In another life I was a researcher on gambling, and perhaps the most important public policy question that (legalized) gambling presents is regulatory: how are the games guaranteed to be "fair"? In Nevada, for example, the Nevada Gaming Commission oversees the casinos to ensure that the operations of the employees and of the technology (roulette wheels, slot machines) are, as their mandate from the legislature puts it, "honest and competitive." The point is not to protect people from making some bad bets (such as betting on a single number in U.S. roulette -- a 38:1 gamble that only pays 35:1), but to guarantee that the games are (a) run as they are claimed to be and (b) in the case of slots, not paying out less often than a certain floor percentage. Why think about this here? Well, with RMT now openly encouraged by the makers of some virtual worlds, can their players trust the 'house' not to skim a bit too much off the top?
In recent discussions here and here, the possibility was raised that in MindArk's Entropia Universe making money is more akin to striking it rich in Vegas than to the just rewards from applying oneself through hard work and entrepreneurial skill. In a related vein, Jason Archinaco has recently posted a piece to ssrn about the career of a virtual horse at horseracingpark.com. While the piece for the most part applies a number of the ideas by our esteemed messrs. Castronova, Hunter, and Lastowka to ask questions at the intersection of law and (virtual) horse-breeding, Archinaco also points to the position of the game's makers and their high level of control over the conditions under which the virtual breeding and racing take place.
Big deal, you might say. If people want to bet their money in an enviroment where the mechanisms for determining outcomes are hidden, it's their money to lose. But public policy on gambling has usually wound up in a more regulatory position, forcing gambling venues to open their procedures and machines to the public or barring that (in the case of slots) to a licensing commission. Most policy experts on gambling point to the well-documented capacity of gambling to prey upon the hopes of the desperate, thereby worsening poverty. The Nevada legislature's mandate to the Nevada Gaming Commission states:
- The continued growth and success of gaming is dependent upon public confidence and trust that gaming is conducted honestly and competitively, that the rights of the creditors of licensees are protected and that gaming is free from criminal and corruptive elements.
- Public confidence and trust can only be maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments and the manufacture or distribution of gambling devices and equipment.
- All establishments where gaming is conducted and where gambling devices are operated, and manufacturers, sellers and distributors of certain gambling devices and equipment must therefore be licensed, controlled and assisted to protect the public health, safety, morals, good order and general welfare of the inhabitants of the state, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.
The free market, then, does not reign over gambling in Nevada. Should it reign over online virtual worlds that encourage the speculative inflow of real capital (via RMT)? The key issue here is information; must virtual world makers with significant economies and RMT "open their books" about how their economies operate, given how much control they have over the conditions and mechanisms of those economies?