From Reuters and CNN comes this small item about Linden Lab asking the FBI to take a look at the casinos in Second Life, which the FBI apparently has done, although the legal status remains up in the air for now. Former Linden Lab General Counsel -- now Vice President for Business Affairs -- Ginsu Yoon has an interesting quote in the piece:
"It's not always clear to us 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," Yoon said.
I am not a lawyer, but about a year ago I did ask whether we needed a virtual gaming commission. (Gambling, as I pointed out then, is often seen from a policy perspective as requiring special oversight.) Apparently, Linden wonders where to go from here about gambling in virtual worlds as well (or maybe they'd just rather the speculation were confined to buying real estate ;-) ).
It's an interesting question. I can see why Linden would ask, given that the target of administration enforcement is not gamblers, but is the money supply - credit card companies, payment services, and banks, under the Unlawful Internet Gambling Enforcement Act.
My view, fwiw, is that this is all teapot and no tempest. Second Life's economy couldn't even begin to handle the kind of volume we're talking about to serve as a replacement for the mega-industry shut down (or slowed down) under the UIGEA. And if it did grow to be that big, then obviously the feds would shut the practice down.
Finally, I'll add that the UIGEA is not internationally popular. The WTO thinks that it discriminates against non-US interests; there may be a pushback against the law internationally, which could be very interesting if played out in virtual worlds.
Posted by: Joshua_Fairfield | Apr 05, 2007 at 17:01
This just in: Linden has announced that they will no longer accept advertising or event listings from casinos/gambling establishments. Currently on the front page at blog.secondlife.com/.
Obviously, LL is trying to minimize their liability. It's not clear whether the $L they collect through ad listings gets sold back into the economy through Lindex, but previously it was just a money sink and that's probably still the case. So much depends on the ultimate legal status of the $L as well as the casinos themselves, as all of this happens before any real world currency enters the equasion.
What this *won't* do is kill casinos in Second Life, the usual "sky is falling" moans (and some cheers) to the contrary. LL has not prohibited the advertising of casinos in SL...only they won't do it themselves anymore. The world is allready ripe with 3rd party advertising solutions, from sophisticated bilboard and affiliate systems like MetaAdverse to everyones least favorite spinning flashing signs.
I'm not even clear, for that mater, whether the US law includes advertisers in their list of "enablers".
Which brings us back to Lindex...Linden Lab can only track cashouts on an account/avatar basis. There's no record of what that individual does to accumulate those $L and it would be impossible for Linden to track in order to block casino owners (who as far as I know, are legal until the moment they cash out) without investigating them on an individual basis. Which should be the job of the FBI, not Linden Lab.
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Posted by: patent | Apr 06, 2007 at 10:32
Of course a virtual casio is still a casino - as long as it's REAL MONEY being gambled.
I don't get why there should be any doubt about this subject..
Posted by: Thomas | Apr 06, 2007 at 12:48
I think what's interesting here is the imposition of sovereignty on VWs. As these spaces increase in value and begin to affect the external world, the external world reacts by demanding quantification and regulation. I suspect that this is just the first shot in a long battle/process of physically sovereign regions imposing sovereignty in virtual worlds. (just like with the regular web, but even more so now that that the market activity becomes distributed/blurry and transactions become vastly more difficult to quantify)
In the end, sovereignty is all about brains and teams, because those are the most valuable resources. So, how will VWs impact the structuring of the global brain? Which pockets will be dissonant or consonant with other pockets?
Posted by: Alvis Brigis | Apr 06, 2007 at 14:37
Ultimately, I believe the real push to contain VR casinos will come from the same group that pushed the US legislation to cripple the real money online casinos based in the Europe and Central America -- the US casino and travel industries.
Sensing the very real competitive threat posed by online casinos, these two industries used their enormous bankrolls to influence law makers and crush the competition. If a person can sit at home in their pajamas and play for real money, why should they: buy an airplane ticket, fly to Las Vegas, book a hotel, pay for taxis and meals, etc., and lose money in a brick and mortar casino?
I think if the VR casinos ever start to do enough business to threaten the folks in Vegas, you will quickly see legislation brought about to end them.
