Gambling in Second Life? Don’t Bet on It

Linden Lab, the creator of the massive Second Life online virtual world, is facing heat from its customers after this week’s decision to ban gambling from the pseudo-reality realm.

The comments filed by members on the Second Life blog, where the gambling ban was announced, range from concerned to mad-as-hell. Despite the mostly negative reaction, Linden Lab appears to be sticking with its decision.

Hands Tied

Writing as Robin Linden in the site’s official blog, Linden Lab executive Robin Harper told users the company’s hands are tied.

“While Linden Lab does not offer an online gambling service, Linden Lab and Second Life residents must comply with state and federal laws applicable to regulated online gambling, even when both operators and players of the games reside outside of the U.S.,” she wrote. “And, because there are a variety of conflicting gambling regulations around the world, we have chosen to restrict gambling in Second Life.”

In April, Linden Labs “discussed the issue of gambling in Second Life in a blog post, and at that time we let you know that we would no longer accept any classified ads, place listings or event listings that appear to relate to simulated casino activity,” Harper reminded users. At the time, the company asked the FBI for its opinion, it was reported.

Real-World Laws

Compliance with real-world laws “has always been an integral part” of Linden Labs’ terms of service, she also told Second Life players.

The new policy clearly states it is a violation “to wager in games” in Second Life if the games “rely on chance or random number generation” to determine a winner or rely on the outcome of real-life organized sporting events and provide a payout in either Linden Dollars (Second Life’s virtual currency) or any real-world currency or thing of value.

The policy says the ban includes sports books or sports betting, “including the placing of bets on actual sporting events against a book-maker or through a betting exchange.”

Linden Lab said it will remove all gambling-related objects from Second Life and may suspend or terminate member accounts. Additionally, it warned that it “may report any relevant details, including user information, to authorities and financial institutions.”

Virtual Money Gets Real

That last part had some observers calling Linden Lab a “narc,” but many who know the law said the company is being prudent by imposing the gambling ban. That’s primarily because Linden Dollars can, and are, readily exchanged for real-world currency, so funds won in Second Life gambling might violate the laws of countries that have made online wagering illegal said Greg Lastowka, assistant professor of law at Rutgers School of Law.

“Given the language of contemporary federal and state gambling laws, and the way the Linden Dollar is being traded as a form of virtual currency, I think it is perfectly reasonable for Second Life to impose these restrictions,” Lastowka told LinuxInsider.

While adhering to the law is part of the rationale for the gambling ban, Linden Lab might have other reasons, suggested gaming analyst Michael Cai of Parks Associates.

Cleaning Up the Neighborhood

“Because Linden Lab has given users a lot of freedom, Second Life is kind of turning into anarchy in a certain way,” Cai told LinuxInsider. “And now it seems Second Life wants to become a business-to-business environment, where it attracts large corporations to set up their presence and become like a commerce or advertising engine. If you want to do that, you can’t really hand over all the control to the users and let them do what they want to do, including stuff that is illegal in the real world.”

Pulling the plug on Second Life gambling is “just a step Linden Lab is taking to regain some of that control,” but doing so is causing uproar among its freedom-loving customers, he said.

“Because it started as this free-for-all virtual space, they run a risk of alienating the users,” he warned.

“It seems Second Life really faces a dilemma now as to how it will go forward to please both the users and potentially some of the business participants.”

Linden Lab did not directly comment, but instead directed inquiries to the information posted on the Second Life blog.

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