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Originally Posted by ETR3(SS)
Looking into it more I think it was due to a piece of legislation that was passed 2005ish regarding Stolen Valor.
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Ah, the Stolen Valor Act of 2005
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illegal for unauthorized persons to wear, buy, sell, barter, trade, or manufacture "any decoration or medal authorized by Congress for the armed forces of the United States, or any of the service medals or badges awarded to the members of such forces."
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It was deemed unconstitutional twice, last at the SCOTUS level.
Subsequently the government made a website for anyone to verify awarded medals of all service branches.
That said, prima facia, this would not apply to the images in video games.
The Stolen Valor Act of 2013 which is constitutional, expands on the original but adds the requirements of "tangible benefit" through convincing someone of their status/award. Still no problem for images and video games.
If anything, it was licensing, not legislation. I would not put it past the U.S government to have a trademark on the images of medals. Not to make money per se, but to control how they are used.