The Emperor’s (New) New Clothes

Producers and users of virtual spaces are heading toward difficult times. These could be made worse through increased regulatory intervention by various countries. I suggest that it is in the best interest of users, produces and nation states alike that those online service providers that use virtual items and currency form self-regulatory body. I suggest further that sport provides a ready-made governance model that the online industry should adapt and adopt.

I thus propose the formation of an: Online Dispute Arbitration Board (ODAB)*

*An academic treatment of this was first presented at The Game Behind the Game by myself and Dr Melissa deZwart.


1       The Problem

Individuals are investing time and money into virtual items but when things go wrong they are seemingly left with no rights and nowhere to turn other than the law. That is there are a number of circumstances where individuals lose access to virtual items or currency in a way they feel is unjust.

Courts and statue are increasingly recognising this position unjust and are finding in favour or users.

This has created a difficult situation where virtual items have a heterogeneous set of rights, which differ widely from jurisdiction to jurisdiction, associated with them. What’s more as the industry grows; cases become larger and more frequent; and, more property like attributes are associated with virtual items - heavy handed regulation that looks very much like real property and / or currency regulation will appear more attractive to lawmakers. This is especially the case as virtual itmes are no long restricted to MMO's or other online games.

Such regulation is likely to have a chilling effect on the industry especially innovation and thus will reduce the choices open to consumers. That is if the regulation is not written such that it inadvertently decimates one corner of the industry that fell outside of the model that law makes had in mind at the time of drafting.

Thus what is required is a system that can provide justice to the individual while not requiring a potentially problematic and inconsistent statutory definition of virtual items – a seemingly intractable problem.


2       The Solution

2.1     Sports regulation

The way to square the virtual item circle can be found in the regulation of sports.

There is something odd at the heart of many sports. However this oddness is so normal that we often forget that it is there. That is, in many sports people regularly do things that would be illegal in any other circumstance. In contact sports, say boxing, people hit each other with intent to hurt. In some cases people die through these encounters; however, just so long as the rules have been followed no one is arrested. Indeed the very thought of walking onto a sports field and arresting everyone for assault is ridiculous.

TVPN-SportsGovernanceWhat sports law and sports governance do is provide a highly sophisticated normative influence on the conduct of sports and sports people. Governance is layered – there tends to be: in-game governance by officials, sometimes with replay facilities, club / league governance, national governing bodies, international sports federations and the international court of sport. The officials tend to ask ‘was act X within the rules’, layers above this tend to decide questions such as ‘was act X so outside the rules that other action is needed’ and ‘in judging act X where the rules applied properly’.

What’s more these structures do not preclude either the intervention of statutory bodies or appeal to such bodies. Hence if one player strikes another player the following layers might apply:




Official: Was it within the rules > no action

Official: Was it outside the rules and impacted play > in game sanction

Team / League: Was it far outside the rules > fine / suspension

Statue: Was it outside what could be reasonable expected / reasonable consented > criminal offence

Similarly if a player disagrees with a decision they may take it through the governances system on the basis the rules were miss-applied, similarly the may (and do) take legal action on grounds such as breach of contract – where a sporting body is seen as having a contractual duty to apply its own rules.

What is key in all of this is that there are a whole set of acts that are judged contextually. Thus in a game of physical contact it is only in the very extreme cases when the question ‘was that contact assault’ ever relevant – even though in any other circumstance it would be.

Hence the legal status of the act is purposely left under-determined, as a determination is not required for most normative purposes in the given context.


2.2     Virtual Item Regulation


Both the philosophy and structure of sports regulation can be applied to virtual items.



 There are not direct parallels for each layer of sports and online services but an approximation is as follows:

Match official < > Guild and / or GM

Team < > MMO Publisher

Sports Governing body < > Online Arbitration Body










3       Operation of Arbitration Body

The primary function of the arbitration body would operate by assessing incidents where an individual was denied access to virtual items in a way that they felt to be contrary to the sprit of the rules outlined by the service provider in question.

In the case of both games and non-game online services that utilised virtual items this would include incidents such as:

In the latter case the perpetrator may also face criminal proceedings the arbitration board though would operate in respect of the return of the items to the victim – something that may (or may not) fall outside the view of the criminal justice system.

