convert fiat currency to a virtual currency or gaming asset that's stored on their account. Players can then use that virtual currency or gaming asset to buy virtual items and services across multiple games in a secondary marketplace owned by the gaming company. The virtual currency or gaming asset cannot be withdrawn for fiat currency. The second flowchart illustrates third-party markets that facilitate converting in-game currency to fiat currency if it's not available through the game. Players can convert fiat currency to a virtual currency or gaming asset that's stored on their account. They can then use a third-party system that connects buyers and sellers of gaming assets or accounts. The buyer pays the seller for the assets on the account through the third-party system. That payment can then be withdrawn for fiat currency. These third-party systems can sometimes be enabled by a gaming platform's API. The third flowchart illustrates third-party gambling sites that make it possible to convert the value of gaming assets to an additional proprietary currency for gambling. Players can convert fiat currency to a virtual currency or gaming asset that's stored on their gaming account. They can then use a third-party gambling site to convert the value of their virtual items, such as skins, to the gambling site's proprietary currency. This value is stored on their account and can be supplemented with fiat currency and crypto-assets. That stored value is then used to play gambling games like blackjack, roulette, or craps. Skins are then won or lost depending on the outcomes of the games. The remaining value can then be converted to fiat currency and any won skins can go back on player's individual gaming account. These third-party gambling sites can sometimes be enabled by a gaming platform's API.

Though their usage remains sparse, a number of virtual worlds and games exist that utilize crypto-assets- such as non-fungible tokens (NFTs)- as virtual items, or crypto-assets as game currency.99 The relationship between these virtual worlds and their official crypto-assets is similar to video games and their in-game currencies. Players purchase the virtual world's native asset and use it to buy goods and services within that virtual world's economy.

While these crypto-asset virtual worlds are significantly less popular than virtual gaming worlds like Roblox, Second Life, or Fortnite,100 they are important to note because of the prevalence of third-party crypto-asset trading platforms, users can convert a virtual world's native crypto-asset to fiat currency, making them even more porous than typical gaming markets. Notably, some of the largest virtual gaming world publishers have expressed growing interest in positioning their virtual items as crypto-assets that have the ability to be traded outside of the game's economy.101

Examples of these crypto-asset related virtual worlds include Decentraland, which uses a crypto-asset called MANA, and The Sandbox, which uses a crypto-asset called SAND.102 Both of these in-game crypto-assets can be used for transactions within their respective virtual worlds and can also be traded on other crypto-asset platforms for USD.103

In the game Axie Infinity, players interact virtually through digital pets called Axies, each of which is a non-fungible token (NFT) stored on the Ronin network. Users earn the crypto-asset Smooth Love Potion (SLP) by playing the game. Players can also breed new Axies by spending SLP and another crypto-asset token, Axie Infinity Shards (AXS). Users can trade SLP and AXS for fiat currency or other crypto-assets on third party crypto-asset trading platforms.104 At the height of its success, Axie Infinity had over 2.7 million daily active users105 but as the number of users grew, the NFTs required to play became very expensive, leading to hierarchies of users: investors, managers, and workers.106 While the crypto-asset industry and its investors lauded the game as a viable way to earn income, reports documented the ways the gaming system exploited workers.107 The ecosystem largely fell apart in 2022 following a breach of the game by a state-sponsored hacking group.108

Conversion and purchase issues with in-game currency Industry experts have expressed concern about the tactics game makers use to obscure the real costs of gaming assets from players.109 Games frequently use currency bundles110 to hide the true value of what players may purchase and to make larger quantities seem like the better deal. These pre-set bundles are often in large quantities (e.g., 100, 1,000, or 10,000 units) with confusing exchange rates (e.g. 2/3, 3/5, 5/7), rather than the exact amount needed for a particular in-game purchase or activity.

In some cases, games may also have more than one currency with different exchange rates for each currency, making the mental conversions between fiat currency and the game currency difficult. This often leads to large amounts of unused currency without any way to get it out of the game. Some players believe this is done by game makers to maximize profits as players are unable to track the exact amount of money spent but feel obligated to keep playing to avoid sunk costs.111

Converting game assets back to fiat currency within a game can lead to increased costs for players, for example, by using differing ratios for deposits and withdrawals or burdensome thresholds for withdrawal. For instance, the popular game Roblox allows players to create games and virtual worlds within Roblox's gaming universe, as well as play games created by other users. As users move from game-to-game within Roblox, they can buy virtual items in exchange for Robux, the platform's in-game currency. When a virtual item is bought within a game developed by a specific player, that player earns Robux. Roblox's terms and conditions only allows players that are active creators112 to cash-out their earned Robux for fiat currency.113 Notably, while Roblox has separate ""User Terms"" and ""Creator Terms,"" everyone who joins Roblox's must agree to both terms and conditions, essentially making all players also creators.114 To convert earned Robux115 to USD, an active creator must earn a minimum of 30,000 Robux. Additionally, Roblox's conversion rate to USD is not intuitive. Buying 100,000 Robux through Roblox's store costs $1,000, but withdrawing 100,000 of earned Robux only gets a player $350.116 Even with these constraints, Roblox players that are creators withdrew $740.8 million in 2023.117

