Tobold's Blog
Tuesday, January 17, 2012
Is Diablo 3 gambling?

If you happen to live in South Korea, the Diablo 3 you will be able to play will differ in one major aspect from that available for other countries: The South Korean version will have the real-money auction house function removed, because the authorities considered that to be gambling. Basically finding a very valuable item in Diablo 3 is very much a question of luck, and thus you paying Blizzard to be able to play in the hope of getting your money back and more from selling random loot drops could well be considered a form of online gambling.

In the United States and Europe online role-playing games have up to now largely avoided too close a scrutiny of legal questions regarding virtual property. Up to now the argument of the game companies, that players did not own anything in a game, and that everything in a game was just intellectual property belonging to the game company, held up well enough. While people *could* sell their accounts, characters, or virtual items on EBay or other platforms, the practice wasn't all that wide-spread, and in most games it was against the rules.

Diablo III represents a huge step forward in the virtual property debate, as now selling virtual items for real money is not just possible, or permitted, but even encouraged with the game company providing the platform to do so. Thus the day approaches where some judge is going to say to Blizzard that if there are thousands of official transactions in the game where the Sword of Uberness is sold for around $10, and the player can cash out that money, there is no more legal reason to consider the Sword of Uberness (or at least the right to use it) not to be a property of the player. And thus the question whether the randomized way in which the player acquired the Sword of Uberness is a form of gambling is valid. And that is just the tip of the iceberg: If virtual property is recognized as a form of property lots of other laws start to bite as well, from tax laws to concerns about money laundering.

I wonder if Blizzard has thought all that through, or whether they are just starting to discover the implications. If Diablo 3 is gambling in South Korea, then why not in other jurisdictions? As long as the flow of money is strictly from the customer to the company, we can always say that the customer is buying a service, not property. Diablo 3 opens up a potential stream of money in the other direction, towards the customer, and it is unlikely that this won't have legal consequences.
(Sorry, previous comment used [b] for formatting instead of HTML code. Please delete it?)

I'm starting to get reminded of the great internet goldrush of the mid to late nineties.

While corporatization of a virtual space has undeniable benefits (would we still be looking at GeoCities-style websites with blink text and crude gifs without the slick corporate cash influence?), and drives a certain amount of artificial growth... There were benefits, but we all definitely had to learn to shield ourselves from the over-eager eyesores that initially plagued the new space as the corporations tried to find their footing.

But is that something we actually need in games?

What benefit am I getting from whipping out my credit card to buy the epic sword of uberness for my Single-Player character that I wasn't getting already by hacking the game with a trainer and adding it to the character the old-fashioned way? None. I'm getting poorer.

I mean, aren't we getting pretty servicable games already? What benefit does RMT bring to the table for D3 that it didn't in D2? I can tell you right off the bat that technological improvements aside, the changes made to bring D3 these new 'innovations' has significantly reduced the value of the game to me compared to D2.

No mods, no offline, no custom/hacked characters to skip the GOD DAMNED FIRST ACT... I won't be buying it when it's released. Unless it's released already? I ignore most news about it, so I don't know. It's off my radar. I'm voting with my wallet.

And yes, I know you don't HAVE to buy anything. I'm capable of saying 'no'. But I have no doubt that either through game design, or through the community, there will be an engineered or evolved awareness that you aren't getting the optimal experience because you aren't shelling out microtransactions.

I personally hope that the legal ramifications of what happens/will happen with D3's auction house render the idea unviable, If anyone CAN pull this off smoothly, it's Acti-Blizz-ion, with deep pockets, smart lawyers, and a willingness to buy lobbyists. But I desperately want to see even smarter, more innovative criminals, miscreants and frauds pull this thing apart for entirely inappropriate misuage, bringing it to the attention of law enforcement and the courts, so that it can be stopped before it spreads.

Let's move gaming in the direction of Skyrim, not Diablo 3.
Personally I think the Koreans banned it for the wrong reason (I don't think it's gambling), but they were right in banning this horrible feature. In fact, I sincerely hope this happens in my region as well (due to potential tax reasons, perhaps?) - I might even buy D3 if it does.
I've always thought the RMT auction house for D3 was a fantasy, and that it would never come to pass.

