FBI Investigates Metaverse Casinos
by Pixeleen Mistral on 04/04/07 at 11:11 am
G-men to consider punishing players?
by Onder Skall
Reuters reports that the FBI have been snooping around Second Life’s casinos and debating what laws are being broken here.
After all, playing unregulated Poker for money is illegal – which of course means that those of you who’ve been playing Poker all this time have been hurting somebody somehow and should feel terrible shame about it. In fact, you should all be locked in cells where you can’t harm the rest of us by playing games with each other. US law, as defined by rich old guys who lie to you, is morality. Respect it more than you respect yourself.
The particular issue is that current laws don’t deal with virtual currencies. Since L$ can be exchanged for US$, there may be a violation of the nail-’em-all “something of value” phrasing of the anti-gambling statutes. The issue may not even be that the law is being broken, but rather who is to blame: casino owners, or Linden Lab.
Herald investigations of SL casinos suggest things of value are wagered
For his part, Linden Lab’s VP for business affairs Ginsu Yoon is handling himself reasonably well. Here’s his block:
“We have invited the FBI several times to take a look around in Second Life and raise any concerns they would like, and we know of at least one instance that federal agents did look around in a virtual casino,”
and here’s his jab:
“Yoon said the company was seeking guidance on virtual gaming activity in Second Life but had not yet received clear rules from U.S. authorities.”
Whether this will be enough for Linden Lab to avoid being prosecuted under last year’s Unlawful Internet Gambling Enforcement Act, which was created to punish “enablers” like credit card companies, remains to be determined. Of course, who knows where this leaves casino owners.
There’s a chance that prosecutors will restrain themselves from pissing all over everybody by allowing for the argument that L$ isn’t real currency. Kotaku offers up the example of Japanese pachinko:
“Right now, it seems like the current system is like Japanese pachinko in which players play for metal balls. Those metal balls are then sold for actual money. But doing this, the pachinko industry is able to escape being labeled as “gambling” in Japan as it is technically illegal. Whether or not the US government will be as tolerant as the Japanese remains to be seen.”
Regardless, now might be a good time for casino owners to get together and develop a battle plan.
Onder Skall also writes for SLGames
shockwave yareach
Apr 4th, 2007
Unless they are ready to pull Monopoly (and its play money) off the shelves, then they really can’t say anything about the gaming going on with lindens (more play money) in SL. While you _can_ sell lindens and not monopoly money (store vendors have no sense of humor when you try to buy beer with monopoly money) you do so at a loss. You purchase X lindens for a dollar and you sell them back for maybe 85% of what you spent.
Even if you break even, everyone at the table loses money on the deal. So it’s hardly a good “internet gambling” scheme. If anybody else offered a poker game on the internet with the caveat that you’d only get a portion of your money back even if you won, people would roundly ignore it.
Anna Discovolante
Apr 4th, 2007
CNN has a pretty extensive article:
http://www.cnn.com/2007/TECH/internet/04/04/secondlife.gambling.reut/index.html
A quote:
“Most lawyers agree that placing bets with Linden dollars likely violates U.S. anti-gambling statutes, which cover circumstances in which “something of value” is wagered. But the degree of Linden Lab’s responsibility, and the likelihood of a any crackdown, is uncertain.
“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 in Tampa, Florida.
Britton said Linden Lab could potentially face criminal charges 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 New York’s Drakeford & Kane who has studied the legal issues of virtual worlds.
“If you’re buying money on the Lindex (a virtual currency exchange) 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.”
Frankie Antonioni
Apr 4th, 2007
This might be off topic.
I have been checking on ebay, and I have noticed that Linden dollars are now selling for about 28.99 for 10k Linden dollars. It used to be about 45.00 dollars for 10k Linden dollars. Is there something going on that is making the Linden dollar, to go down in value.
Inigo Chamerberlin
Apr 4th, 2007
‘now might be a good time for casino owners to get together and develop a battle plan’
They don’t need to. All they need do is use LL’s well work mantra – ‘that’s a social issue’ and the Feds will just dry up and blow away…
Emerald Beaumont
Apr 4th, 2007
Shockwave had a few facts askew…
Prior to the internet gambling crackdown of last year, almost every single poker table, at almost every single on-line poker website, had a rake. The rake is a percentage of the pot held back so that the website can earn revenue from offering the service of playing poker in my PJ’s (or out of them) whenever I, and the hundreds of thousands of people playing at any given time around the world, wanted. The percentage would normally scale down as the blinds or ante’s scaled up. This known cost was and is an acceptable cost for the convenience.
