All Bets Are Off

Linden Lab has recently changed their policy about gambling in Second Life, effectively banning it (find a clutch of news reports here). The specific demands, in terms of policy and regulation, that gambling and other significant-stakes gaming make on virtual worlds have drawn my attention on TN before. Here I'd like to ask TN-at-large the following: What do you think the effects of this policy are likely to be on SL? On virtual worlds in general (if any)?

Comments

[Nick Lanng]

1.

Wow this is a really big move!
I feel sorry for everyone who invested in casinos, islands and the like, they stand to lose a lot of money. On the other hand I think it might be good for the 'game', it seems like creativity has really fallen in recent times and money making schemes are on the rise. I like seeing what people can build and script and less of that exists as more and more cloned casinos have moved in, if I want to gamble I would go to a real gambling site.

At least it looks like Tringo is safe :D

[Shava Nerad/Shava Suntzu in SL]

2.

I've been researching this and the WSE/banking meltdowns all week. One issue is that the casino folks are pulling out of SL, because they can't afford to maintain their holdings without income. They have their assets locked, apparently -- something that's been remarkably hard to substantiate.

But reasonably, land prices should go down and lindens should inflate for a while. A lot of the circulating linden currency should seem to get lower. It will be interesting to see how it washes out. I'm filing stories on all of this for the Metaverse Messenger in a couple hours, I'll post links when they go up.

Whee! I can tell you this is the most fun I've *ever* had in SL, appealing to me as policy wonk, social philosopher, businesswoman, gamer, and disaster voyeur...:)

Yrs,
Shava

[Tom]

3.

This will be very interesting to track - there's a lot of buzz going on in sl about 1) what, if any, was the threatened rl lawsuit/complaint that motivated this, and 2) how is it linking up to broader issues about governance in virtual worlds; in particular, will there be a push to a kind of lowest common denominator thing where if X is illegal somewhere, then there will be pressure to ban it in sl? (As a gay man this obviously concerns me!)

One good think piece on all this not on Malaby's list (because it just came out) is:
http://gwynethllewelyn.net/article182visual1layout1.html

[Amarilla]

4.

@ Tom : 1- the motivations for such moves and changes are always very complex , and very simple same time : "...let do what is - hopefully-the best for our business ".
2- there are no governance issues in Virtual Worlds : in my own private house , i'm not gonna invite / accept gays if i consider it to be detrimential to my ( emotional or/and financial )interests ; even if i'd be a gay myself.

@ Thomas : i think the effects gonna be benefittial for SL and for LL . And i think it gonna have a significant impact over the VWs in general.

[randolfe_]

5.

As the L$ devalues pressure will build on LL to pay out real money in order to maintain their de facto peg.

They won't, because they're getting all dressed up for a big date -- some rumor mills are saying with Fox Interactive. Paying your customers to remain your customers doesn't look very good in either the financial statements or the business model when you're trying get get bought (I'm sure they hope for a couple billion dollars).

The short of it, anyone with L$ left in-game gets the privilege of subsidizing the sale of Linden Research, Inc., and making many of "The Lindens" multimillionaires. But Virtual Mayberrians were warned they would be left holding the bag many months ago.

[Amarilla]

6.

:) something very interesting to me : the move from "...we MAY do this and that " to "....we WILL ". LL deserves some respect. They start to look like serious businessmen.

[You'd bet!]

7.

Roughly, sl is entering a deflationary spiral, gaming financed too many jobs and impulse sales to be considered less than most important factor in its economical order. As always an econimical disaster lays the grassroots for a new golden era, or as Ginko's Nicholas Portocarrero put it in his statement for july 30th "Something really good is coming out of this short term difficulty, something really, really good. If you don't believe me, that is fine, just wait and see."

[dmx]

8.

Well, I just got me some pizza and a couple beers. I'm just going to sit there and watch the fire works.

What where the two engines of the economy here again? Sex and gambling. Oh dear.

[Andy Havens]

9.

