Many Filipinos wish they were John Aaron Ramos. On May 1, the 22-year-old announced on Facebook that he had bought two homes, solely with money earned from playing an online game.

Ramos is not an elite esports star with brand sponsorships, nor a Twitch streamer. He is a keen player of Axie Infinity, a play-to-earn game that falls somewhere between Pokémon Go and an NFT market, where users battle brightly colored creatures for in-game rewards that can be converted into cash. 

In a viral post, Ramos shared selfies outside his new home, thanking Axie Infinity for making it all possible. In one photo, skinny and bespectacled, he flashes a peace sign in front of the door of a bright yellow house. In another, he poses with the property deed. “I believed in AXIE’s ability to lift us up,” he wrote in a mix of Filipino and English. “I held SLP [a reference to the in-game currency]. I paid attention to the trend of AXIE Community. I did my research.” 

In the comments, players offered their congratulations and support, while others expressed their hopes to, like him, make it big playing the game.

The post drew a slew of media attention. It also, according to many in the community, caught the eye of another audience: the Philippine Bureau of Internal Revenue (BIR). In August, the BIR announced that Axie Infinity players must register to pay taxes — something that has been met with confusion by players, and consternation by the guilds that manage teams and take a cut of their earnings.

Recent months have seen the game’s popularity explode, particularly in the Philippines, where some 40% of players are now based. While not all of those have minted the same fortune as Ramos, many have posted about making several times their usual monthly salary, or how the extra money has allowed them to provide for others

As the game’s profile has risen, so has the Philippine government’s drive to tackle a problem plaguing officials worldwide: how to tax new forms of online income. 

The Philippine government is focused on two forms of online earning: the influencer industry, and income earned through play-to-earn games like Axie. With no international example to follow, Philippine players, managers, and advisors are now scrambling to work out how a tax regime might be enforced — and are trying to test if this kind of income, which goes through multiple, tiny, in-game transactions, and is often earned by people outside the tax system, can really enter the mainstream.

“Many are saying: Oh no, BIR, why go after us … when we’re simply playing a game?” said the department’s Deputy Commissioner Marissa O. Cabreros in a briefing. “Unfortunately, the labor of playing a game is something where you’re all paid an income. You’re all earning.”

From its founding in 2018 to July 1 this year, Axie Infinity brought in just $21 million in revenue for its developer Sky Mavis, according to Bloomberg. Between July and August of this year, that number jumped nearly 23 times to $485 million. Transactions worth more than $2 billion have been generated by the trade in Axie tokens, according to CryptoSlam. 

By early August, Axie Infinity had attracted more than a million players, but its developers were tweaking the game on the run to keep up with its success.

As word of stories like Ramos’ spread, players began building scripts to automate game play, mining it for profits. Battling Axie creatures against other players is one way to earn Smooth Love Potions (SLPs), the in-game currency; the other, more predictable, method is to complete tasks called “adventures” and “quests” by playing against the game’s AI. The scripts were designed to grind Axies through as many tasks as possible, neglecting the battles intended to be at the center of the game.

The rate at which players were entering, minting SLPs, and cashing out their earnings sent the value of the in-game token crashing from $.35 in July to around $.06 in September. Sky Mavis intervened, announcing that the rewards for quests and adventures would be cut in half — and acknowledging that they had been unprepared for the game’s popularity. The move unnerved players, even as Sky Mavis assured them that this change, among others, would make the game more sustainable.

That same month, the Philippine tax office said it would also be investigating 250 influencers as part of a renewed tax compliance campaign that, some believe, is squarely targeted toward the digital economy. Axie players and their managers, on the other hand, hold that most earn nowhere near the taxable threshold — and that many players are coming into the game from precarious work or as first-time employees, and have never filed taxes in their lives.

Luis Buenaventura, the Philippine country head for Yield Guild Games (YGG), one of the largest Axie Infinity guilds with more than 5,000 sponsored players under its umbrella, said the announcement sent panic through the community. 