Imagine kids telling their parents that they need to keep playing in order to pay for the subscription.

The "gaming addiction" crowd would certainly speak out. Clearly adding a possible real money payout to an already habit forming game can't be a good thing?

Certainly not for minors.

It may not be gambling, but it sure will get more attention before all is said and done. Especially now that the G word has been used.
"I wonder if Blizzard has thought all that through, or whether they are just starting to discover the implications."

Blizzard's history with previous attempts at linking some aspect of their games to the outside world (exhibit A: RealID) lead me to put my money (metaphorically speaking :) ) on option B.
From my point of view it's absolutely gambling. It will be interesting to watch what happens ...
I think to consider games in terms of gambling it's helpful to consider what it is the law is trying to control. Perhaps that is addictive compulsive behaviour which includes an element of "if I get lucky and win big I can pay my rent". Thus gamblers may decide to gamble to obtain essential money rather than do something more productive.

I also think, and here I diverge from D3, that gambling implies the risk of losing. If I put £200 on the spin of a roulette wheel I could make money or I could lose it. In D3, after the initial software purchase, I can only gain. Sure I might spend all day item farming and get nothing worth selling but that's just time, it's not financial loss.

So for me D3 is not gambling but it does encourage behaviour very similar to undesirable behaviour shown by addicted gamblers. Thus what we're seeing, I think, is the use of gambling legislation to control something else that is deemed socially undesirable in the same way that health and safety laws are sometimes used against civil protests like the Occupy movement.
Cam: "What benefit am I getting from whipping out my credit card to buy the epic sword of uberness for my Single-Player character that I wasn't getting already by hacking the game with a trainer and adding it to the character the old-fashioned way?"

All gear is relative. Ultimately it doesn't matter in the slightest if your sword does 100 base damage and the monsters have 10k hit points or your sword does 1000 base damage and the monsters have 100k hit points.

What matters, and what people pay for, is that your sword does 100 damage and most other people's do 50 damage. People pay to be better than other people.

(It's not the only area of modern life this happens in, cosmetic surgery, designer clothes tap into the same desires).
Blizzard's move is certainly more high-profile, but LiveGamer provided a legal, authorized service within SoE games for years by which you could trade in-game items for real-world money while the intellectual property rights stayed with Sony.

It will take decades for the law to catch up with these issues and law is not a universal constant. It will happen eventually, though.
In thinking about both what you and Cam posted - here are some big questions that started bouncing around my own brain:

- If a player is banned (with or without cause), do they not have a potential lawsuit for loss of property based on the RMT value of their current set of characters, along with the potential lost value incumbent on no longer having access to the service?

- If your account is hacked or stolen, does Blizzard not have financial culpability for the loss?

- Does a cyberhack now include penalties for theft - e.g., if the RMT value of your character is over $2000 USD, will that mean that, in the US, you are also guilty of grand theft (a felony)?

- Does the mere presence of the RMT auction house place Blizzard under the rule of law for leasing property? (technically, that /is/ what you're doing - it's their stuff, and you're paying just to use it.)

The more I think about it, the deeper the "rabbit hole" goes.
Well, at least in the US, the questions of tax and "property" are very well trod. If you make money from the game, you will be subject to tax. There's even an ebay inspired 1099-K for entities to report monetary transfers.

The gambling issue is different in the US though as online gambling is illegal and it's illegal for banks and credit cards to process returns from such. I believe Blizzard was asked about this and said they are certain it wouldn't be considered gambling, but I'm not sure why they are so certain and I'm skeptical the returns from processing fees are going to be sufficient to fight the IRS over it.

I'm not really sure what Blizzard thinks this will bring to the game. My personal suspicion is that freed from all restriction, farmers and bots will reduce the value of everything in real money to nil and everyone will have identical suits of uberness for pennies making the entire game trivial.
Really, it comes down to content use I believe. We are talkig about a contry that has a TV channel devoted to starcraft. Think of it like this.

