Wednesday, April 4, 2007

Second Life Casinos and the new Unlawful Internet Gambling Enforcement Act

CNN: Virtual Feds Visit Second Life Casino

It was inevitable. The MMORPG crowd and the Internet Gambling Regulators have been on a collision course for quite some time, as I noted in my 2005 paper. However, since I wrote that paper, the landscape has changed. The Unlawful Internet Gambling Enforcement Act passed congress, dramatically changing what is "illegal" internet gambling. Meanwhile, Blizzard and eBay have pretty much eliminated the gold trade from World of Warcraft.

What does this investigation mean for Second Life? More than likely, Second Life Casinos will have to be shut down. The statute is worded in such a way that any betting with Linden Dollars will exactly fall in the realm of the statute. Failing that, Second Life could be forced to shut its doors because transactions for Linden Dollars would be "restricted transactions" under the act. Under an alternate interpretation, transactions of Linden Dollars to Second Life casinos would be restricted, if the Federal Reserve classified Linden Dollars as a "designated payment system." In either case, the Second Life casinos should be on notice.

Does this have any implication for World of Warcraft? For now, nothing. World of Warcraft seems insulated enough from the real economy to fall under an exception for risking nothing of value other than the result of personal efforts in the game. Not that this really matters, since Blizzard banned World of Warcraft gambling quite some time ago.

It will be interesting to see how the regulators actually deal with Second Life. Until then, it seems likely that their casinos won't last much longer.

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