U.S. Regulators And Crypto-Games In 2025

Around the time CCP Games began selling Alpha access to EVE Frontier, a question popped into my head. Will U.S. government regulations prevent blockchain games from even operating in the United States, whether from making the games unprofitable though onerous regulations or Congress just passing an outright ban? The question went from crazy to possible once Cognosphere settled with the FTC's lawsuit over practices in Genshin Impact.

Things move slowly in the United States' political system. For example, I first wrote about skins gambling in CounterStrike: Global Operations 8 1/2 years ago. The Washington State Gambling Commission even filed a lawsuit in February 2016 against Valve for aiding in the practice. But a state gambling commission isn't a federal government agency like the Federal Trade Commission or the Consumer Financial Protection Bureau.

An article on MassivelyOP led me on a trip down the rabbit hole to a CFPB report titled "Banking in video games and virtual worlds" published in April 2024. Here I found a reference to that old issue of skins gambling.

Although, the Steam Community Market does not directly facilitate a cash-out process to withdraw Steam wallet funds for fiat currency, there is an entire ecosystem of third-party markets that are enabled by Steam’s application programming interface (API). These sites facilitate player-to-player trading and converting skins to crypto-assets or fiat currency, leading to even higher exchange values for some individual skins on these third-party markets, as well as the Steam Community Market. For example, the largest sale of a Counter-Strike skin occurred in 2023 on a third-party website for over $500,000.

Third-party websites also facilitate a growing skin gambling industry that supports wagering skins, similar to casino chips, in virtual games such as blackjack, roulette, or craps. For example, a player’s account balance can be made up of skins, conventional currency, and other forms of virtual currency that are then converted to that site’s form of credit. Skins are then won or lost depending on the outcomes of the games. Third-party websites also facilitate skin betting on events like competitive gaming contests, also known as esports, and games between professional sports teams. Winnings can be converted to fiat currency or other forms of virtual currency and withdrawn for a fee directly to the player’s digital wallet.

Yes, after 8 years the issue is on the radar of federal regulators. Also on the minds of regulators, or at least those that issued the report? "Crypto-asset related metaverses."

Is crypto always on their minds?

The attention doesn't just come from in the form of diagrams. Does the following passage sound like EVE Frontier falls within the description?

Though their usage remains sparse, a number of virtual worlds and games exist that utilize crypto-assets—such as non-fungible tokens (NFTs)—as virtual items, or crypto-assets as game currency. The relationship between these virtual worlds and their official crypto-assets is similar to video games and their in-game currencies. Players purchase the virtual world’s native asset and use it to buy goods and services within that virtual world’s economy.

While these crypto-asset virtual worlds are significantly less popular than virtual gaming worlds like Roblox, Second Life, or Fortnite, they are important to note because of the prevalence of third-party crypto-asset trading platforms, users can convert a virtual world’s native crypto-asset to fiat currency, making them even more porous than typical gaming markets. Notably, some of the largest virtual gaming world publishers have expressed growing interest in positioning their virtual items as crypto-assets that have the ability to be traded outside of the game’s economy.

Also, the report uses Axie Infinity as an example of a crypto-game. I don't find the passage very flattering.

In the game Axie Infinity, players interact virtually through digital pets called “Axies,” each of which is a non-fungible token (NFT) stored on the Ronin network. Users earn the crypto-asset Smooth Love Potion (SLP) by playing the game. Players can also “breed” new Axies by spending SLP and another crypto-asset token, Axie Infinity Shards (AXS). Users can trade SLP and AXS for fiat currency or other crypto-assets on third party crypto-asset trading platforms. At the height of its success, Axie Infinity had over 2.7 million daily active users but as the number of users grew, the NFTs required to play became very expensive, leading to hierarchies of users: investors, managers, and workers. While the crypto-asset industry and its investors lauded the game as a viable way to earn income, reports documented the ways the gaming system exploited workers. The ecosystem largely fell apart in 2022 following a breach of the game by a state-sponsored hacking group. [emphasis mine]

The paragraph reads like areas in which the author sees the need for government regulation from an agency like the Consumer Financial Protection Bureau.

Today's post is just a taste of what I've seen in the CFPB's April report. I didn't get too excited about the issues back in 2016 and 2017 because I knew the government works extremely slowly. Also, blockchain games are tiny compared to big players in the video games industry like Microsoft and Sony. Between the report and the settlement between Cognosphere and the FTC (technically the DoJ), we are now seeing more active government intervention in the video game industry. I don't know what form the attention will take but I may have to return to following the activities of regulatory bodies again, this time the ones in North America.