Appeal to the arbitration board would typically be defined within the Terms and Conditions of the service provide but would only be applicable when the providers internal appeals system was exhausted.

Appeals may require a fee on behalf of users to cover, in part, administration costs and, in part, as a way to dissuading frivolous uses of the system.

The kinds of outcomes the board would determine would include:


3.1     Benefits of the proposal

Cheaper - Arbitration tends to be cheaper than law. Even when quasi-judicial bodies are established these tend to be less costly than legal actions. Further, the existence of an arbitration body does not preclude the option of legal action, as we see in sport.

Better - Assuming that ODAB can attract the right mix of individuals it should provide a better process than the courts, at least in the short term. This is because, as with sports, ODAB will have individuals that understand the details and culture of online games, hence will understand the issues at stake for all the actors.

Regulatory burden - A governing body that has normative power on players and publishers relieves the burden on states, at least in part, from enacting legislation and creating statutory bodies to deal with the issues that begin to arise in greater numbers from online games. This is particularly important as online games tend to be international and states tend to act first on a heterogeneous national basis and then take some years to come to forms of international consensus – all of which is time consuming and costly.

Regulatory peril - From a publisher’s perspective, an independent arbitration board may give states confidence that citizens will be sufficiently protected as customers of online games such that they do not need to pass the legislation and create statutory bodies noted above. The peril for publishers is that any such action runs the risk of having serious intended or unintended consequence on the industry as it is hard to pass laws that capture the nuance and dynamic of individual games. Here again the sports model is apt as states tend to regulate by law the rules of individual sports. 


3.2     Dis-benefits of the proposal

Insufficient volume currently there is a low volume of disputes that are taken to court hence costs of any arbitration body are likely to outweigh any savings from the few disputes it might hear. As  stated aboveI feel that the number of cases will increase but we concede that it is difficult to know when the best time to set up an arbitration body would be and that it may initially be financially inefficient.

It will be ‘griefed’ almost all systems of online game norming are exploited by some players, the same will happen with an arbitration board with players simply wanting a cheap way to grief publishers. The scope of the arbitration board must be defined such to filter out griefing, for example a rule would be that publisher’s dispute systems are fully exhausted before the arbitration body is evoked, fees may be involved, cases may be publisied.

There is no publishers’ associationthe online game industry has no recognised body hence it is unlikely that publishers will recognize the arbitration board. Initially the arbitration board will have to work directly with publishers and existing associations e.g. some publishers of online games are members of general publishing associations such as UKIP in the UK and ESA in the US. More broadly the lack of self-identification of online publishers is seen as a barrier to the creation of an arbitration body.

It is not peer based / lack of player representation it is likely that the body will be made up of publishers only hence will be bias and fail due to lack of credibility. This is a challenge for the body especially as funding is likely to come from publishers. Thus the constitution of the body that publisher agreed to must ensure representation of players either through other bodies or non-publisher individuals.

4       Conclusion

Some form of arbitration system to resolve serious disputes about virtual items is the best mechanism for users, publishes and nation states as it provides a contextual, commensurate way of determining just remedies in an increasingly important aspect of many peoples lives without the necessity of legislators to try to understand and regulate an ever changing, complex set of online relationships centring on virtual items.


Comments on The Emperor’s (New) New Clothes:

Ren Reynolds says:

5 Appendix I: A history of disputes, cases and statue

Here is a quick run down of the relevant major disputes, cases and statue involving video games and virtual items.

