Look Out Virtual Worlds….Here Comes The US Congress

Sometime around August, the US Congress Joint Economic Committee (JEC) will release their most recent report on the potential taxation of virtual goods. At present there is no denying the monster growth in these virtual worlds such as Entropia Universe, World of Warcraft, Second Life & EverQuest.

While the consensus is that the JEC is not yet seeking to impose new taxes on virtual economies, the Internal Revenue Service has started paying very close attention to these new ‘virtual’ issues. Real world sales proceeds from virtual assets such as castles, weapons and private virtual currency may soon have to be reported.

If Congress heads in the direction of taxing virtual worlds, this could create big problems for the game software creators and operators. Not to mention legal and tax jurisdictional problems, server placement….on and on. Forcing publishers to create taxing solutions to these potential problems at this early stage of the game could stunt the growth of this blossoming industry.

The multitude of in house banking, loan and ‘virtual’ financial services coupled with secondary markets disconnected from the primary game webs already creates a big problem for any agency trying to wrangle this virtual bronco.

I’ve been keeping an eye on Sparter’s new Gamer2Gamer market for virtual currency, along with the 5 new virtual banking licenses just sold at Entropia Universe and even the rumored ‘closer look’ by the Feds at possible violation of the UIGEA by Second Life. Its a brave new virtual world out there.

I hope that, unlike the digital currency industry, virtual gaming companies are spending on lawyers and lobbyists to bolster some helpful support before any possible regulatory hammer falls.

Bottom line…go easy on the new virtual economies and let them grow! Big government has already put the fix in for online gambling, please steer clear of the virtual worlds.