Gaming platforms facilitate the P2P transfer of gaming assets As previously mentioned, gaming assets are frequently exchanged or transferred among players through various means. These means can include gifting virtual items to other players, which is supported by games like Fortnite, Rocket League, and Minecraft.118 As well as, platform-supported secondary markets like the Steam Community Marketplace and in-game markets like RuneScape's expansive transfer market, where individuals can trade valuable virtual items in their inventory and currency with other players.119 Gaming platforms and virtual worlds thus appear to function like payment systems by facilitating the storage and exchange of valuable assets.

Players have also found ways to recreate traditional P2P transfer activities within gaming markets that do not allow it. While Roblox expressly disallows person-to-person transfers of Robux,120 users facilitate the transfer process themselves by purchasing quickly developed items from an individual enrolled in the Developer Exchange Program, who may also be a player. The individual who receives Robux from the purchase of their item will receive 70 percent of the earned Robux. This effectively transfers Robux from one person (the buyer) to another (the seller).121 This also extends to collectives known as Roblox Groups, which include individuals that are enrolled in the Developer Exchange Program and who want to split Robux revenue. These earnings can then be transferred to USD through a one-time or recurring payment.122

The impact of gaming assets having monetary value Video games and virtual worlds appear to be functioning more and more like banking and payment systems that facilitate the storage and exchange of valuable assets. As gaming assets store greater amounts of value and their use becomes increasingly similar to that of money, the CFPB is monitoring how gaming assets are used and the associated risks, including those impacting children and the emergence of products or services that resemble traditional consumer financial products or services.

Accounts may be vulnerable to losses When in-game currency or virtual items are earned during game play or procured via microtransactions, they are stored on a player's account for future use. This use can include transactions within the game,123 trading virtual items with other players,124 buying products on platform-supported secondary markets,125 converting gaming assets to fiat currency,126 withdrawals as fiat currency,127 or using third-parties to convert and withdraw as fiat currency.128 As a result, a player's account is considered highly valuable. In fact, several third-party systems facilitate the buying and selling of entire player accounts themselves, not just individual gaming assets.129

The practice of harvesting in-game currency for sale on a player account, also known as gold farming and the amount of potential earnings has drawn seasoned players to this practice as a source of income. However, as detailed below, gaming accounts often lack the security and protections of traditional bank accounts. Some of the most common scams include defrauding a player of the assets stored on their account, as well as hacking into their account and transferring in-game currency to another account.

Account vulnerabilities The monetary value of player accounts combined with the ability to cash-out gaming assets has led to an influx of phishing attempts and reports of account theft. Attackers often use compromised user credentials to break into player accounts and access game currency or virtual items. They then use third-party systems to transfer gaming assets to another account or sell the assets for fiat currency.130 A recent study from 10,000 gamers globally showed that 63 percent of respondents feel their accounts aren't safe enough from attacks- with one in three reporting that their accounts had been hacked in the last two years.131 Industry experts consider young gamers especially at risk of phishing attempts due to their likely presence on social media and lack of awareness about social engineering tactics.132 Consumers are also potentially threatened by an emerging market of account recovery scammers that promote their ability to obtain lost gaming assets for victims of theft.133

Recourse when assets are lost In complaints to the FTC and CFPB, several players reported hacking attempts, account theft, scams, unauthorized transactions, and losing access to game currencies and virtual items, but they received limited recourse from gaming companies. Gaming companies often take a buyer beware approach, putting the burden on individual players to avoid these scams and phishing attempts. They may lock or ban players' accounts suspected of scamming and phishing but do little to provide remedy to the victim. For example, stolen items on Steam are not returned due in part to market incentives. Steam states that its virtual items' value is at least partially determined by that item's scarcity. If more copies of the item are added to the economy…the value of every other instance of that item would be reduced.134

Consumers have complained that some gaming companies will terminate the accounts of players for pursuing recourse from their financial institution for unauthorized game purchases. In their terms and conditions, Roblox requests users to contact Roblox Support before disputing any charges directly with your payment processor.135 The CFPB and FTC have received complaints from players who contacted their financial institutions regarding unauthorized Roblox game purchases. These complaints note that while they received refunds through their financial institutions, Roblox then terminated or locked their account.

When a player loses access to their account because they are accused of violating a game's terms of service or a game is terminated altogether, the game publishers state that they have no obligation to compensate the players for their lost assets or return the money players have invested.136

Fraud in gaming markets The ability to transfer and otherwise convert gaming assets to fiat currency or crypto-assets has led to a proliferation of money laundering137 and fraud138 on gaming platforms.

