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Is that really how it started? What prompted the change?

Yes. http://web.archive.org/web/20070817170606/http://mtgox.com/g...

A couple years after 2007, it appears mtgox.com was being a fantasy game (possibly inspired by Magic The Gathering but not the same) http://web.archive.org/web/20090812073342/http://www.mtgox.c...

The original owner of mtgox had the domain name lying around. As far as I know, even the original mtgox bitcoin exchange shared no code with a card exchange.

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