Introduction
Video games have never been more serious. The gaming industry generated approximately $224 billion in global revenue in 2024.
Some experts project that figure will reach $300 billion by 2029.
That is more annual revenue than the global movie and music industries combined.
Roughly four billion people play video games worldwide, including roughly three out of four children in the United States.
Within the last fifteen years, gaming companies have adopted a “monetize[d]” business model.
Many companies earn revenues through microtransactions—minor but regular payments for points and items.
Some games now collect revenue entirely through these purchases rather than sticker prices.
According to proponents, microtransactions enable quicker gameplay.
Platform distributors—Microsoft, Sony, Apple, Google, and Valve—control monetary infrastructure.
Players (or their parents) can add funds to accounts via company gift cards and branded credit cards.
Companies also issue store balances.
Most troublingly, gaming companies issue financial instruments within games, and players can convert the value into other forms of money, including dollar-denominated bank deposits.
Compared to the early days of analog gaming, it is as if Parker Brothers and the toy industry had collaborated to create, lend, and transfer Monopoly money worldwide, even helping players cash out “funny money” into “real money.”
This Article analyzes a suite of financial instruments issued and deployed by the video game industry, terming them “gaming money,” as they now display critical features that legal scholars assign to “money,” most notably convertibility into government-backed money (bank deposits and cash) at an expanding scale.
By issuing this money, gaming companies are not merely creating virtual financial systems, but encroaching on the domain of banking law, which contains several statutes restricting money creation to the federal government-chartered banks, as well as several other laws governing money and finance.
Although money is at the core of banking and finance (public and private), no provision of federal banking or financial regulation defines “money.” Regulators adopt different, usually implicit definitions of “money” in different ways to govern different sets of disparate markets, activities, and instruments that do not seem to fit into particular categories.
For instance, the Federal Reserve Act requires that Federal Reserve notes be redeemed in “lawful money,” which neither the Act nor the courts have defined.
The Treasury and state governments license “money services businesses,”
including “money transmitters” such as Western Union, and impose requirements regarding data governance, solvency, and the prevention of illicit flows.
Federal and state agencies now apply these frameworks (lightly) to regulate digital wallet companies, including companies primarily offering wallets for cryptocurrencies.
The Treasury surveils the financial system for various activities clustered under a broad definition of “money laundering.”
Federal and state securities regulators treat markets that blur the lines between banking, securities, and derivatives as “money market funds.”
Finally, a set of rarely invoked laws governing “legal tender” contain their own conceptions of “money.”
One might view the lack of a universal statutory definition of money as a feature of financial regulation that facilitates innovation. From the perspective of this Article, it is more like a “bug” in governance that confuses financial regulation and circumvention of the sovereign’s constitutional authority over money creation.
Within gaming money systems, gamers suffer many harms. Roblox, the most popular video game in the world, has 112 million daily active users, thirty million of whom are under the age of thirteen.
Players exist as avatars, which users customize with “clothing, gear, animations, simulated gestures, emotes, and other objects” and use to play games.
Within an immersive environment without a single storyline, players learn how to code and develop games for other players to play.
Gamers can earn “Robux” as they become entrepreneurs.
Although players can purchase Robux through platforms like the Apple and Google stores, the distributors take a 30% cut of all sales.
On February 16, 2024, Raymond and Laura Noel, the parents of three gamers, filed a class action lawsuit against Roblox, claiming it financially exploits children.
Such lawsuits proceed alongside multiple state attorney general lawsuits (and other federal lawsuits) alleging that Roblox’s design facilitates child abuse and grooming (a subject matter beyond the scope of this Article).
For roughly a decade, Electronic Arts’ FIFA Football franchise, one of the best-selling games of all time,
has been a site of fraud. In 2016, coconspirators created software bots that “logged thousands of FIFA football matches within a matter of seconds,” improperly earning “FIFA coins,” which they sold in illicit secondary markets for over $16 million.
In 2021, Ukrainian law enforcement inspected a warehouse thought to have been used for cryptocurrency mining, finding fraudsters running bots on 3,800 PlayStation 4 consoles to earn FIFA coins and sell them in illicit markets.
During the global COVID-19 pandemic, many gamers in countries with unstable currencies made a living by earning gaming money they could convert into government-backed money.
For instance, in Axie Infinity, a game reminiscent of Nintendo’s Pokémon, players buy, trade, and battle each other with creatures called “Axies” (which are themselves digital representations of art known as non-fungible tokens, or NFTs).
In 2022, the game’s payment token, “Smooth Love Potion,” collapsed, plunging many users into debt and leaving others with worthless investments in Axies.
As harm to players becomes apparent, online gaming is receiving more academic attention. While other scholars have explored money in video games from different angles, such as gambling law
and consumer protection for children,
as well as the possibility of taxation
and securities regulation
within virtual environments, the literature has yet to examine new online gaming practices as a unique puzzle for laws governing money.
This Article shows how dominant video game companies are not only harming gamers but, much like financial technology and cryptocurrency companies, developing “shadow money” systems
and thus evading regulations meant to prevent structural harms. Compounding problems further, gaming companies can invoke a distinctive defense, claiming they operate “virtual” worlds of entertainment, media, and the arts, beyond the reach of regulators. Yet the laws governing money do not ask if money is “real,” for instance, but whether its issuance infringes on the legal privileges of the federal government and its chartered money.
Financial regulation, especially banking law and legal tender law, contemplates the development of shadow money regardless of technological format. Moreover, banking regulators govern “by hypothetical” and should not wait for small-scale problems to become large-scale crises.