@randolfe: At the moment (according to the public Linden stats), there are a bit over $LD 2.6 billion in game. At the current rate of around 770 $LD/$US, that works out to around $US 9.6 million.

The Lindens have been very, very good at the PR game thusfar. If they get anything even close to $US 1 billion as a buy-out, it would make perfect sense (I think) to allow everyone with even $1 LD to cash out; whether that came from the Lindens' side of the fence or the pockets of the new guys.

Much better for the new owners to not piss off the die-hards on day 1.

[randolfe_]

10.

@andy

Lol. The peg hasn't broken yet. I think you meant to say 270SLL / USD, not 770SLL. But that moment may come soon enough. I notice the spreads are increasing dramatically, a sign the liquidity is drying up.

Were I to guess, I'd say Linden is likely to launch some kind of new PR media blitz, maybe with the cooperation of their chosen suitor. They can try to temporarily finance the inflationary pressures with a new batch of Looky Loos who hopefully will visit the game a couple times and spend a dollar or two (which by that point might be a couple thousands L$).

[thoreau]

11.

Virtual gambling banned. Next up, virtual prostitution and child play.

[Bill Ashbless]

12.

Leaving Second Life with a few IBM meetings and miles and miles of uninhabited wasteland that they have to maintain in case the owners ever come back.

[Allen]

13.

I'm puzzled that anyone was willing to use SL slot machines to begin with, since there's no way to guarantee what odds of winning (if any) you're getting.

Then again, I'm not sure why anyone would pay large amounts of real money for virtual "property" that can be dramatically altered/devalued by a third party with zero compensation to its nominal "owner" in the first place. Whether or not shutting down the casinos was the legally/ethically correct thing to do, Linden has just unilaterally banned a non-trivial number of businesses with no opportunity for appeal or redress (other than an arbitration clause so one-sided that it may not be enforcible under US law). This probably won't be the landmark court case all of us are looking for since the potential plaintiffs were operating what may or may not be considered illegal casinos, but can this really have no effect on buyer confidence investing in SL assets?

[Heather]

14.

I remember my one foray into SL. Pretty much all I found was gambling, gambling, and... more slot machines. I didn't stay long. So I figure either this'll turn SL into something of a wasteland, or people will come up with something creative to replace the gambling with.

Okay, that's not very insightful, is it? :D

[Robert Bloomfield]

15.

I don't see this as the end of SL's economy. As others say above, the end of gambling surely will trigger a contraction of the economy. But people who enjoy creating content in SL (and there are lots of them!) will simply make new content, which hopefully will be more creative and engaging for users.

Also, note that games of skill are not banned under the policy. SL would seem to provide an excellent venue for team sports and other highly social competitions.

[Amarilla]

16.

@ Allen : i'm puzzled that you consider ".... buyer confidence investing in SL assets...".

LL never sold anything SL-related ,to its players , so there're no buyers.

SL is an online game , so , one could only invest in LL, but never in SL. Wake up.

@ Robert : "...games of skill are not banned under the policy. SL would seem to provide an excellent venue for team sports and other highly social competitions."

You mean : they will move the gambling a bit deeper into the magic circle ?

Or do you mean : LL and MindArk will tell to their players what exactely the influence of skills are on the odds ? Like : " this or that precise level / number of skills will trigger this and that % of loot, $L, PEDs , wich then you can ask to be converted into real cash currency and transferred into your bank account . "

So, Robert, what is your opinion ? Is that ban a real one or a cover-up ?

[Lavant]

17.

@Amarilla, Whether or not you want a particular group in your world is irrelevant if that desicion flies in the face of constitutional rights, especially choices based on race, religion and sexuality. The power ends there. So perhaps you won't invite unwanteds, but you surely have to accept them. You may create the rules of the game, but not the law of the land.

[Lavant]

18.

That said, it seems SL gambling is a clear cut violation of law and degredation of the SL gaming environment. For once I agree, ban the infedels.

[Amarilla]

19.

