Following up on recent posts on the tax consequences of online virtual worlds:
- Adam Chodorow (Arizona State), Tracing Basis Through Virtual Spaces, 95 Cornell L. Rev. 283 (2010)
- Leandra Lederman (Indiana-Bloomington), EBay’s Second Life: When Should Virtual Earnings Bear Real Taxes?, 118 Yale L.J. Pocket Part 136 (2009).
- Theodore P. Seto (Loyola-L.A.), When is a Game Only a Game?: The Taxation of Virtual Worlds, 77 U. Cin. L. Rev. 1027 (2009)
- Bryan Camp (Texas Tech), The Play’s the Thing: A Theory of Taxing Virtual Worlds, 59 Hastings L.J. 1 (2008)
- Adam Chodorow (Arizona State), Ability to Pay and the Taxation of Virtual Income, 75 Tenn. L. Rev. 695 (2008)
- David J. Mack, Comment, iTax: An Analysis of the Laws and Policies Behind the Taxation of Property Transactions in a Virtual World, 60 Admin. L. Rev. 749 (2008)
CNN, Can People Actually ‘Own’ Virtual Land?:
[I]n a sign that virtual issues increasingly are bleeding into the real world, some “residents” of Second Life are taking virtual property rights to real-world court, citing California consumer protection laws to make their case.
On April 15, four Second Life property owners filed a class-action suit against Linden Lab, the online world’s creator, alleging the company misled players into thinking they owned their virtual lands. People pay real dollars to Linden Lab for access to virtual land. …
The complaint says Second Life tried to lure people into the virtual world by promising it would be a unique place where residents actually owned their property. Then the virtual world unfairly changed its rules, the suit says. Linden Lab’s rules now say the land is a service the company controls and can cancel. Plaintiffs seek at least $5 million in damages. …
Legal experts said the case highlights the fact that our courts haven’t caught up the increasingly complex interactions that take place in online worlds. Virtual worlds are somewhat lawless, the experts said. The only government that controls them is the company that created the world. The only constitution that reigns is that company’s “Terms of Service” agreement, which users must sign digitally before getting access to the service.
“In these worlds, we are somewhere in like the 16th century” in terms of legal systems, said James Grimmelmann, an associate professor New York Law School who focuses on technology and the law. “I’m quite serious. When this stuff started out we were talking pre-feudal — totally made up on the spot. They made [rules] pretty much in response to individual situations. But as this stuff got to be big business, the companies realized they had to start getting regular in administering justice. They couldn’t be too irregular or people would quit.” …
Andrea Matwyshyn, an assistant professor of legal and business ethics at the Wharton School at the University of Pennsylvania, said real courts have been slow to take up issues associated with these complicated worlds. “The law is a slow-moving elephant, and technology is a graceful gazelle,” she said. “And it’s a mismatch.”
Matwyshyn said virtual property should be thought of like a “service” instead of something that’s actually owned. But because the issue is so new, the new lawsuit likely will be settled out of court, she said. That happened with a similar case in 2006, she said.
Grimmelmann, the law professor, said the virtual land does have real value. It makes people feel happy and at home, the same way looking out at a front yard from a real-world porch would, he said. But he cautioned against over-regulating virtual worlds because that would stem the high levels of creativity they inspire.
From a commenter: “[T]he government will soon be working on a property tax for virtual land owners.”
(Hat Tip: Roberta Mann.)