Posted by: mark | Apr 06, 2007 at 18:04
mark is right, afterall you dont put me in jail for virtual murders in a virtual world . The $L are virtual items, not real money. The article is just that, a PR, and when the Big Gamble Sharks would like to enforce their views / opinions / interests , they will persuade LL , in private, to do the right thing.The feds have no power to do anything at all , as long as the terms as " virtual ownership " , " virtual currencies " and all the sh** are not legally defined .Not to mention the jurisdictions ofcourse. You know, from times to times, LL feels an urge to realease new PRs , it's called " advertising ".You know, from the very first momment a player make a cash transfer into its SL account, the cash becomes virtual currency : $L , wich $L is the ownership of LL , including the whole account / alt. There are so many easy ways to elude the tracing , that its a totally waste of time/money to even try to.
End of story.
Posted by: Amarilla | Apr 07, 2007 at 08:20
I believe Amarilla is correct; this is nothing more than Linden realizing they hadn't received any press last month for someone unleashing a Penis-Storm on a Presidential Candidate.
There are quite a lot of interesting and legitimate RW analogs for this type of gaming. In many Southern States there exsist "Clubs" that exchange in virtual currencies to get around Gambling laws. There is plenty of precident here, if they had hired a Gaming Lawyer for an hour before calling the FBI they'd know they were in the clear.
Posted by: Detritus | Apr 07, 2007 at 08:56
Amarilla's statement probably has a good degree of truth to it, but I wouldn't rule out some nervousness here. Virtual currency aside, real money can be used to purchase it- and cash back out of it.
Online gambling sites have used "3rd party 'credits'" services in the past to dodge legislation directed toward prohibited real-money gambling. Those are essentially virtual currency in their own way.
There's plenty of precedent to make LL wary of possibly being targeted for facilitating online gambling, if the government wanted to lean that way. They're probably very wise to insulate themselves as much as possible here.
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Posted by: web tasarım | Apr 08, 2007 at 06:11
"Amarilla said:
mark is right, afterall you dont put me in jail for virtual murders in a virtual world . The $L are virtual items, not real money."
When you die in a virtual world you continue breathing in the 'real' world. When you lose $L in Second Life you lose $dollars in the 'real' world.
That is all the difference.
Posted by: dave | Apr 08, 2007 at 16:22
The feds have no power to do anything at all , as long as the terms as " virtual ownership " , " virtual currencies " and all the sh** are not legally defined .Not to mention the jurisdictions ofcourse.
To ever make the assumption "The feds have no power to..." is folly. The Federal government has wide and extensive power, should they choose to exercise it. Few people who find themselves subject to enforcement action are comforted by lofty legal theory arguments as they live their lives day-to-day, under investigation, not knowing if or when they'll be hauled in to jail. Try telling someone recently indicted for illegal internet gambling about the WTO.
Had Linden hired a gaming lawyer for an hour -- something I rather think they most likely have done, and for more than one hour -- they would have concluded that they could readily be accused of violating US gambling laws. Whether these charges would ultimately hold or not is something else. But there is little doubt there is enough there to justify prosecution action should such become in the interest of federal prosecutors.
I do know a gaming lawyer, who I worked with about a year and a half ago on a quasi gambling/computer game venture I was doing some work for. (I still think that sanctioned virtual casinos complete with strong social elements are an inevitability; the question is who will control and profit from them). She used to be a Harrah's attorney, and I judged she was reasonably credible.
Posted by: randolfe_ | Apr 08, 2007 at 17:33
I'm with randolfe. I think gambling may hold more potential danger to SL than any other single type of activity. Because it is *not* virtual in any degree. As dave pointed out so succinctly, you lose $L in SL, you lose money in RL. And it is a transaction where it is almost trivially easy to make a 1-to-1 connection between what is being done in the virtual casino vs. an RL casino, and thus to make the case that what happens in SL should be regulated similarly. Which, frankly, only makes sense.
Virtual sex, while holding varying levels of appeal or disgust for different folks, is also varyingly opaque in both its every instance (you never really know what the other person is doing in RL), and in its VR-to-RL meaning in the abstract. One could make the perfectly legitimate claim that one's VR sexual antics are "art." You may disagree, but you can't really put up any argument, except to disagree. There isn't any way to settle the matter; it's about taste and fun and joy and all kinds of "soft" value judgments.