@ Lavant : fortunatelly, i have the freedom and the power to refuse your access , without the need to explain to you or to anyone else why i did so. But if you - or the Constitution - insist,i'm kind enough to enlight both and any of you : today i dont like the colour of your shirt, and tomorrow i'm Constitutionally free to change my taste ; on shirts colours,ofcourse.

Or maybe you believe you have the constitutional right to expose your naked ass in my livingroom.

Or maybe, while i'm atheist , i must accept your religious propaganda in my bedroom.

"..That said, it seems SL gambling is a clear cut violation of law ..."

SL gambling was a clear cut violation of law since last year.

"..and degredation of the SL gaming environment. "

LL said different : LL designed and ruled SL's gambling and gaming environment , sice its beginning until today ; ops, until yeasterday.

[Amarilla]

20.

And @ Lavant, the only thing you're born with and nobody can remove it from you is your race. Also are few things that nobody can tell on internet: my race and your race. Also our gender and religion . Speaking of Laws and Constitution...

[Ari]

21.

Lavant says:

@Amarilla, Whether or not you want a particular group in your world is irrelevant if that desicion flies in the face of constitutional rights, especially choices based on race, religion and sexuality. The power ends there. So perhaps you won't invite unwanteds, but you surely have to accept them. You may create the rules of the game, but not the law of the land.

------

Nah... all that are just federal laws - not in the constitution.
But what ~is~ in the constitution is the "Right to Freedom of Association"

U.S. Supreme Court decision: ACLU vs. Boys Scouts of America

[dmx]

22.

I was always under the impression the constitution bound governments not citizens. I might be wrong, but hey.

[randolfe_]

23.

I was always under the impression the constitution bound governments not citizens. I might be wrong, but hey.

I felt a twitch in my forehead as I tried to figure out what the difference is, practically. The Constitution binds the Government; the Government binds the People. Or as a laboratory experiment try this: start selling slaves. When the Government comes to arrest you, tell them that the Constitution binds them, not you.

[Thomas Malaby]

24.

These are the logic puzzles that brought down many an omnipotent robot when cleverly employed by our dear Capt. Kirk. People can change the constitutions which bind the government which governs the people. A neat little circle (vastly simplified), that really just points to how governance is all a process, not a fill in the blanks lesson. And that, fwiw, in my opinion informs the thinking behind Josh's post here.

[Elle Pollack]

25.

Ok, this is mostly based on hearsey but here's my speculation: This was a survival play on LL's part. Reason? Back in, June was it?, a post was made to the official blog explaining why people were seeing forign currency charges (sometimes huge, according to the comments that followed): payments were being routed through UK banks. No explainaion was given as to why an American company - British office norwithstanding - was processing payments from US customers oversees. But the most obvious motivation (without having any inside track into the LL offices) would be the US anti-internet gambling bill (what was the name again?) forbidding credit card companies to process payments from gambling sites; if some of them put LL on their blacklist that would be nasty for their bottom line.

It still sucks, but in the absence of a runaway competitor, this will probably be just another bump in the road unless people care enough to get the law changed.

And randolfe, the rumor mill has been speculating on SL's "impending sellout" for at least the last year and a half and Linden Lab has always denied them. I'd like to think that if they ever did sell they'd be very choosy about who to trust with their magnum opus, but in the meantime I wouldn't put much stock in the rumor mill.

[randolfe_]

26.

I was under the impression that the lead investors could force either a sale or an MBO, even if they are in the minority. Even an MBO would drastically change the way LL operates. Nothing keeps management working harder than a dose of stifling debt.

[Andy Havens]

27.

@randolfe: :-)

A good re-phrasing of the famous Samuel Johnson quote: "Nothing focuses the mind like a hanging."

[Dr. Cat]

28.

I found it quite surprising that Linden Labs allowed as much gambling as they did, for as long as they did, given the US legal system's stance on internet gambling. There's good reasons why the gambling websites are run from places like Barabados, rather than right here in the USA. To me, Linden Labs seemed like a glaring exception to that, without even the legal recourse of claiming "It's not gambling because the L$ has no cash value". They took over the role of helping you sell your L$ for real money, clearly establishing that they support that and treat their game currency as something that has cash value.