Researchers and academics have found that gaming markets can facilitate illegal money laundering.139 For example, a person can open different player accounts on several online gaming platforms, use those accounts to buy gaming assets with illegally obtained funds. They can then send the assets to other accounts within the game and then convert them to fiat currency using third-party markets. These practices enable ill-gotten funds to become less traceable with each step.140

Further, the conditions of gaming markets embolden activities such as fraudulent transactions and scams. In 2023, one firm estimated that it lost $110 million due to fraudulent transactions.141 The CFPB has received complaints regarding various trade scams on these third-party websites. In one complaint, a consumer reports that they purchased a gaming account from a prominent third-party website and confirmed receipt of the account. However, once receipt was confirmed, the account was hacked and recovered by the original owner. Per the third-party website's terms and conditions, once receipt was confirmed, there was no available recourse for the buyer.142

Issues with third-party systems The terms and conditions of these third-party websites can be misleading or otherwise obscure the truth about the risks involved in their services. For example, some third-party websites entice users with gaming assets, like discounted bundles of game currency or rare virtual items, in exchange for downloading applications, watching advertiser content, or submitting personal details.143 These tactics potentially expose players to risks like credit card fraud, malware, and identity theft. 144

Several of these third-party websites collect a large amount of personally identifiable information including email addresses, gaming usernames, and log data, such as IP addresses and browser information. They may also need banking information to process payments through services like Stripe and PayPal.145 Yet, these marketplaces have had a number of data breaches and hacks.146 These incidents have also occurred at large gaming companies, pointing to an industry-wide security issue.147 As these markets evolve, including functioning more and more like banking and payment systems, it is imperative that companies take appropriate data security steps.148

Gaming specific financial products Leveraging the value of gaming assets and the amount of commerce occurring on gaming platforms, some companies have begun exploring gaming-specific services that resemble traditional financial products. For example, J.P. Morgan recently expressed interest in an embedded payment ecosystem for gaming, meaning a wallet, that can serve as a central hub for anything related to a player: gaming credentials, in-game currency balances and transactions and spending history.149 J.P. Morgan Payments has also provided strategic investment to Tilia, a payment processer and subsidiary of Linden Lab.150 Tilia was created to provide financial services to virtual worlds in the form of in-game transactions, payouts to creators, and conversions of in-game currencies to fiat currency, including USD. Tilia is currently partnered with several virtual worlds, online games, and NFT marketplaces, including Second Life, Upland and Avatus.151

Similar products have also emerged by technology companies. ZELF launched in the US in June 2022 as a banking service for virtual worlds with the intention of easing the transfer of money between the online world and the offline world, as well as trading gaming assets between players.152 This was done through an instant and virtual Visa credit card secured by a deposit account, known as a ZELF Account, that could be opened within 30 seconds using only the applicant's name, email, and phone number.153 Once issued, users could deposit crypto-assets, NFTs, and gaming assets to then be converted into fiat currency.154 Additionally, ZELF's marketing suggests that its intended target audience was Gen Z and young people.155 According to reporting, the ZELF Account aimed to provide young people the ability to facilitate borrowing against gaming assets by holding game currency in escrow and providing players with payday loans.156 The ZELF Account157 was shut down within two days of publicly launching.158

In 2023, MetaLend announced a program that would allow Axie Infinity players to take out loans against their in-game crypto-based assets.159 Further, in 2022, an international technology company offered a two-year loan for approximately $30,000 to a Decentraland gamer. The loan was used to purchase digital land in the crypto-based virtual world and many reports at the time referred to the loan as the first mortgage of the metaverse. In the loan, the technology company owned the land and the borrower had to pay monthly payments to use the land. Once paid, the land would transfer to the borrower.160

The role of banks and consumer finance products within gaming is evolving, but there appears to be a trend towards introducing services that are similar to traditional consumer financial products that rely on the value of gaming assets and the digital transactions that are happening on gaming platforms.

Conclusion For several years, the most popular video games have included immersive virtual worlds that offer the storage and exchange of valuable assets. Gaming companies have created digital marketplaces that facilitate the buying, selling, and trading of these assets with limited consumer protections, which has led to potentially harmful practices for players including financial losses due to theft and scams.

Consumer protection laws apply to banking and payment systems that facilitate the storage and exchange of valuable assets. The CFPB is monitoring non-traditional markets where consumer financial products and services may be offered, including where such products and services are provided by or in connection with proprietary gaming platforms.

Additionally, the vast accumulation of data collected from consumers by gaming companies raises questions as to whether privacy rules are being adhered to and whether consumers, especially young ones and their parents, are fully aware of how their data is being collected and used across the industry. The CFPB will continue to work with other agencies to monitor companies that assemble and sell sensitive consumer data, such as a consumer's payment history, especially when this data is harvested and monetized without the user's awareness."

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