Same for many craft businesses and even virtual real estate. Again... we can argue for hours about the legitimacy or worth of virtual land and the laws that should apply to it. But in the end, to some extent, we have to throw up our hands and use the word "virtual" because these are pixels and columns and rows in a database.
Not so with gambling. Gambling is about one thing: odds. And the odds don't care if you're in a plush, RL casino, a cheap folding chair in your church basement, or in your boxers at home in front of a CRT. Full house beats three of a kind; paper, pixel or toon.
"Virtual gambling," I'd argue, is actually a non-phrase, unless you are gambling in an MMO or VW for assets that have zero value outside the space. Maybe (I hope), in the case of a property like WoW, since the TOS forbid RMT, the fact that in-game stuff is *supposed* to have zero value outside the space, we'll be saved the horror of not being able to have in-world games of chance because the FBI sees "Elf Poker" as a threat to RL casinos.
That would suck. Another reason to hate RMT ;-)
Posted by: Andy Havens | Apr 08, 2007 at 21:11
I've discussed this story with Lindens and found out the following:
1. They didn't "call in" the FBI. Read their statements carefully. They indicated they are open to the FBI, should the FBI wish to check anything.
2. FBI agents didn't enter Second Life as avatars, evidently. At least, they say that agents did not enter the world. Naturally, I was sorry to hear that my vision of avatars with a Linden-assigned last-name like "agent," wearing dark classes and trench-coats and slouch hats had to give way to something more mundane, like FBI agents maybe merely coming to Linden Lab and talking to them or something.
So...the FBI didn't raid Second Life. And it wasn't callled into Second Life as such.
So...what did happen?
I guess the Lindens felt they were getting more and more scrutiny as more and more media and real-life big business and even congressmen began to come into SL. And this issue of gambling, like ageplay and prostitution (that will be next -- watch for that) have always been openly discussed by residents as vulnerable points for SL.
So, they've responded with some legalise and CYA activity, pre-emptively.
As with the ageplay card, they didn't say 'you can't have a casino' or "the Feds will be busting you any minute". Instead they essentially said, "we will no longer accept advertising for casinos and you can't advertise them on the classifieds list, the search list, or anywhere else inworld or on forums" and "you're responsible for compliance with the law as a property owner (interesting!) and you're the one who will have to answer under the law in your own jurisdiction." And then they said, and P.S. we hope to make tools for you to be able to distinguish who is or isn't in your country and what their age is, in case you want to prove you're from a certain country or age. Lik, say, on an Indian reservation and only want Americans over the age of 21 to patronize your casino you've registered with a U.S. state to operate with a virtual presence in SL.
I really think you cannot get tied down in semantics about this whatsoever. Gaming is a huge part of the SL economy. People make serious, serious money and cash it out and laugh all the way to the bank...but not anymore.
The Linden value dropped at least a point after this announcement, and we are all speculating furiously why all of a sudden the Lindex is "broken" and people cannot buy Linden dollars. This may be an unrelated billing snafu the Lindens posted about, but it seems terribly fortuitous, when they needed to close the Lindex to make sure there wasn't a run on the bank.
I guess I wouldn't worry about a run on the bank, because if there is one Supply Linden can just stop printing Linden dollars (he printed a million US 3 months ago; he printed $885,000 or so US last month, and sold them out of thin air). Sure, it means that LL might have a revenue loss from their "game token sales" that month, but their goal is to keep the Linden stable.
My guess is that a lot of the casino people will now turn to auction land and start buying more there. Now we'll also get to see whether the awful camp-chair phenom associated with casinos will finally end, or grow worse, it could go either way.
Posted by: Prokofy Neva | Apr 08, 2007 at 23:23
@dave,you never lose money in SL because when you put money in SL you do so in order to have fun, to play a MMORPG. Or do you have any other sort of EULA and TOS governing your relation with LL/SL ? Dude.....Has LL ever oficially and legally promised you to buy " your " $L back , for real $ ?! Sue them, they lied to you. When you enter a movie , you dont lose your money if the movie was crap or if there is a power failure . Dave, lemme tell you again : you "lose" real dollars in the real world form the very momment you give them away ; you could tell the same , about the coins you give to a homeless , or to your Church.You can lose money gambling , as well.