1982 Atari v. North American Philips Consumer Elecs., 672 F.2d 607. (infringement)
1982 Williams Electronics v. Artic International, 685 F.2d 870 (3d Cir. 1982) (play as co-authorship)
1983 Apple v. Franklin, 714 F.2d 1240 (3d Cir. 1983) (copyright in code)
1996 National Basketball Association v. Motorola, 105 F.3d 841 (2d Cir. 1996) (play as authorship)
2002 Blacksnow Interactive
2002 Ashcroft v. Free Speech Coalition 535 U.S. 234, 122 S.Ct. 1389 (2002) (virtual child porn)
2003 Hongchen vs Beijing Arctic Ice Technology Co Ltd – theft of virtual goods
2003 Kremen vs. Cohen (property in domain names)
2003 Intel v. Hamidi (trespass on chattels)
2003 Taiwan – clarifies Criminal Code making it illegal to steal virtual items (possibly illegal before the clarification also)
2005 Sony Station Exchange Launched
2005 Marvel vs NC Soft
2006 Kopp v Vivendi (game guide)
2006 Bragg v Linden
2006 Korean Game Industry Protection act
2007 Korea bans gains from ‘abnormal play’
2007 Eros LLC v. Volkov Catteneo
2007 WoW v. Peons for Hire
2007 Hernandez v. Internet Gaming Entertainment ltd (anti-gold farming class action)
2007 Korea applies 10% VAT to virtual currency sales – but only to a limit (akin to prize fighting?)
2007 Linden bans ‘gambling’
2008 Habbo & RuneScape item thefts in Holland (theft under 312 Dutch Criminal Code)
2008 Linden ‘bans’ banking
2008 Blizzard vs WoW Glider
2008 Blizzard v. In Game Dollar LLC
2009 Bank ‘theft’ in EvE online
2009 China ‘bans’ the use of virtual currency outside game
2009 Korean supreme court clarifies Game Industry Protection act – in case of players selling virtual currency
2010 Stern v. Sony (disability / accommodation)
2010 Blizzard vs WoW Glider (9th C decision)
2011 Zinga poker chips case (
2011 Meguerian et al v. Apple Inc. allowing children to purchase in-game items

Posted Apr 18, 2011 6:15:53 PM | link

Marcus says:

An interesting and compelling read. Thanks Ryan.

It seems very suitable, as it would be capable of adapting to each individual game, such as EVE Online where scamming is allowed/encouraged (EVE definition for the difference between scamming/exploits can be found here). The existence of such a body would probably protect players who defraud others, as they would protect boxers from being charged with assault.

Posted Apr 19, 2011 2:03:35 AM | link

Richard says:

One additional thing I think that needs to be made clear is that statute should somehow approve of the rules that the sport has. After all, the kind of framework you describe could be set up around cockfighting, but even if all the processes and procedures are followed scrupulously statute in most countries is going to pay no attention to that at all.

With virtual worlds, we're OK in the "no real humans were harmed in the making of this level 50 warrior" category, but if government thinks this is some kind of tax avoidance scam then no amount of regulatory fairness on our part is going to make a difference.

As for the general principle, I'm wholeheartedly in favour of it. One of the reasons that game developers may be in favour of it is that it takes the heat of developers in dealing with complaints. As an analogy, where I teach at Essex University there is a zero tolerance policy towards late assignment submissions. In the past, if a student submitted 27 seconds too late (as one did in my last assignment) I'd have had to have made the decision as to whether or not to accept it myself, which is very awkward should I decide against it. Now, it's out of my hands and a committee handles it, which is not only more agreeable for me but fairer for the students as the decisions are consistent across all courses. I can see how developers might find it attractive to pass certain common kinds of dispute to an impartial body; it's less work for them, and if things don't go the player's way it's the overseeing body that's "to blame", not the developer.


PS: I fine my students one mark for every misspelling of the word "lose"...

Posted Apr 19, 2011 4:10:43 AM | link

Ren Reynolds says:

Richard > One additional thing I think that needs to be made clear is that statute should somehow approve of the rules that the sport has. After all, the kind of framework you describe could be set up around cockfighting, but even if all the processes and procedures are followed scrupulously statute in most countries is going to pay no attention to that at all.

All this comes out of my research into the history of sport and law. In common law jurisdictions there tends to be no explicit definition of what is legal in sport and what is not. Indeed one of my points is there is often a direct contradiction.

In the case of boxing (in English law which I know the best), I don’t think there was or is a statute that says boxing is ok, nor is there one say that a tackle in Rugby is ok. Rather there has been an accommodation over time where certain statutes are not applied in certain circumstances – one of the driving forces behind this was the codification of boxing through practitioner defined and regulated norms (to get really nerdy the Broughton Rules of 1743 still form the core of today’s boxing rules).