If 25% of a 100 mil population play, that's 250k that are playing fervently. If enough play, you can make the gambing connection. But if that were 1%? That would be about 10k, and pretty worthless.

At this point, you my be thinking "What does this have to do with anything?"? Well, it's money. If 10k people make 1$ a day off the AH, then that's 10k$ a day. A perhaps 10% gambling tax on that is worthless. But 250k$ a day, that's 25k$ a day in taxes, and as that number goes up and up, it's worth looking at.

The problem though? They have no way to track or tax. Therefore, common government choice, if they can't tax it you can't have it in the first place. Don't get caught up by morality of any sort here, it's politics of government pure and simple.
I guess I still don't understand all the hate for the RMAH.

I mean, aren't we getting pretty servicable games already? What benefit does RMT bring to the table for D3 that it didn't in D2? I can tell you right off the bat that technological improvements aside, the changes made to bring D3 these new 'innovations' has significantly reduced the value of the game to me compared to D2.

How? You do realize that there has been real money transactions happening for Diablo 2 items for years upon years, right?

How is the addition of an official channel to conduct such business (rather than often shady 3rd party websites) diminished the game for you?

I myself won't be using the RMAH so for all intents and purposes, it won't exist for me. Simple as that.
I like the idea of an online game where you can get out of it, what you put into it. RMT already exists in D2. I don't mind spending a few $$$ to get this Uber Sword of Godliness if it means I don't have to spend hours farming it. On the same token, if I'm farming for this sword and find Uber Bow of Awesome, I can sell it on the RMAH.
I'm not convinced that it is gambling. After all the legal reason Korea gave was that the auction way not find a buyer so therefore paying an upfront action fee was the gambling part.

That is a HUGE point. The auction fee was what classified it as gambling since there is no guarantee that it would sell. The rest of the world would not classify auction fees as gambling.

But here is the REAL problem. As Tobold stated the item becomes real property in that you own it and can sell it, etc. That opens the whole thing up to all kinds of taxes like sales taxes, income taxes on profits etc. This becomes a paperwork nightmare if Blizz has to track all these sales and report on them.
As I remember, the idea of 'ante' in Magic The Gathering was removed ages ago just because it was seen as gambling...
You pay money to Blizzard for the priviledge to participate. Then through a combination of skill and luck you can get more money out of it than you paid in. To those of you who think that this isn't gambling, I would like to pose the question what it is. I don't think it qualifies as "work", and then I'm running out of names for activities you get paid for.
Tobold, Korea didn't have an issue with the luck in finding the item. They had an issue that the item may not sell. You have to put up real money to place that item on the aution house. It was gambling in their mind because there was no refund of auction fees or a guarantee that it would sell.

This is a very important point. Would you say all auctions are therefore gambling as long as you had to pay an upfront auction fee?

And here is the other difference. You don't have to put up real money (other than buying the game) to find that uber sword. Gambling requires you to risk money. there is no risk in the finding of the sword. The risk comes in selling it. But the US and UK have ruled that auctions are not gambling.
You also pay a "flea market" or craft festival for space, or even pay a business license for a chance to profit. That's a gamble, but not considered "gambling".

I lived in Nevada, USA for many years. Regulation of gambling, officially called "gaming" BTW, is fairly simple and public. The win/loss ratios of various electronic games are easily found. The games are legally engineered to favor the house by a specific percentage over time, and this is not a secret nor subsersive.

I can't imagine that Blizzard would design and market a system without consulting at least the Gaming Commission and a panel of expert lawyers. Not knowing exactly how Korea would fall, however, is excusable.

One of the key elements is that Blizzard would only profit from players "winning" a rare drop (AH cut), not from them "losing" and not getting anything marketable.

What about the argument that more people would subscribe for a chance to "win"?

The subs fee has a well established value for access to the game, and wouldn't be considered profit from player losses, unless access to payouts increase with more money put in, or access to use the RMT AH was limited to special fees.

Players may indeed play more and therefore pay longer in the hopes of a cash return, but they will not be paying out any more than players who are just enjoying the game play.

