Paying for Playing: White-Collar Risks for Online Video Game Companies
Online video games are a big business. Fortnite, Roblox, Minecraft, and Counter-Strike, to name a few, have become a part not just of gaming culture but of the mainstream, IP-driven entertainment universe.
A significant component of the money made by those in the online gaming businesses derives from “microtransactions”: players spending real-world money on in-game features and items, such as virtual currency, power-ups to give players a strategic advantage, or cosmetic updates, and “skins” for game characters.
According to one industry report, of the overall $37.3 billion in computer gaming revenue in 2024, $24.4 billion—more than half—of that revenue was from microtransactions. Microtransactions have become ubiquitous in many sectors of gaming, especially in mobile and “free to play” games, where users can access the game and play for free but may be encouraged to spend real money to accelerate their in-game progress.
Microtransactions have been controversial since their introduction. Gamers often view them as exploitative and predatory, while online safety advocates allege that they utilize unfair trade practices and, in some instances, may promote gambling (for example, loot boxes and so-called “gacha” games, which may encourage players to spend real money for the random chance to win high-value in-game items).
Even putting those criticisms aside, online gaming platforms engaging in microtransactions must be aware that doing so may expose them to two traditional white-collar issues to which those platforms must pay particular attention: (i) money services regulations and (i) potential abuse of their platforms to launder money or violate sanctions laws. By considering these concerns early and carefully planning how they set up microtransactions on a particular platform, online gaming companies can proactively address and avoid potential issues.
Microtransactions
Microtransactions in online games take many forms, but they are generally characterized by gamers engaging in transactions to purchase in-game items, features, or benefits separately from any sum they paid for the game itself.
Sometimes, these digital assets offer a meaningful gameplay benefit to the user, such as a powerful weapon, but just as often, these items are purely cosmetic, such as a new appearance for the in-game character.
Depending on how a particular gaming platform is set up, gamers may purchase specific items in exchange for real-world currency, or they may use real-world currency to buy in-world currency that can then, in turn, be used to purchase digital assets within a game.
Rare digital items are often prized items in a game, especially when items are limited edition, highly customizable, or carry social prestige. As a result, secondary markets for the items that can be purchased via microtransactions often emerge, and many gamers are willing to pay real-world money for these items.
While most frequently observed in multiplayer games, this phenomenon has even spread to some traditional single-player games. For example, online sites allow users to order rare items in Bandai Namco’s Elden Ring, as well as order “runes” to be delivered to them in-game and facilitate their ability to level up and progress.
Many game designers discourage or outright ban such markets, but players and third-party platforms frequently find ways to facilitate these transactions. This has led to a growing ecosystem around digital goods, with sites dedicated to verifying trades, assessing item value, and ensuring security in exchanges.
Money Service Businesses
Online gaming platforms that allow microtransactions—particularly ones that allow for the purchase of in-game currency or offer the ability to withdraw real-world funds from a game—need to consider whether they might be functioning as money services businesses, subject to the Bank Secrecy Act’s anti-money laundering requirements.
Those requirements include registering with the Financial Crimes Enforcement Network (FinCEN), implementing anti-money laundering (AML) policies, conducting know-your-customer (KYC) checks, filing Currency Transaction Reports for transactions greater than $10,000, and filing Suspicious Activity Reports.
Failing to comply with BSA requirements can result in civil penalties, see 31 U.S.C. §5321, and, in certain circumstances, even expose those involved to criminal liability. Indeed, operating an unlicensed money transmission service is a federal crime. See 18 U.S.C. §1960(b)(1).
There are three ways the developer of an online game might find itself a “money services business” under FinCEN regulations: as (i) providers of “prepaid access,” (ii) sellers of “prepaid access,” or as (iii) money transmitting services. See 31 C.F.R. §1010.100(ff)(4), (7), (5).
Game developers who offer in-game currency or similar products should consider designing the operation of this currency to satisfy any of these exceptions if they wish to avoid significant BSA requirements.
Provider of Prepaid Access. “Prepaid access” refers to “[a]ccess to funds or the value of funds that have been paid in advance and can be retrieved or transferred at some point in the future through an electronic device or vehicle, such as a card, code, electronic serial number, mobile identification number, or personal identification number.” 31 C.F.R. §1010.100(ww).
Providing players in-game currency to be used in the future in exchange for real-world currency may constitute “prepaid access” under this definition, although certain exceptions that may shield such game developers.
The first applies to “closed-loop” prepaid access, which means the prepaid funds “can be used only for goods or services in transactions involving a defined merchant or location,” and can only be provided to or used by a gamer in an amount less than $2,000 per day. See31 C.F.R. §1010.100(ff)(4)(iii)(A); (kkk). In the context of online games, access to prepaid funds may be in a “closed loop” if the use of those funds is limited to a particular game or group of similar games.
