April 8, 2007
Gambling Inside Second Life: What Are the Legal Issues?

Debate continues to be raised about the nature of Linden Labs' Second Life versus the real world, as the Federal Bureau of Investigation attempts to decide whether casinos inside the virtual world are as illegal as unsanctioned gambling operations in "first life."

According to Adam Reuters' story, hundreds of casinos exist in Second Life, and the three largest 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 question right now is the culpability of Linden Labs if the government is to crack down on these gambling sites. At issue is the fact that the Linden dollars can be exchanged to and from U.S. dollars, as evidenced by the daily measurement of the exchange rate between the U.S. dollar and the Linden dollar measured on the Reuters Second Life Web site.

Some governments have questioned, for instance, the right to be able to tax within the virtual world.

These questions raise important conceptual arguments about how the virtual world intersects with the physical world and, consequently, questions about how the Internet should be handled by public policy and law.

Reuters interviewed Ginsu Yoon (of proceed and permitted fame) through e-mail, who said, "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. 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."

I first wrote about the Reuters bureau in Second Life back in October. Adam Reuters is the Second Life avatar for veteran tech journalist Adam Pastick, and he now keeps regular hours in Second Life. This story is just one example of the continuous reporting from Pastick and others about in-world events in Second Life, emphasizing the increasing importance of not just Second Life in particular but of virtual worlds in general.

I wrote back in October that:

Reuter's CEO says that this "shows Reuters has a certain with-it-ness." While that statement may put its cool factor in jeopardy, his point isn't completely off-base, and it's an interesting experiment to retain the validity of a traditional trusted news source. It will be interesting to see what type of content Reuters' online bureau focuses on and whether it develops a reputation as being a serious source of news within Second Life or simply a fun extension--the questions will be what this virtual bureau means for quality journalism and what it means for the brand of a traditional journalism source.

With stories like this, Reuters is proving that a Second Life bureau does not mean a series of feature stories with no "hard news" but rather serious coverage of intriguing questions that are raised in Second Life but that may have substantial effects outside of the Linden world.

For more C3 takes on virtual worlds, see the Second Life and virtual worlds debate in February and this report from C3's Futures of Entertainment conference back in November.

Thanks to Ivan Askwith for forwarding this story along.