The real "losers" in the formula, of course, are those buying the überness.
Yeah, but that is just Korea. My question was more general. How, if not by gambling, are you planning to make money from Diablo 3? I don't think Bristal's comparison with a flea market holds, because you don't make money on a flea market unless you have something for sale.

So what do you sell in Diablo 3, and how did you acquire it? You sell virtual items you acquired as random loot, mostly based on luck. Thus I'd consider your source of money in Diablo 3 to be gambling, even if in detail the Koreans said something slightly different.
Is commodity trading gambling? Its risky but its not classified as gambling. Some are planning to make money by buying low and selling high. Or even cornering the market on certain items. None of that is gambling. It may be dumb but its not technically gambling.

Is buying trading real gold gambling?

What would be gambling in D3 is if you paid real money and got a chest. Now in that chest is either a piece or junk or something worth more than what you paid for it. The house controls the prices and how often the good item appears. See in all gambling you can figure out the odds and in fact the odds are communicated freely. Selling something for an unknown amount at auction is not gambling. It's risk taking.
Any assumptions about D3 being gambling are wrong and here is why.

With gambling, you pay a sum of money (wager) for the chance to win a larger sum of money. Winnings are normally based on probability, and if you don't get lucky, then you lose your wager.

Diablo 3 is a no loss scenario. There is no wager. There isn't even a monthly fee. Only a $60 initial purchase price, which is normal for a new computer game.

Bottom line is...its not gambling if there is no risk of loss. Is looking for beach treasure with a metal detector gambling too? You might find nothing...or you might find a diamond ring. Either way its still not gambling by any legal definition. The only thing you could lose is your time.
"You sell virtual items you acquired as random loot, mostly based on luck. Thus I'd consider your source of money in Diablo 3 to be gambling."

Consider this scenario:

A shrimper buys a shrimp boat for 60 bucks. Goes out to sea to find shrimp in the areas he feels are most suitable. If he gets lucky he will catch lots of shrimp. If he has moderate lucky he will catch only some shrimp. And if he is unlucky he will catch barely any. He then brings back his catch and sells it on the market.

A D3 player buys the game for 60 bucks. He goes out to the world of sanctuary to find items. If he is lucky he will find lots of items. If he is moderately lucky he will find some items. If he is unlucky he will find few or no items. He then goes to the auction house to sell his items.

Why is doing this in D3 gambling, but doing it IRL is not? People use these items for their entertainment value. People eat shrimp for their nutritional value.
Is a door-to-door salesman gambling? He's paying time and money (for transportation and to carry stock) with no guarantee of a reward. If he knocks on lots of doors and no one wants to buy his knives he's going to lose money. If he stumbles onto a knife collector he's going to make a lot of money. Is he gambling?

I'd say no. He has the very reasonable expectation that with enough time invested he'll make a living. Some door-to-door salesmen may be bad, or unlucky, and lose money. But overall he'll expect to do just fine.

It's the same way with random loot drops. Some people who play a lot will only ever get useless trash but in general for the vast majority of people the amount of time you put in will be directly related to the amount of good drops you get.
Just to be clear. RMT isn’t what I primarily object to. What I most strongly object to is having my otherwise perfectly acceptable gaming experience interfered with for the worse, for the sake of catering to something I intend to have nothing to do with.

For the folks who are pro-RMT and don’t understand my perspective, please indulge me in an allegory:

Imagine you spent an amazing Honeymoon on a tropical island resort. The resort was minimal – just some amenities and individual cabins. You were able to relax, unwind, forget about your regimented corporate wage-slave life, and your best first nights were spent bringing unopened champagne bottles from the wedding down to the beach, where you made love to your new spouse for hours and lay in each others arms until the sunrise and forget the rest of the world exists.

Fast-forward ten years. The resort had fallen into disrepair but has been given a fancy new facelift and you and your partner decide to go back and see how it’s improved.

Except when you get there, you are assigned a ‘Personal Entertainment Assistant’ (PEA).

“Hi there! I’ll be enrolling you in a series of carefully-supervised entertainment programs for your enjoyment! Every morning just sign in with myself or another PEA and we’ll guide you to your relaxation destination! Apart from scheduled internal training sessions and emergency meetings, our staff will be available 24/7! All your enrolled activities will reward you with Island Dollars, which you can use to enjoy premium facilities!”