The Treasury, including its Financial Crimes Enforcement Network (FinCEN), and state money transmitter and securities regulators all require corporations engaged in money transmission and related services to register before doing business.
Finally, the application of legal tender law, although unassigned to any particular regulator, would explicitly ban many of the practices adopted by video game companies.
The Article proposes that federal agencies supervise companies converting or materially supporting the conversion of gaming money to government-backed money (currency and bank deposits) at scale. Ultimately, however, Congress should empower regulators to supervise gaming companies that issue convertible gaming money at scale.
The Article concludes by reviewing the argument and expounding on how an analysis of gaming money generates insights that should inform how scholars and policymakers should approach the relationship between financial regulation, especially monetary regulation, and technology. Gaming money is part of a new kind of payments infrastructure, embedded within a functionally sovereign social platform where the financial instruments in question often remain the property of the issuer. For now, at least, this regime should be agnostic toward the specific quality of this technology in defining jurisdiction but sensitive in the intensity of supervision of companies that do not cause concern regarding their conversion practices.
Beyond gaming, the Article suggests that regulators should approach money itself as a category of regulatory concern, regardless of how the regime has previously governed the instruments in question. This Article does not undertake to prove this broader, structural claim, but does illustrate it within a particularly technologically sophisticated industry. The gaming case urges a more unified analysis.
Part I analyzes the history of corporations deploying new technology to create “shadow money” just beyond the reach of the law. Congress has charged banking regulators with preventing such developments. Policymakers have also previously terminated or proactively prevented the issuance of shadow money by railroad, canal, and mining companies,
retail giants,
and social media conglomerates.
Per Professor Dan Awrey of Cornell Law School, “[f]or most of the twentieth century, banks enjoyed a virtual monopoly over private money creation.”
Today, gaming companies follow fintech and cryptocurrency companies that have been issuing shadow money for over a decade.
They engage in activities in ways that confuse regulatory categories and boundaries.
In the twenty-first century, the sovereign struggles to govern money and banking. History suggests banking regulation is incomplete without a vision of concretely regulating nonbank corporate monies.
Part II shows how gaming companies create money through games, online stores, and gift cards. Gaming money is critical in organizing information, data governance, and behavior within the game.
Moreover, the monetization of video games leads to many harmful practices. First, gaming companies manipulate exchange rates between gaming money and government currency, rendering the nominal value of many retail financial products and services illusory.
Second, gaming companies have created environments ripe for laundering money between gaming money systems and chartered banks.
Third, gaming companies expose gamers, developers, and counterparties to new forms of payments and liquidity risk.
Part III argues that gaming companies also present a novel legal challenge, which is nevertheless surmountable. Unfortunately, many policymakers have implicitly subscribed to the metaphor of a “magic circle,” a term some scholars use to separate worlds of play from the real world, that is the proper realm of law,
even as many dispute the metaphor’s utility.
In the courts, the gaming industry regularly leverages the background laws of intellectual property, speech, and communications that encase technology and entertainment companies from regulation.
Gaming companies constitute and reinforce this defense through contract and property law—terms of service (ToS) and end-user license agreements (EULAs) disclaiming convertibility, user property rights, and deposit-like and bank-like features.
The disclaimers are revealing: The need to deny such categorization of these legal and financial relations presupposes that the broader public may view the balances this way. Indeed, SEC disclosures and other financial statements reveal some companies may classify gaming money as liabilities on their balance sheets while simultaneously telling those same consumers that gaming money has no monetary value and constitutes no property right.
Effectively, gaming companies operate as if exempt from many important laws governing money, banking, and finance.
Situating the analysis within the law and technology literature on virtual spaces
and platform power,
the Article argues that virtuality—or more accurately, the claim of sovereignty over a virtual world—is an insufficient defense against financial regulation. Lawmakers should adopt the regulatory axis of “convertibility,” as it tracks the power of private money creation and, thus, the level of public governance necessary.
Governments have consistently regulated entities that support the conversion of private money into currency and bank deposits, paying close attention to the instruments and new technologies of conversion.
Some companies may not yet engage in pernicious activity at scale and hence may only require light regulatory supervision. However, regulators should not wait for a micro issue to become a macro issue. Despite working in uncertain conditions with limited information, financial regulatory agencies aim to anticipate and ideally prevent crises.
Part IV offers a graduated framework for regulating gaming money, replacing the industry’s magic circle with public administrative standards revolving around convertibility to government money, bank deposits, and now, stablecoins, at scale. Based on existing laws, the Consumer Financial Protection Bureau (CFPB) could lead other regulators to examine large gaming companies that support converting gaming money to currency and bank deposits and other familiar financial instruments for unfair practices.
As a practical reality in this political moment, the CFPB is unlikely to move forward, and its very existence is in peril.
Ultimately, Congress should also pass a Gaming Money Act, empowering regulators to license and supervise companies issuing gaming money. Licensed gaming money companies would face tailored rate controls, customer identification requirements, and structural separation of gaming money operations from broader business activity, according to relative harms and risks outlined in Parts I and II. These laws would apply regardless of the technological media of gaming money or its characterization per the laws governing media, entertainment, and the arts, but according to its interface with the public money system.
The Article concludes by reviewing the argument and how it suggests a more concerning future for the governance of money, banking, and finance. The stakes are becoming more urgent. Sony has applied for a national trust bank charter to issue cryptocurrency (stablecoins), placing some of its gaming money operations in a new, cognizable, and regulated (if underregulated) space.
This move signals that video game companies are seriously interested in building out private monetary systems we hardly understand. If technology companies can engage in regulatory arbitrage across imagined lines of virtuality and reality, then policymakers and scholars must reconstruct regulation.