The new Reuters Second Life branch reports on a Congressional probe into games with virtual economies like Second Life and World of Warcraft. Massive amounts of money changes hands in these titles; Second Life users spend up to $500,000 in daily transactions. The U.S. government has caught the scent of money wafting up from the internet tubes and hopes to get its share.

Americans are already required to pay taxes on real-world earnings when they cash out of a game, but should they pay taxes on virtual, in-game profits? For example, citizens pay capital gains taxes on real-world asset sales -- profits from an investment over time -- but in-game capital gains policy and enforcement are unclear. Should you owe Linden Dollars to the U.S. government after selling Second Life property in-game, even if you don't cash-out to U.S. currency?

Should virtual worlds be governed by real-world laws, or are they becoming something closer to their own nations? If governments start taxing strictly in-game situations, will gamers deserve in-game social services and a virtual seat in Congress?

[Via Second Life Insider]

[Update 1: Thanks, Ish, for the capital gains lesson. Sorry for the mistake; the second paragraph is clarified.]

The Unlawful Internet Gambling Enforcement Act passed through congress last week as a rider to a port security bill, like a tick clinging to a deer. The gambling legislation intends to make online poker and other money-winning internet games illegal super illegal in the United States (see below). (Business Week mentions that some gaming companies are counting on loopholes, but most U.S. operations have a dire outlook.) President Bush is expected to sign the bill into law within the next few weeks.

Card Squad says, and we agree, that laws should be created on their own merits. The site covers Shelley Berkeley (D-Nevada) debating the act, expressing her disappointment that the bill was tacked on to critical security legislation.

While we usually leave the poker playing to Card Squad, these bills make us nervous for impending legislation in the videogame industry. Will the Video Game Decency Act pass or fail on its own merits, or will it ride on the back of a more important law?

Would U.S. lawmakers try to save Springfield from a comet if they had to allocate $30 million to "support the perverted arts?"

Thanks to Dirk and others for pointing out that gambling is already technically illegal in the United States. It's only legal under state laws or on Native American land, which has limited sovereignty in this situation. (Although state-run gambling exists as lotteries.)

The Unlawful Internet Gambling Enforcement Act gives the government new tools to enforce old laws, making the transaction illegal. Read the act in its original state or in its new habitat, hiding in the SAFE Port Act.

[Update 1: Added last two paragraphs.]

Sen. Sam Brownback (R-KS) has proposed a bill that would require the ESRB to play games in their entirety before providing a rating. This, like so much other legislation, establishes how little the government knows about games, making us concerned when it tries to legislate gaming.

The punch-line, as you've guessed, is that there's not enough time for the ESRB to play every game. That's like asking a chef to make every possible meal before rating a restaurant. And how do you decide when an MMO, or even a repetitive game like Tetris, is complete?

Under the current rating system, publishers provide the ESRB with video of the gameplay and detailed information about a game's content. The ESRB may also play the game, but the group relies most on publishers' full disclosure. If the publisher lies about the game, that company faces fines and the possibility that the ESRB won't rate its future releases. (Most major chains won't stock unrated titles.)

Legislation like this, where our representatives don't understand the subject of their bills, makes us uncomfortable. We hope that logic will end this proposal, but logic seems to evaporate the closer we get to Congressional elections.

[Via: Digg]

In their usual sensationalist form, the Pentagon decided to take a machinima fan film of Battlefield 2 and spin it off as a real danger to our national security during a presentation on May 4 in front of the U.S. House intelligence committee. Coming prepared with video clip and fear mongering in tow, these Internet and terrorism "experts" explained how the video was an advertisement for evil doers around the globe simply because it appeared on some insurgent-related Web sites.

More specifically, Eric Michael, an Internet specialist with Science Applications International, said the game mentally conditions users to kill coalition forces. Keep in mind, Michael and his SAI buddies are part of a $7 million project to "monitor insurgent Web sites."

The real story first broke with a post over at GamePolitics soon after the presentation and recently the original creator of the video -- who goes by the name of Samir -- spoke to ABC's Nightline about how the video was originally intended to be a spoof of Team America: World Police. Oooops. These are your tax dollars at work folks. Why is the government so ready to blame video games for all the world's ills nowadays? I can't wait for the topic of video games and their relationship, or lack thereof, to violence to finally sour as flavor of the day.

[Thanks, Rad]

[Update 1: You can watch the Nightline video here. Also check out Water Cooler Games for Georgia Tech professor -- and Nightline talking-head -- Ian Bogost's thoughts. Thanks, SickNic and Jarbwock]

Wednesday's episode of The Daily Show with Jon Stewart featured a long segment based around Congress' recent hearing on the topic of the video game ratings system, which brilliantly highlights how many Congressmen and women sound like out-of-touch jackasses when it comes to discussing the topic that "anybody in any party can grandstand about".

One of the most poignant parts of the show is where Jon responds to a clip of a seemingly helpless Lee Terry pleading to the hearing that "as a father of three young boys... who are avid gamers, I am very concerned about the content included in the games" by deadpanning "and as I stand there, watching them play these violent games, helpless to do anything about it, I can't help but wonder where the system has failed". Also worth a look is the end of the segment interview with Samantha Bee, a Senior PlayStationologist, from within San Andreas.

It's the typical Daily Show mix of poking fun at the ignorance of people with power, coupled with an "OMG the 'House of Representatives filled with insane jackasses' might screw up my favorite past-time" hangover.

Sure, old Mario has been known to paint, play professional sports, and even do some actual plumbing work on occasion, but he'll soon be able to power your mail through the postal service in the Far East.

10-stamp sheets of 80 Yen stamps are now available for pre-order in Japan, where gaming otakus will soon be able to adorn their snail mail with the likes of goombas, magic mushrooms, and mustachioed men. The set will be out next month.

Has the government of a country like the US ever done anything this official to honor one of the icons of gaming? Perhaps when we have avid gaming advocates in Congress -- or even, dare we say, in the White House -- things will look a little different with game legislation proposals and the postage of unwanted junk mail.

[Via GameBrink]

See also:

• French stamps to feature video game icons
• (Super) Mario Bros. question mark and POW block speakers