Second Life Bans Gambling...Sort Of

As I continue to play catch up from my hiatus, I have been hit by a bit of an irony. During my time away, I did submit the finalized version of "A Tale of Two Worlds: New US Gambling Laws and the MMORPG," which will be appearing in this month's Gaming Law Review. Of course, a mere few days later, Virtually Blind reports that Second Life has issued a clear "ban" on in game gambling, making some of the examples I used in the paper moot.

While I do agree with Virtually Blind's Benjamin Duranske that the revised policy statement is far clearer than the previous, I can't go as far as to call this a true "ban." The revised statement leaves many loopholes that I'm certain will be exploited in the days, weeks, and months to come. The policy states that games cannot "(1)(a) rely on chance or random number generation to determine a winner, OR (b) rely on the outcome of real-life organized sporting events, AND (2) provide a payout in (a) Linden Dollars, OR (b) any real-world currency or thing of value."

First, the statement really makes no claims at all with respect to games of skill. In fact, Second Life poker wouldn't violate this policy under many interpretations of "relying on chance." Whether it would be interpreted this way under the UIGEA is an entirely different debate (without an answer at this point), but more than likely poker would not violate the Second Life policy. The same could be said for any other game of skill that could be integrated into the grid. I suspect it will only be a matter of time before someone builds a Quake Zero betting system that plays through Second Life.

The second loophole is actually one that was mentioned in the article, being that only betting on the outcome of "real-life organized sporting events" is banned. Thus, if your event is either not real life, not organized, or not a sporting event, it is excluded. Virtually Blind mentioned the Oscars or Survivor (although Big Brother would be more timely at the moment). But there are a large number of other excluded events. MMO-based sporting events (in Second Life, World of Warcraft or elsewhere) would not be "real-life" events, so they would be excluded. This means that theoretically you could bet on PvP matches. The definition of "organized" will likely be pushed, probably in drawing a line between "professional" or "league" play. However, the most critical designation may be "sporting." What is defined as a sport? Is Major League Gaming a sport? I know of people who would argue on both sides of that debate. This restriction is by no means as comprehensive as it appears.

Perhaps the biggest loophole is in the "payout in (a) Linden Dollars, OR (b) any real-world currency or thing of value" clause. First, as Virtually Blind points out, the phrasing doesn't seem to restrict gambling in virtual items "of value." This, taken broadly, means that a simple casino chip system implemented in Second Life could circumvent the restriction. The only restrictions are on betting with Linden Dollars or real world currency or items of value. Thus, any virtual good that can be bought, gambled with, and resold for value would not be included. While actual chips might be argued to be the equivalent of currency, a system that operates in a similar manner without using chips may skirt the rules. Moreover, as Play No Evil's Steven Davis points out in comment 1, the use of a pachinko style system would skirt the restriction. For those unfamiliar with Japanese gambling, pachinko is a game in which you play with, earn or lose metal ball bearings. Having played the game while in Japan, it's much like a cross between a slot machine, a pinball machine, and a video game. These ball bearings can be redeemed for prizes. Among the prizes are a tokens that are, in the parlor, worthless, but if you take them to a booth nearby, they can be exchanged for cash. A similar model could be employed in Second Life as a means to bypass this policy.

While this new policy does help in some respects, it is still probably inadequate to deflect the pressures the UIGEA is placing on the system. Whether these loopholes were intentional or the result of an oversight will not impact the government's investigation, which seems to be an inevitability at this point.