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Last Updated: Thursday, 19 October 2006, 10:02 GMT 11:02 UK
US Congress steps into cyberspace
Screenshot from Eve Online, CCP Games
Trade is central to many online games
US politicians could soon be rubbing shoulders with orcs and night elves in World of Warcraft.

The Joint Economic Committee (JEC) of the US Congress has announced it is investigating the amount of commerce taking place in virtual game worlds.

The investigation is unlikely to mean that in-game trading will start to be taxed.

Many popular virtual worlds such as Eve Online and Second Life revolve around trade of one sort or another.

Cash call

In a statement announcing the investigation, the Committee said its probe was prompted by the "dramatic increase in the popularity of online gaming".

It said it was interested solely in the "universe of transactions" that occur within online worlds such as Second Life.

Although an economic value can be put on this trade because in-game currencies do have an equivalent real world value, committee chairman Jim Saxton said its investigation was not being carried out with a view to slapping taxes on this trade.

"There is a concern that the IRS (Internal Revenue Service) might step forward with regulations that start taxing transactions that occur within virtual economies," said Mr Saxton. "This, I believe, would be a mistake."

Shop in World of Warcraft, Blizzard
Buying better gear and selling the old is a big part of game play
Instead, he said, the investigation wanted to get a better understanding of where the line falls between taxable and non-taxable trade. Studies of game activity suggest the time and effort put into these online worlds has an economic impact equivalent to the GDP of Namibia.

Players of online fantasy games such as World of Warcraft know that much of the game revolves around looting of dead monsters and selling the booty. Cash generated by the sales is usually used to improve the gear worn and used by that player's in-game avatar.

Some players of these games have amassed huge fortunes of game currency by exploiting the quirks of the virtual world's monetary and trade systems.

There are reports that many people in nations such as China earn their entire salary by "gold-farming" in which they play the game solely to get gold which is then sold for real world money.

The JEC statement said: "Clearly, virtual economies represent an area where technology has outpaced the law. The goal of the forthcoming JEC study is to help lawmakers understand the issues involved and head off any premature attempt to impose a tax on virtual economies."

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