@randolfe, please ,in the USA one can be put in jail even only for she sold a hamburger to an alegedly terrorist suspect. Oh my,im gonna end my poor days at Gitmo. The USA already became a police state and a terrorist state , even toward its own citizens , no wonder. So what you gonna do next ? Insulate on Internet ? LMAO, go for it.The rich ones there in the USA will simply take a plane to Belize and gamble there . Or use a proxy and gamble online , ina NON USA BASED game. The Chinese peoples can get around their govt internet bans and censure, i guess an american gambler can do the same. " Boooo! Agent Mulder was here ! "
@ Prokofy , they didnt call the feds, they only stated they are open ....sure, why not, i remember Albania declared war to the USA , some time ago. And also Albania is open to any sort of contacts with an Alien Civilisation. Also the High Deeps' 238 members community , Montana ,announced they are open to anything . I guess SL/LL are " attention whores".Not that i care very much. Andy is almost right , except the part where he disagree .Happy Eastern Holidays everyone.
Posted by: Amarilla | Apr 09, 2007 at 08:58
@Amarilla: The point you're making is a good one -- the slippery difference between "action within VW" and "action enabled by VW."
On the one hand, I agree with you. Yes. Many people go to Vegas for the whole shebangabang of the experience. And, if you roll high enough, gamble enough money, lots of the other "stuff" comes along free. You drop a couple hundred large at the tables... the house will comp you a room, your meals, your car, etc. etc. So... if that's the case, and all you're really losing is your money, all the other "fun stuff" is free, right? Which makes it a lot like a virtual world a-la SL.
I can create a free avatar and a free account. I enjoy meeting and chatting with funky interesting people for free. The casino provides interesting entertainment (music? strippers? videos? dancing? neat architecture?) for free. If I want to drop a few $L into the slots or a game of Tringo or a few hands of poker... OK. Cool. Am I "gambling?" Or just "investing $L in a good time within a virtual world?"
Don't look now, Amarilla.. you're making Dave's point for him (and me).
Problem is, because Linden has stated that $L has some relationship to real money, what "happens in SL" doesn't necessarily stay in SL. And the activity we call gambling is very, very easily quantifiable and comparable both in and outside the world, making it easy for people to feel competed with, cheated or ill-used.
For example, if Country A requires a certain amount of oversight, taxation, permits, etc. in order to set up a casino in RL, and that ends up, on average, costing them (let's say) 15% of their net profit... but casinos in SL aren't regulated like "gambling," and don't have all that gruff, and all that government hoo-hah only costs them, say... zero % of their net... that will make the RL casnio owners somewhat pissy. Because it is, essentially, an unfair business practice.
And just saying, "Well, people aren't really gambling, they're just paying to play a video game, and one of the mini-games happens to be gambling," won't cut that cheese with the gambling industry. Because they'll come back and say, "OK, then. I want to have a virtual, micro-currency in my casino. And I'm only going to charge people for entry and to 'play the casino game' and interact with each other however they want. If they want to gamble, fine. If they want to eat food, cool. If they want to watch TV, great. I want the same deal-i-o as SL. You know... the one where I don't have to pay licensing fees and extra taxes and dues and deal with regulations, etc."
What's sauce for the toon is sauce for the gambler, eh?
Posted by: Andy Havens | Apr 09, 2007 at 12:54
@Andy. Right. I have no problems making anyone's point. But LL has not stated anything at all, actually;not in this matter, nor in any other important/relevant one,ever. A " Statement ", presume accountability and liability , and it is done in a certain -let say - environment; not then saying "....afterall, whatever comes after Virtual means it is NOT ...". I stick to my pov :as long as this sort of business is not legally defined , there is nothing any official authority could do about it . Yes you can take me to Gitmo, yes you can persuade me, you can bribe me, you can even kill me ; but you cannot sue and winn in court against me. As far as i know, the FBI acts based on laws. I may be wrong, tho...
