[javajosh]

If you keep people's money and move it around for them, you start looking like a bank, and you get regulated like a bank. I think this is why online games let you buy tokens with real money, and the tokens sit in your account. (It's probably of critical importance that there exist no way for the tokens to be converted back into currency - which is why regulators were and are far more concerned about online gold farming than the game devs themselves. It's good to be the bank.)

[chipotle_coyote]

Having worked many years ago at There, a now defunct-in-all-but-name Second Life competitor: you're absolutely right. We could let people buy "Therebucks," but it would have been illegal for us to let them convert Therebucks back to cash.

WRT Patreon, I'm 99% sure that this is the reason they didn't propose something like a "balance card" where patrons just give them $X and both pledges and fees get deducted from that -- since that money's being held and then paid to someone else, it could end up being too close to a "money transmission service." (I'd thought there was a non-zero chance that this was a motivating factor in this change to start with, actually; coming so soon after a huge investment round sure makes it seem like there was a condition to that investment that spurred this change. Christie Koehler wrote a good post about that on her blog, although I don't have the link handy.)

[thedirt0115]

How do this work for services like Playstation or Steam, which have wallets like you're describing? Is it just the fact that you can't take money back out or what? (I have no idea about laws regarding banking/finance/etc)

[chipotle_coyote]

I'm pretty sure it's the "can't take money back out" that's the deciding factor, yep. While I'm not positive, I think this is even true for (non-banking) government agencies -- I can load value on a transit card, but I can't take it back off as cash.

(Edited to add: of course, this means that Patreon could have done a balance card thing if they were willing to say "but you can't get your balance back if you cancel," but I doubt that would have won much more love than the per-transaction fee idea did...)

[caf]

Or indeed Apple App Store, Google Play.

[chipotle_coyote]

Those aren't the same, though. You can pay for a subscription with the App Store, and you can buy in-app "tokens" for games. But the subscriptions are being charged when they turn over each month (Apple will bundle charges together that occur on the same day, but that's it, AFAIK), and you can't exchange tokens back for cash. So Apple is never "holding" your money.

[caf]

I was thinking more along the lines of buying iTunes cards to load money onto your "account", which you can then later use to purchase digital goods, at which point the funds are disbursed to the content creators, minus Apple's rake.

How is that different from putting money into a Patreon account, which can later be allocated to content creators, at which point the funds are disbursed, minus Patreon's rake?

[chipotle_coyote]

Ah, I see. But I think that's still the same "one-way conversion" thing that avoids the issue, right? If you buy a $50 iTunes card, you can't spend $25 of it on iTunes and get the other $25 back as cash.

Patreon could certainly do that, but either they haven't considered it or--probably more likely--they don't like the idea. There could be practical reasons for not wanting to do that; a lot of people have talked about Patreon's problems with chargebacks, for instance, when people want to cancel pledges but they're bundled together with pledges they want to keep going all in one credit card transaction. In this balance card scenario, it'd be easy to have someone say, "Hey, I wanna cancel the monthly pledges I'm giving and get my balance back," and they could lose a lot of goodwill if they say, "Yeah, you can't do that." (While many of us would rather receive cash than gift cards, we generally understand that an iTunes gift card is something we can only use by spending at iTunes.)

[bstrand]

Here's CK's blog post: https://subfictional.com/my-theory-patreon-doesnt-want-to-be...

[sgdread]

You can go creative (though, I'm not lawyer, nor accountant): have a minimum payment limit: 5$, for instance; if pledge is $1, then ask to pre-pay 5 units in advance (and be transparent why this has to be this way).