I always prided myself a bit on running a company that takes the "savvy" risks that bigger companies wouldn't touch, like having thousands of volunteers even after the Ultima Online class action suit (and the America Online volunteers lawsuit as well) soured most of the big MMOs of the time from ever using volunteer labor again. Or going into user created content in spite of the twin demons of copyright infringement and obscenity law that some of your users are pretty much guaranteed to violate. But I wouldn't dream of supporting gambling with a currency that my company has clearly put an effort into establishing to have a cash value. I thought this was a surprisingly large risk for Linden, and I'm not surprised at all they decided to stop exposing the company to that risk. I'm more surprised that they chose to keep risking it as long as they did. What long term impact it'll have on their economy I couldn't guess yet, but I'll be interested to see.

As for potential buyouts - aren't they a venture funded corporation? The whole idea of those is to sell out whenever you get to a point where you can manage to fetch a price that represents a huge enough profit. I would suspect that at least some of the company founders are motivated by that goal as well as the goal of making a really interesting product. It's hard for even the most idealistic of geeks to resist the siren song of a multi-million dollar cashout. (You can always tell yourself that you'll use the money to go make ANOTHER amazing thing - after you get done partying across Europe for a couple years!)

If I were one of the principles in the company, considering potential buyout offers, I would be considering two things. Are the chances better of getting a big valuation early on, based on a lot of buzz, media attention, and reputation as "the next big thing" (which SL has managed, to some extent, to accomplish at this moment in time), or getting a big valuation based on sticking around for years, managing to continue to grow, and establishing Ebay or Amazon like levels of volume & profitability, enabling you to get a sober, realistic valuation from the market that's still quite huge? That latter is a big "maybe", even if a company is onto the right thing at the right time, there's no guarantee it's going to get the grail.

The other question I'd be asking myself is, will any of the potential current suitors really go all the way and gives us a few billion right now? If that's "yes", I think two billion birds in the hand is worth almost anything you might imagine to be in the bush. If it's a maybe, you still have to have all those hush-hush negotiations to try for it. Especially given signs that the hype-machine roller coaster may have passed its peak and started on a bit of a downturn. Best to sell before potential suitors might start seeing too many reasons to doubt that the company's growth is sustainable, or that it's potential can be "milked" by a big media company to the extent they think they could.

It is entirely plausible that the liability issues from supporting all that gambling were a dealbreaker for a big potential buyer like Fox, and that such an issue coming up in negotiations was a motivator to eliminate that problem. But the issue someone mentioned of ability to keep processing credit card payments may be the correct explanation too. I've seen various online payment solutions move away from allowing any gambling services to use them over the years, including PayPal who ditched them all quite a while back.

[Amarilla]

29.

Nobody will buy LL until Brag's case ends one way or the other. And i'm now amazed at all , for " how comes LL afforded to risk the gambling thingie and the porn thingie " : in my book, the only way for someone- anyone - to take such a big risk, is only when you know you bribed somebody big enough. And when you did it not with your own money, but with players' money. The surely path to fail is the arrogance , and LL had a lot of it.

[greglas]

30.

@Dr. Cat

Yep, Yep. Those are the questions I wonder about too.

[Elle Pollack]

31.

@randolfe and Andy: As far as I'm aware, Linden Lab is currently profitable, regardless of their many issues. So it's not like their investors would be pushing to dump them. They certinaly have debts but we have no way of knowing how they may be paying them off.

[Amarilla]

32.

By offering free accounts and waiting for the mexicans to join en-masse. It didn't worked too well with the chinese tho, but who knows, maybe this time...

SL is not only dead , but also started to smell.

[Amarilla]

33.

"Elle Pollack says:

@randolfe and Andy: As far as I'm aware, Linden Lab is currently profitable, regardless of their many issues. So it's not like their investors would be pushing to dump them. They certinaly have debts but we have no way of knowing how they may be paying them off. "

This way : http://www.your2ndplace.com/node/410