And i need to repeat : when you sell the illusions IN the game, that's ok, this is what the game is , an assummed illusion . But when you " blure " the lines and mix the game's illusions with the real world things ( gambling, porn,terro,money laundering, false advertising,ID theft,statements and so on ), when the game is specifically designed and purpoted and ruled this way, then you created a mess. You may be able to make big money and even to keep them;but not for long.Winning whatever, currencies /items/skills/powers in game by playing and having fun, creates no problems , because you totally controll/balance them , and the RMT in wich the players gets involved outside the game is not significant. But from the momment you SELL game's currencies for real money , you transformed the game in : gambling, money laundering, ponzi , scam,you name it. Because at an end you have the real money, and at the other end you have the " virtual real values " . And you stay there in the middle , talking mumbo-jumbo , doing this sort of unregulated business , and making untaxable profits providing the " offshore " environment for all kind of things , including covered gambling.And from times to times, you pay a news agency to make some hype PR for you. Attention whore. Any press is a good press. Clay ? Not important.Bragg ? Not important.Money talks , and there - especially in the USA- are tons of " easy- to- trick " rich idiots . If i'm wrong, answer me this question :if LL is doing a honest business , where from came the need to mislead and misinform its playerbase and the potentially new customers , with contradictory statements , false promises and flamboyant claims ?
Posted by: Amarilla | Apr 09, 2007 at 18:45
And another thing : you know what is your bank account ? Virtual currency. Pixels on a screen and electrons in a PC. You know what is your credit score ? Virtual currency . You know what is your credit on your mobile phone ? Virtual currency. Guess what : all these and many many others are regulated. I buy virtual currency from my cell phone provider , time ( impulses ) , and i can even play a game , even an on-line one , i can download a mp3 and so on. And it is regulated.They dont have an EULA/TOS stating " we reserve the right to cancell your account for any reason or for no reason , no refunds granted ". Because , doing business is regulated : you sell something - a product, a service , anything -and i buy it ;there are rules to follow for both of us. One of the rules are : the contract you offer to me must be legal. Legal terms , legal clauses.How can LL operate on the market , without a legal contract between it and its customers ? Is that a legal contract, where the seller have all the rights and the buyer have none ? I doubt; but the Courts should not .The fact that i agreed to a fake contract does not change anything. Calling the $L " virtual currency " is not an excuse and it is not something new or unique. And the gambling is just that, gambling . Anything done on internet is virtual. But i dont see what this virtuality have to do with the gambling laws and with the commerce laws.These laws exist,are in place.Fix the EULAs and TOSs and all the issues are solved. Remember that old game "Hercules" ?
"...use your head !..." ; use your common sense.
I know, LL is going to say : " but that implies huge costs , also the game-platform-nongame-blabla-gaga will lose its appeal ". So what if ?! Do it right or don't do it at all. Go take a job , for a living. Sell what you say or say what you sell.
Posted by: Amarilla | Apr 09, 2007 at 19:39
@Amarilla
I stick to my pov :as long as this sort of business is not legally defined , there is nothing any official authority could do about it .
You are entitled to your point of view. In this case it is an oversimplification of the process. Many laws are defined as a process of enforcement and subsequent challenges to that enforcement. That is why we have three branches of government in this country. One to make the laws. One to enforce the laws. And one to judge whether those laws were rightly enforced.
If you wish to sit around while the courts decide your fate, so be it. Most US corporations would rather not, as it's a bit difficult to earn profits while your server equipment sits in an evidence locker and a bunch of lawyers and judges argue about the proper interpretation of the law.
What is in my bank account is *not* virtual currency by any measure. It is USD denominated fiat, on which I enjoy property rights and financial claims. It is counted as a demand deposit in the money supply, insured by federal deposit insurance, and _must_ be accepted for _all_ payments of debts or transactions within the US. What exactly is "virtual" about that? Electronic != Virtual.
Posted by: randolfe_ | Apr 09, 2007 at 21:03
"Virtual", stupid word anyway.
Randolfe's electronic currency isn't virtual because the law says it isn't. Amarilla's virtual gambling isn't gambling because the law doesn't say it is. Or maybe it does.
Sounds like a job for Lawyerman.
How anyone can say that SL Casinos aren't EXACTLY like gambling websites though, I have no idea.
Except...
@Andy
""OK, then. I want to have a virtual, micro-currency in my casino. And I'm only going to charge people for entry and to 'play the casino game' and interact with each other however they want. If they want to gamble, fine. If they want to eat food, cool. If they want to watch TV, great. I want the same deal-i-o as SL."
I think that'd require exiting players to cash their chips only with the incoming patrons.
