FBI probes Second Life gambling
By Adam Reuters
SECOND LIFE, April 3 (Reuters) - The FBI has visited casinos in Second Life at the invitation of Linden Lab, but federal law enforcement officials have not yet taken an official stance on virtual gambling.
“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,” said Ginsu Yoon, until recently Linden Lab’s general counsel and currently vice president for business affairs. “We have specifically requested that a US Attorney give us guidance on virtual gaming activity in SL, but this hasn’t resulted in clear rules yet.”
The Federal Bureau of Investigation and the US Attorney’s Office for Northern California declined to comment.
Hundreds of casinos offering poker, slot machines and blackjack can be found in Second Life. While the virtual world’s decentralized nature makes it difficult to estimate the total size of the gambling industry, the three largest poker casinos are earning profits of US$1,500 each per month, according to casino owners and industry watchers. Growth is estimated to be about 30 percent a month.
The surge in the Second Life gambling industry coincides with a crackdown in the real world by the U.S. government, which has arrested executives from offshore gambling Web sites.
Most lawyers agree that placing bets with Linden dollars violates U.S. anti-gambling statutes, which require that “something of value” be wagered. But the degree of Linden Lab’s responsibility, and the likelihood of a crackdown by law enforcement officials, is far from certain.
“That’s the risk — we have a set of unknowns and we don’t know how they’re going to play out,” said Brent Britton, an attorney specializing in emergent technology at the law firm Squire, Sanders & Dempsey.
Game developers such as Raph Koster, who is developing a Second Life rival called Areae, have warned that Linden Lab’s policy of making the Linden dollar freely exchangeable for “real” money will eventually lead to a crackdown.
“SL is running an elevated level of risk compared to a similar business that doesn’t run a monetary exchange,” Britton said. He added that the company could theoretically face criminal sanctions under the 1970 Illegal Gambling Business Act or the Unlawful Internet Gambling Enforcement Act.
The latter law, passed last year, takes aim at credit card companies and other electronic funds transfers that enable Internet gambling.
“What they 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,” said Sean Kane, a lawyer at Drakeford & Kane who has studied the legal ramifications of virtual worlds.
“If you’re buying money on the Lindex and utilizing it for gambling purposes, Linden could have a much higher level of responsibility,” he added. “If they would be found in violation, that’s difficult to say, but I can see a much stronger case being made.”
People running gambling businesses in Second Life are adopting a wait-and-see attitude, but admit there is a chance of a crackdown.
“If the Department of Justice says shut it down, then you shut it down,” said Xess Dix, editor of SLPokerplayer.com and a consultant to virtual casinos. “Or Linden will shut it down. Let’s do it honestly and ethically until Linden says we can’t do it anymore.”
Dix declined to disclose his real-life name.
Linden Lab’s terms of service ban any illegal activity, but the company itself is not sure whether in-world gambling crosses the line.
“It’s not always clear to us whether a 3D 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,” Ginsu Yoon said in an email interview.
Even if the law were clear, he said the company would have no way to monitor or prevent in-world gambling, much as law enforcement cannot police every neighborhood poker game or office basketball pool.
“There are millions of registered accounts and tens of millions of different objects in Second Life, there is simply no way for us to monitor content prospectively even if we wanted to,” Yoon said. “That would be a harder task than pre-monitoring all email sent through Yahoo Mail or Gmail, and no one expects those services to prevent all possible use of email for illegal activity.”
Yoon’s claim echoes the unsuccessful arguments of peer-to-peer filing sharing networks that they could not track or block the transmission of copyrighted content, according to Kane.
“In the Napster and Grokster cases, the courts … looked at it and said, ‘You set up a platform that has been used for infringing purposes.’” Kane said. “Linden Lab has set up a platform that allows gambling to occur. They’re not doing anything to promote it, but they’re not putting the kibosh on it either.”
(Click here to read more about Second Life’s poker entrepreneurs)
(Additional reporting by Eric Reuters)
