Each server would likely have to utilize a payment service.

Yeah but that would mean each server has to take custody of funds, have their own individual contractual agreements with game companies, handle refunds, bear all the legal and tax burdens of this, and get people to trust they won’t scam them. It’s just too much of a burden, these are all things that benefit heavily from centralization and economies of scale, due to the legalistic nature of payments. You would end up with one dominant instance and unused federation, if there was even anyone willing to deal with all that stuff to begin with.

I feel like you could solve this stuff pretty well with crypto, having payment go directly to the game devs, and a no refund policy or something to simplify things, but crypto is too hated so that wouldn’t work right now.