Posted by: always_black | Apr 10, 2007 at 08:35
@randolfe, thank you very much for enlightened me.
Pay a little attention please : what you call " real cash ", money , real currencies, actually are just that : virtualities.While the gold/jewlery has an intrinsec value, as them can be directly/phisically usefull to somebody ( i'm talking about the so-called " troc " ) , the " money are the " printed " representation of a social convention : they represent the asummed values one could access using that currency. Values can be the food, clothes, the phisically needs , also can be " what you buy for your own soul and mind " : fun , instruction and so on. So, your bank account is not virtual just because it is electronic; the only difference between the $L and your bank account is that your bank account is regulated. Let me repeat : the money are the representation ( thus they are virtual ) of the convenied value.LL is inviting me in SL to do business, to work and to gain ownership. LL is selling me a currency , a real one , the $L, because - just an example : i can gamble the $L and earn values. This is the point. It does not matter how you call the " money ", as long as that " virtual currency ", the $L, have exactely the same functions - related to me , the player - as the "real money ". Oh, but still, there it is a big difference , indeed.....ones are regulated and the others are not :=). So, since when is it legal in the USA to print bills and coins and to sell them ?! Call the $L " virtual chips ", or call them what you want : actually LL is selling money. With their money , one can have fun in game , or can do business implying real work / creation / art , and can even buy a burger : you can cash out from your bank account at an ATM and buy a burger using the cash, or you can cash out from SL to your bank account and do the same. There is not important how many banks actually transfer your money between them , til the ATM . Is SL a bank ?
Posted by: Amarilla | Apr 11, 2007 at 02:13
I can't believe this discussion has gone this far without anyone mentioning the IRS (OK, taxes have indeed been mentioned). But come on, this issue (i.e., casinos/gambling in VWs) is going to be one of the keys to speed the IRS to start enacting policy around virtual goods, RMT and the interplay of $ and V$ ( <-- ooo! did I just coin a term?!!).
Wouldn't be surprised to see the US tax code changed for 2007 tax year...for 2008 at the latest.
Posted by: Tripp | Apr 12, 2007 at 17:38
@Amarilla
I don't think SL is a bank. If it is, then they are in violation of myriad US laws, state laws, and a number of international "laws".
I disagree with your definition of "currency". There is a specific, well agreed upon definition of "money" and "currency" in the economic literature. What you're falling into is the "fiat money isn't real" trap, which is often used by goldbugs (wiki it to learn about goldbugs) to scare people into abandoning paper money and buy gold. I've long railed against goldbugs and other conspiracy theories about fiat money.
All fiat means is "the currency is valuable because you have a reasonable expectation that *everyone* else (everyone being all but a few cranks) will also consider it valuable". The L$ fails on that front. Many people, myself included, either do not believe it is valuable or aren't even aware of it, and will not accept it for payment.
Further, the L$ has no value independent of its convertibility. If the Euro, Yen and Pound all went away tomorrow, the USD would still have the same (with some technical adjustments) value within the US. With it the US economy would continue to function. By contrast if suddenly you could no longer exchange L$ to/from any real currency, the value would become undefined, and over time, effectively worthless. This is because the RMT mechanism that feeds the zero-sum economy that is Second Life would become disconnected, rendering the "economy" (which is really a marketplace) purely fictional. At this point it would be no different than a big game of Monopoly, with the money being just play money. Fun to win and have a big fat stack, but not *worth* anything outside of the context of the fictional game.
@Tripp
The IRS won't really care about Second Life as a specific target because it is far too small. They may take a broader interest in all RMT. The size of RMT related to World of Warcraft is many times the size of Second Life. The only thing I'd imagine the IRS would go after at first would be simple tax cheats: people who aren't declaring earnings that already fall under US tax code. In the US you have to declare all income, regardless of its source. So every time you sell a WoW character, or redeem a bunch of L$, the IRS should see that amount on your 1040 (or related self employment or corp. tax) form. But very likely many, maybe most, people just don't. The IRS could easily demand that all RMT vendors and "virtual currency" exchanges submit 1099 forms reporting what you were paid to the IRS for you, and strongly encouraging you to be honest on tax day.
Posted by: randolfe_ | Apr 12, 2007 at 19:07