“Er… that’s OK, we just were going to head out on to the beach with a bottle of bubbly and…”

“Oh! So you’ll be wanting to visit the Refreshment Shop! All your refreshment needs are catered to. You can either use your Island Dollars or visa/American express/mastercard to purchase officially-sanctioned liquor! In the early 00’s visitors were bringing their own liquor or buying it from unlicenced island locals, which could have potentially been risky or violated the local laws, leading to harsh imprisonment, or potentially unsafe beverages. We aim to keep you safe and legal!”

You carefully try to avoid letting your eyes wander to your suitcase with bottles of liquor in it.
“Fine. Fine, can you just leave us alone for a bit and we’ll explore.”

“Oh, so you want to sign up for the explorer package? Good choice! We offer a variety of hotspots for you and three of your friends to explore, or meet NEW friends for bonus Island Dollars! You’ll be guided through exotic landmarks in a carefully-planned order that allows you to experience and appreciate the cultural richness of—“

“No, we just wanted to go for a wander. By ourselves.”

“So that’ll be the Lonely Beach Wanderer package for today? We will follow and observe at a discreet distance. Apart from the surveillance equipment and safety-zone check-in points, you won’t even know we’re there!”

“Wait. Check-in? Surv… what?”

“Purely a legal precaution. We observed that some tourists were previously engaging in lewd behaviour and not enjoying the beach experience the way it was intended. But with Safety zones and check-in points, you can even order refreshments through the Refreshment Shop for Island Dollars or credit! By the way! If you Like us on Facebook, you’ll be awarded--”

“GO AWAY YOU HORRIBLE LITTLE MAN. Honey, pack your bags. We’re going to that mountain resort place instead. Sky-something.”
@Degrin: Excellent point well-put. So. The fisherman has to pay tax on what he is able to sell.

Does the item-seller?
Diablo 3 is no more a gamble than paying $100k to go to university.

Certainly there is some type of uncertainty involved, but to bundle it any where near the current forms of what the public considers as "gambling" is quite a stretch. If you consider Diablo 3 as gambling, then you'd need to consider anything with a bit of uncertainty as a gamble (and given the certainty that real life is uncertain, that means almost everything).
Ok, I'll wade into this...

To answer some basic questions:

1) Nothing on an online game belongs to the player NOTHING. There is no property there is no transfer. Read your User Agreement and Terms of Service if you have questions about this.

2) There is pretty much no recourse if you somehow become a Diablo 3 millionaire and Blizzard randomly bans you. Your use of any Activision service is at the sole discretion of Activision/Blizzard AGAIN Read your User Agreement and the Terms of Service.

a column on wowinsider called "Lawgiver" actually does a couple of nice write ups about this. Google it.

Is it gambling? To be gambling there must be a wager (that is money exchanged) where there are NO GOODS/Instruments BEING EXCHANGED. (yes I know but financial instruments like futures... but the SEC says they are not gambling)

My opinion would be D3 is not providing a gambling venue since it is only providing a service that facilitates data movement. BUT, some US State's laws are really arcane on gambling determination...

and isn't it great that the Koreans called it gambling??? right Blizz legal???

The Fee thing, basically Blizz/Actievil is a service provider and a service provider can always charge a fee. That fee does not constitute any obligation legally except as contained in the Terms of Service(TOS).

So... since Blizzard pretty much sets the most draconian TOS known to man... there really is no recourse if you become a Diablo 3 millionaire and lose access to the service via not paying your fee.

makes me want to sign up at the casino... er service
Magic Online has been active for years, and Collectible Card Games are one of the most straight-forward examples of gambling anyone can make. Magic Online is especially apt considering if you manage to collect 1 digital copy of every card in a specific set, you can even trade the digital copy for a real copy direct from Wizards of the Coast. There has been an eBay market for Magic Online cards since it started.

So if it was illegal, it seems this should have been hashed out with WotC years ago.
Yeah, but last time I checked there were only 3 people left playing Magic Online. Diablo 3 is going to be much bigger.