One of the things that rules and governance do is act as a signal that there has been consent and that something will happen if an act falls outside of what has been consented to. The limit of the rules is bounded by the limit of what one can consent to.

So, indeed the system that I’ve outlined could apply to Cock Fighting, in fact the world of C18 boxing that Broughton’s rules applied to would no doubt be illegal today (it was not boxing as we understand it now, it was more akin to bare knuckle full contact cage fighting), what occurred over time is that the bounds of self-governed practice and the interface with law changed as sensibilities changed.

Why I’m resting so heavily on sports law is that this subtle change overtime is understood within the legal regime.

Thus I don’t think statue does need to recognise the governance structure that I’ve outlined, but I do think that nation states and other regulatory bodies do have to respect it. This will occur if it is seen the kind of harms that regulators may be concerned about fall under the normative power of the governance.

So, to take the several cases of people that have been forced to give virtual items to others. We have two documented cases of this in the Netherlands, in one someone was convicted of theft. That aspect will always remain a criminal matter. But, what about the items that were stolen, we neither want them to be given a ‘hard’ value that would require a online provider to set up as a bank, nor (I suggest) do we want to leave the victim in the circumstance where the contract with the service provider gives them no right of access to their item and no other recourse than to sue for the stuff back – which was the subject of the 2002 Hongchen vs Beijing Arctic Ice Technology Co Ltd case.

This takes work – the online industry would have to talk to policy makers about what they were putting in place, how it would work etc.


Posted Apr 19, 2011 2:04:02 PM | link

Ren Reynolds says:

Marcus, EvE vs SL banking issues is one of the things I had in mind. But, who's Ryan?

Posted Apr 19, 2011 2:04:59 PM | link

Marcus says:

I have no idea. My brain somehow turned Ren Reynolds into Ryan. My apologies!

Posted Apr 20, 2011 9:18:39 PM | link

Shander says:

I think the connection to sport is a good approach to avoid the worst issues with virtual property being treated as real life property. A couple thoughts though:

Soft wipes , or even hard wipes might be necessary especially in those virtual worlds with active vitural economies and assets that be transfered between players (the part of the games I most enjoy btw). I hate the idea but still, to fit the sport model, the game would need an end. A date 5 years in the future where all virtual goods would dissapear might be a big help...I think that a soft wipe might be enough...the notion that the player could start again with his character that might have a head start in reaquiring status or assets in the next match might look akin to a team facing the next game with the same players.

The value of a players character is probably something mmo's would have resources to address, and which would look less like property to least easier to cast as just game position.


Someone being cooerced and having economic damage done to them doesn't need to be a property issue. If the netherlands case were seen more as someone harming someones enjoyment of a sporting event someone could seek redress for something more like "enjoyment" not property. Could things look more like a ticket to a game than a share of the game itself?

I'm not exactly sure on how to say that but I do think there is an approach that takes the sporting aspect into effect...its not as if the court is going to find that a criminal has done more damage to a person prevented from seeing what ended up as an all time classic game, rather than missing a poor peformance, after the fact. the ticket price, not the value of the game play itself....hmm

Posted Apr 26, 2011 2:33:44 PM | link

Shander says:

Another idea short of a soft or hard wipe to make items look more like points scored in a soccer match rather than rare stamps in a stamp collection.

Not that you guys need my brainstorming, but generally the more ephemeral the in game items are, the less I'd think they'd look like real life property to outsiders.

I remember a mud where all items disintegrated after a certain number of game days... some dozens, some hundreds (Avalon) .

There's a subtle, but significant difference between "this sword sells for 15$ on ebay, and the right to use this sword for 18 months sells for 15$ on ebay.

In the second, you're selling temporary in game privalege....its going to be worthless at some-point...a court is going to start looking at the relative utility of the time value of a +5 sword and be more likely to say "whatever , its just a game" . Players will still want to work for the weapon, and its dissapearence won't feel like either a confiscation nor a nerf ... it just wore out in a predicable way.

Posted Apr 26, 2011 5:15:46 PM | link