“The announcement felt very much like an admonishment,” he said. “It alienated an entire group of people, many of which have never had an income in their entire lives, that don’t know the first thing about tax or tax reporting, tax filing, tax registration, any of those things.”

Buenaventura argued that the strategy was misguided and that big, splashy earners were in the minority of players.

“On average, [Axie Infinity players] are making $400 a month, which … is under the taxation threshold of $5,000 per year here in the Philippines,” he said. While players still need to file to prove that, he estimated that the majority of players in the country would owe the government nothing. Buenaventura said he and other Axie Infinity leaders are planning to meet with the government to help them better understand the game’s mechanics.

Richard Prodigalidad, who runs a tech solutions company and heads an independent guild of 40 players called QR Code NFT Gaming Guild, agreed. He told Rest of World that many of his players are students in their mid-to-late teens.

Ginger Arboleda, co-founder of tax assistance startup Taxumo, said she received an uptick in requests for how to file taxes after the government made its announcement. (Arboleda also runs an Axie Infinity guild on the side, with about 40 players.)

Arboleda said all of her players have other jobs and will likely be filing their gaming earnings as freelance earnings. But registering for tax is a very manual process, she said, involving in-person visits to a local BIR office and various form submissions.

Since its announcement, the Philippine BIR hasn’t released any further details for its new tax proposal. While unclear how the government will tax game play, Arboleda told Rest of World that it seems more likely to fall to individuals to report their earnings when they cash out. In some ways, Buenaventura said, Axie Infinity, which requires the purchase of Axie creatures to play the game and earn money, can look like a security. For scholars, who are paid in SLP by the managers who own the Axies, it might look more like freelance income.

The painful attempt to tax new online streams of income, particularly cryptocurrency-related earnings, isn’t a problem in only the Philippines. In 2019, Indonesia announced that influencers should be paying taxes on their brand endorsement deals, and in the U.S., cryptocurrency exchange Coinbase reports to the Internal Revenue Service when traders make profits above $600 through rewards or staking, which are taxed in the same way as stocks or property. In Japan, a steep 55% tax on crypto resulted in an estimated $93 million in underreported crypto earnings in 2019, leading the National Tax Agency to create specialized jobs dedicated to assisting in tax evasion investigations around cryptocurrency and e-commerce.  

Leah Callon-Butler, a director of the consulting group Emfarsis, which has produced market analysis for the Axie Infinity community in the Philippines, said that the government’s attention could have positive effects in the longer term. “I actually think that this delivers enormous legitimacy,” said Callon-Butler. “People are actually recognizing the fact that playing video games and earning an income from it: that’s legitimate work.”

Following the BIR’s press release, Axie Infinity developer Sky Mavis released a statement saying it was open to “working with physical nations (governments) on a path forward that encourages innovation and empowers gamers.” Sky Mavis did not respond to a request for an interview about how exactly the company plans to work with governments.

“People are actually recognizing the fact that playing video games and earning an income from it, that’s legitimate work.”

While managers point at administrative stumbling blocks, players who spoke to Rest of World were largely at peace with the idea of taxation. A few were frustrated at a lack of clarity; others at what they saw as a grab for their earnings.

Mavs Ignacio left his job as a Manila call center agent to participate in play-to-earn games like Axie Infinity full time. He pointed out that, bar investigations into individuals, taxation looks to rely on the players self-reporting their earnings.

“How will our government pinpoint who owns an Axie team? If a miracle happened, and they did, how will they know if that certain person is earning from it?” he said to Rest of World.

Ignacio and his wife have a small team, with three scholars under their wing. To people for whom play-to-earn was liberating compared to other job alternatives — farm work, business process outsourcing — the grip of regulation is a new feeling.

“The Philippine government wouldn’t even know crypto if it wasn’t for the hype of Axie Infinity,” he said.

Despite the proposed changes, none of the six players who spoke to Rest of World plan to abandon the game — at least, not as long as they can continue to earn money. While the days of John Aaron Ramos–style displays of wealth might be limited, it seems key for players to hang on to a meaningful amount of earnings. When some were asked if they’d still play Axie Infinity if there were no financial reward, the answer was a resounding “no.”