Diablo 3 is no more a gamble than paying $100k to go to university.

Your attitude to education explains a lot of things. What do you suppose people *do* at an university? Kill professors by clicking on them until one of them randomly drops an epic diploma?
@Tobold:Your attitude to education explains a lot of things. What do you suppose people *do* at an university? Kill professors by clicking on them until one of them randomly drops an epic diploma?

I certainly don't see a reason to be glib about it.

Going to college isn't a guarantee for a good job and a good life. You risk a large amount of debt just to get through college, and hope that you'll see returns larger than if you didn't spend a lot of cash and several years of your time away studying for a diploma. There's also the large possibility that you won't graduate and won't see any returns whatsoever. Last I checked, barely half of college students actually graduate, and all of the friends at my college dropped out early, with me being the only one who graduated.

The point of all this is that going to college is as much as a gamble as anything, but I find it silly that you (and South Korea) would you consider this to be the same thing legally speaking as blackjack or slot machines.
You call that a "gamble"? Obviously I haven't got first-hand experience of how American universities work, but in Europe the diplomas, good jobs, and good life goes to those who are intelligent and study hard. Those who play video games instead of studying fail. There is a pretty clear causal relationship between studying and succeeding, so I don't call that a gamble.
The point was that nothing is for certain. Even if there is a causal relationship between hardwork and success, there are still risks. People still sometimes get the short end of the stick, and that's why it's a gamble.

Or do the odds need to be stacked against you for it to be considered gambling? What odds do you need before it's considered a gamble? In which case I don't see how D3 is a gamble either, since as long as you farm long and hard enough, you'll make your money back.
If Wikipedia wasn't down today to protest SOPA, I'd link you a definition of gambling. But basically the question is whether the result is *mostly* luck. Thus poker is considered to not be gambling, but a game of skill, in some jurisdictions, while roulette is considered gambling everywhere.

Whether you succeed at college depends very much on your personal skill and effort, with a very tiny luck component (you are more likely to be unluckily fired from your job than to be unluckily kicked out of college). What kind of loot drops you get in Diablo 3 is nearly exclusively luck based.

I do agree that if you play the Diablo 3 RMAH *without* killing mobs for loot, just by buying and selling virtual goods, this becomes a much less luck based activity, and resembles more the activity of a trader. But it was my impression that more people planned to get rich by selling the epic loot that dropped for them.
Yeah, but last time I checked there were only 3 people left playing Magic Online.

Last I checked, it was an operation that generated millions of dollars in a rather public way, directly analogous to the topic at hand. That is less of a deal nowadays is irrelevant.

And, hey, I was using Magic Online as an example because of the directness of the analogy. If you want to look at bigger deals, how about paper M:tG or, hell, Pokemon? Spend $10 on booster packs and get 1 rare card out of a pool of hundreds. If that isn't gambling - and I distinctly remember parents groups screaming about it being so back in the day - then I hardly doubt Diablo 3 is any sort of funny business.

But, yes, the legal system will have to catch up with direct rulings eventually.
Well, the thing is that although there is luck involved, you're always looking at favorable odds with absolutely no risk involved. You can't lose money by playing D3, only gain.

Also, if D3 AH is anything like WoW AH, the money makers aren't in the rare 1:1000000 drop rate items; although they'll certainly sell for lots of money, it usually isn't worth the effort and you will probably end up with nothing. Instead, the money is in the workhorse items that are easily farmed and everyone needs. There was always money to be made by selling off the greens/blues that you got in WoW, and I'm sure D3 will be no different.

Worst comes to worst, you could always just farm a ton of gold, buy a valuable item with gold, and then resell it for cash.
Legal definition of "gaming", which is the legal term for Casino-type gambling:

The act or practice of gambling; an agreement between two or more individuals to play collectively at a game of chance for a stake or wager, which will become the property of the winner and to which all involved make a contribution.

I'm sure both sides can make decent arguments about where D3 falls ad infinitum.

The biggest question to me; is there really a "wager" in D3? Or are we just playing a game that also might rarely result in cash winnings?
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