The second exception applies to “open-loop” prepaid access, limited to $1,000 per user per day, but with several other requirements to account for the less-restrictive nature of “open-loop” funds: (i) the funds cannot be transmitted internationally, (ii) the funds cannot be transferred between or among other players, and (iii) players must load the funds from a depository source, such as a bank, rather than a source like a credit card. See 31 C.F.R. §1010.100(ff)(4)(iii)(D).
Seller of Prepaid Access. A gaming company that “receives funds or the value of funds in exchange for an initial loading or subsequent loading of prepaid access” if it sells “prepaid access…to funds that exceed $10,000 to any person during any one day,” and it does not have policies and procedures reasonably designed to prevent selling access to more than $10,000 per gamer per day. See 31 C.F.R. §1010.100(ff)(7).
Money Transmitting Services. A money transmitting business typically also constitutes a money services business for purposes of the BSA if it provides “money transmission services”—i.e., “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means,” or is otherwise “engaged in the transfer of funds.” See 31 C.F.R. §1010.100(ff)(5).
Game developers who permit gamers to sell or transfer in-game currency to other gamers or others may find themselves engaged in money transmission services for purposes of the BSA requirements unless they satisfy one of FinCEN’s exceptions, such as the “integral exception,” which permits, without FinCEN registration, money transmission that is “integral to the sale of goods or the provision of services, other than money transmission services.” 31 C.F.R. §1010.100(ff)(5)(ii)(F) (emphasis added).
When a game developer can establish that its sale of in-game currencies is integral only to the sale of its game, such as when the sale of in-game currencies is necessary to finance play of the game itself, that developer may be able to rely on this exception.
Sanctions Violations and Money Laundering
Gaming platforms cannot stop their efforts to assess potential liability at considering applicable exemptions to FinCEN registration requirements. Even those platforms that are fully compliant with BSA regulations may find themselves unwittingly used as tools by bad actors. Indeed, the anonymized nature of online gaming, and the ability to move real-world funds through a game that utilizes in-game currency, makes certain online games prime subjects for bad actors seeking to engage in transactions that violate sanctions or constitute money laundering.
Even where in-game currency is not directly convertible back into real-world currency, the existence of secondary markets wherein real money is exchanged for digital assets can enable bad actors to transact with sanctioned entities or to launder those funds.
This is no idle concern. In 2019, the publisher of the game Counter-Strike: Global Offensive terminated its players’ ability to trade certain in-game items after discovering that what the game operators called “nearly all” of the trading was part of a money-laundering scheme run by “worldwide fraud networks.” That same year, the publisher of Second Life, a game well known for its robust internal economy that permits players to convert in-game currency into real-world currency, had to implement strict KYC requirements for its users to address potential AML concerns.
In the years since, the popularity, user base, and variety of online games utilizing virtual currencies have only increased, which means the possibilities for use of those currencies in illicit finance have increased as well. So what are game developers to do?
Data Analysis. In the absence of, or in addition to, concrete information about its players, game developers can rely on aggregate data, algorithms, and AI to implement detection and prevention systems to target transactions with indicia of money laundering or a potential sanctions nexus, such as a history of repeated and larger-than-usual purchases of in-game items that are quickly transferred to others, or relying on geolocating information that might indicate funds are ultimately being transferred to sanctioned jurisdictions.
KYC Processes. Game developers may seek to implement more rigorous KYC processes to identify and verify the identity of players and monitor their in-game transactions. Game developers are already familiar with similar requirements in the context of the Children’s Online Privacy Protection Act, which requires websites to get verifiable parental consent before collecting, using, or disclosing personal information from children under 13. Implementing controls around the ability to make in-game purchases and conduct in-game transactions will further protect gaming platforms from being unwittingly used to circumvent the law.
Conclusion
Online gaming is a multi-billion-dollar industry. While in-game battles and universe building may seem worlds away from concerns of Bank Secrecy Act issues, money laundering, and sanctions violations, game developers need to keep in mind their potential regulatory obligations as they consider how to build and operate their platforms, heeding the requirements of FinCEN registration (and exceptions) and being mindful of the need to ensure that their products are not being used in a way that could subject them to sanctions or money laundering liability.
By consulting with experienced counsel before platforms are set up, virtual currencies are designed, and microtransactions are offered, game developers can avoid issues that may cause gaming platforms to face serious real-world consequences.
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This article originally appeared in the June 18, 2025 edition of the “New York Law Journal” © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.
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[NYLJ] Paying for Playing: White-Collar Risks for Online Video Game Companies
