I hope there are some solid statistics collected by MS that this will not collapse the retail gaming ecosystem. After all, if you can't trade your game in, you may be a lot more discerning in buying as many new releases. Total obliteration of second tier games.
Further to this, the ability to trade off your game has resulted in higher quality products. The developer wanted you to keep your copy to prevent it competing against the sale of an unopened one. That insentive evaporates.
I really can't see it. The only way this is feasible if the keys can be re-purchased at a discount, like todays online passes. But this time the retailer can source it also (at a fee) and include it as part of the secondhand sale. Everybody wins.
Following on from this: today, publishers have a great incentive to produce games that their customers never want to sell. If nobody sells the game, the used market is small, and newcomers to the game will buy new; the publisher might even be able to reprint the game.
But if used sales become impossible, the publisher's incentive not only evaporates, but reverses direction entirely. They wouldn't gain anything by making a game that everybody wants to hold on to for years and years. Instead, with each key purchase for an existing copy, the publisher takes in pure profit with no additional production costs -- which means that they'd be better off intentionally producing ephemeral games that nobody wants to keep. Move that content from person to person and get paid multiple times after only producing it once!
Is that the kind of game industry that we customers want?