On April 4, 2024, the CFPB issued a report examining the growth of financial transactions in online video games and virtual worlds.  The report, titled “Banking in Video Games and Virtual Worlds,” highlights the growth and scale of the industry, risks to consumers, and the evolution of games and virtual worlds into online marketplaces.  When it released the report, the CFPB announced that the markets it will be monitoring to ensure compliance with federal consumer protection laws include video games and virtual worlds.

According to the Bureau, global revenue for video games is expected to reach $321 billion by 2026, and Americans spent nearly $57 billion on gaming in 2023, including purchases of hardware, software, and in-game transactions (e.g., converting dollars to virtual currencies or other gaming assets).  The report notes that the highest revenue generating games are increasing profits through in-game microtransactions – small, optional, one-off payments – and most games have in-game marketplaces where assets can be bought, sold or traded.

The report examines the evolution of the gaming industry and in-game transactions.  It also discusses the systems that allow fiat currencies to be used in games and virtual worlds and how they act as electronic platforms that enable players to store and transfer valuable assets.  The CFPB identifies trends and risks associated with gaming assets, including:

• Gaming products and services resemble conventional financial products: Valuable assets, such as in-game currencies and virtual items (e.g. cosmetic skins or collectibles) are stored and transferred, and companies have incorporated products and services such as proprietary payment processors and money transmitters to support transactions.
• Some (but not most) gaming companies allow players to “cash-out”: Some games provide “on-ramps of fiat currency” by allowing purchases to be made in dollars, but most games do not currently allow players to extract fiat currency (“cash-out”).  Fiat currency is typically converted into in-game currency that can be used to buy goods and services within the game.  Third party systems are emerging to facilitate the conversion of gaming assets to fiat currency.  Many games make it impossible to convert gaming assets back to fiat currency without going through a third party website.
• Crypto-assets, including non-fungible tokens (NFTs) are being used in some games: The report notes that crypto-asset virtual worlds are less prevalent and popular than virtual gaming worlds like Roblox and other popular games, but they are important to note because users can convert a virtual world’s crypto-asset to fiat currency, and some of the largest virtual gaming world publishers have expressed growing interest in crypto-assets that can be traded outside of the game.
• Gaming companies provide little customer support when consumers experience financial harm: Consumers report little recourse from gaming companies when they suffer losses through phishing or account thefts or when a game or their account is closed.  The monetary value of player accounts plus the ability to cash out assets in some games increase the vulnerability of these types of attacks.
• Gaming companies are collecting personal and behavioral data: Consumer data collected includes financial data, purchasing history, and spending thresholds, and VR headsets may also collect biometric data.  According to the report, “[g]aming companies have been using behavioral, biometric, and personal data to manipulate prices and the availability of goods or services on a highly individualized level.”
• The advent of gaming-specific services that resemble traditional financial products: The report states that “[t]he 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.”  Products and financial services that are being developed to operate in digital worlds include wallets, virtual cards, and loans.

According to the report, the risks it has identified are heightened for young people whose financial habits are still forming.  The CPFB has stated it will monitor this market and look for ways to protect consumers from fraud and scams.

Like traditional consumer financial services products, the CFPB is concerned that game makers are obscuring the real cost of gaming assets from players, either because of bundling of currency purchases (often at a discount) or through the use of different exchange rates for in-game currency.  While somewhat novel in the examples provided, the main takeaway from the report is that video game makers are now on notice that the CFPB will be scrutinizing financial products and services in virtual worlds in the same way it does in the real world.

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