The Uncertain Legality of Second Life Gambling

According to a recent Reuters article, neither the FBI nor creator Linden Labs are quite sure how to approach the legality of gambling within the virtual world of Second Life. Focusing entirely on user-supplied content, Second Life allows its members to create and build a variety objects via in-application 3D modeling tools. A scripting language provides advanced users the ability to "control object and avatar behavior, up to and including mini-games and other complex programs," the official site states.

Though participating in Second Life does not require a fee, US dollars can be exchanged for the community's virtual currency, known as Linden dollars, used to purchase land, items and services from other members. This exchange has led to some legally grey situations when combined with the ability to put money into the user-scripted programs, such as those emulating slot machines, which some believe may violate US anti-gambling policy. As of this writing, the official site boasts that the virtual community has over 5.2 million registered accounts, with $1.5 million US dollars spent in the last day.

"It's not always clear to us [Linden Labs] whether a 3-D simulation of a casino is the same thing as a casino, legally speaking, and it's not clear to the law enforcement authorities we have asked," explained Linden's vice president for business affairs Ginsu Yoon. "We have invited the FBI several times to take a look around in Second Life and raise any concerns they would like, and we know of at least one instance that federal agents did look around in a virtual casino." Yoon also let it slip that Linden has no way to monitor or prevent gambling in the virtual world.

Lawyer Sean Kane described the legal issues Linden could theoretically face. "What they [US lawmakers] did was go after the processors, and made it a crime to process payments that relate to online gambling sites. Linden could potentially be held as the same sort of processor." he claimed. "If you're buying money...and utilizing it for gambling purposes, Linden could have a much higher level of responsibility."

Chris Faylor was previously a games journalist creating content at Shacknews.

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From The Chatty
  • reply
    April 5, 2007 8:40 AM

    It's probably illegal. If it wasn't don't you think online casinos would have skirted the new law by having the customers just go buy tokens?

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      April 5, 2007 9:25 AM

      I don't think it is that simple. In this case, linden isn't the one that does the gambling nor do they directly profit from it.

      They are instead a processor like Netteller which provides virtual currency to the gambling sites for a fee and profits indirectly off their use.

      It seems to me that the worst, they will be subject to the same rules and regulations that online payment processors are. I don't know the details of the new gambling law, but that may just mean that they have to stop dealing with casinos when they are told of their existence, much like the enforcement of copyright infringement laws on places like youtube.

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      April 5, 2007 9:25 AM

      Good point.

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      April 5, 2007 9:31 AM

      It's rather more complicated than that. Linden Lab doesn't sell Second Life money, they only "print" it (giving each user a small amount per week) and facilitate its exchange for in-game products and real-world cash. Likewise, they don't create the in-game gambling machines, or even explicitly facilitate them. Linden Lab just provides a programming interface and a space for virtual objects.

      Making a case for holding Linden Lab responsible for in-game gambling would be fairly tough. It would be akin to going after PayPal, the PHP developers, and Time-Warner Cable because someone is running a homebrew gambling website on their personal webspace.

      Moreover, there's probably a case to be made that it's not illegal gambling at all, since it's perfectly feasable to play the gambling games without ever spending a dime of real money, and there's no reasonable way to distinguish the activities of people who paid for their in-game gambling money with real money.

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        April 5, 2007 10:35 AM

        While it's true online casinos are specifically designed for gambling and Second Life is not, based on your idea what's to stop a company from saying "here's some server space, build what you want....we'll give everyone 50 'fun chips' a week to get started (but you can buy more fun chips for cash if you want...totally optional...and you can always sell them back to us for cash)", some one "just happens" to build a virtual casino there, and then people start betting their fun chips at the slots.

        I wouldn't want anything to do with it if I was Linden Labs. Unless of course the "bad" gambling is replaced with "good" gambling like horse racing, which the law doesn't apply to.

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          April 5, 2007 11:00 AM

          Like I said, SL/Linden doesn't actually sell the money. All they do is let other people exchange the money with each-other for a fee. It's no different than any other money market, except that one of the "currencies" being exchanged isn't legal tender.

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            April 5, 2007 2:05 PM


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              April 5, 2007 2:46 PM

              That's just an in-world interface for the LindeX, the money market. They charge your CC, but the money actually ends up in the hands of some other user aside from a small fee.

        • reply
          April 5, 2007 11:03 AM

          Also, it's perfectly feasable to get more SL money beyond the stipend without gambling or buying more money.

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