In brick and mortar casinos all over the world, right now, poker tables employ a rake to ensure that not only is the house in on the action, but so they can afford to pay the dealers, card room managers, waitresses offering free drinks to poker players etc.
When it comes to tournaments (as opposed to cash games) the buy-in that builds the prize pool almost always includes an additional cost to the player that goes directly to the casino. On-line, SL or RL, the house needs to make a profit, or why do it? Competition between the establishments keeps the rake and the additional buy-ins reasonable.
Why do we willingly pay the unrecoverable cost in rake or additional buy-in’s for tournaments? Because we can! It’s the action, the risk, the possibilities. As long as a place exists to experience these needed outlets, we’ll keep coming. Poker anyone?
Doubledown Tandino
Apr 4th, 2007
My opinion:
Is SL gambling illegal – yes
Should it be stopped/does it hurt people – yes
Should it be legal if regulated – no
Is Linden Lab responsible or liable – no
Linden Lab is in no way an enabler of gambling, it is completely the person taking the bet. Linden Lab just needs to be clear on their stance, but by trying to act like the linden dollar doesn’t count as money and it’s not really gambling, that’ll be their downfall. LL needs to use a little common sense and realize that it IS indeed illegal internet gambling and that they don’t condone it.
But trying to accuse the “enabler” is a crock of shit! We might as well accuse the US Mint for printing the money which could potentially be used for gambling.
Petey
Apr 4th, 2007
@ Frankie Antonioni:
“Is there something going on that is making the Linden dollar, to go down in value.”
Hmm I have no idea why public confidence in fiat currency produced by a game company filled with crazy people and hyped beyond belief would *possibly* be dropping.
@ Doubledown:
The U.S. Economy doesn’t consist of 80% gambling.
Tenshi Vielle
Apr 4th, 2007
Did you know that a search for James Bond in-world (people) will bring up the fact that there is an avatar named James Bond, he’s unique, and works for the FBI. Only Bond in the game. Interesting.
Jessica Holyoke
Apr 4th, 2007
Without looking at the specific statutes, there has to be more to Linden Labs liability under the act. If Visa processes payments for Golden Casino, that’s one aspect. Visa would be enabling internet gambling. But, on the player end, there’s no way of knowing if the LindeX order is for gambling or not. It would be similar to a player making a cash advance at a Casino ATM. There’s no way to know that the player is going to use the money for gambling.
Looking at the casino owner’s are another thing. If someone only provides gambling *and* they cash out the earnings on the LindeX, then maybe the Feds can say that Linden Lab is facilitating gambling. But even then, that money isn’t being used for gambling, but rather was gained from gambling. It’s not the predicate action such as in the first Visa example. The player could not gamble without his Visa card. The SL player doesn’t need that transaction to gamble.
tp
Apr 4th, 2007
As long as $L can be associated with real dollars, and bought and sold that way through credit cards, it’ll be on the shoulders of the credit card companies to halt $L movement.
If they try to disable gambling for $L then the rest of SL business is then halted as well by the credit card companies. Only thing they could do to halt gambling in SL would be to have it enforced by LL which is unlikely (LL is the rake and the casino in this case with their handling of the lindex, or close down any buy/sell of $L.
FBI should be more interested in the tax free land deals that go way above and beyond any gamblers or casinos earning in $L dollars. The IRS obviously could give a shit about SL though.
Ickabod Humphreys
Apr 4th, 2007
A day without Slingo for half the residence would be a total nightmarish hell. That’s serious money folks (On Average, you could win over $1000L per pot if you’re lucky). And I know people who run up over $7000 a day playing that game. So what this all boils down to isn’t whether gambling in SL is illegal or not. It’s about someone not getting paid.. and that person being Uncle Sam. Because as far as my knowledge goes, no one has died in RL over gambling in SL (yet).
Jayson Watkin
Apr 4th, 2007
Tax and gambling are two different issues. The IRS would investigate tax issues. The FBI would follow gambling.
The other issue about enforcement is whether or not its worth it. Say a casino rakes in $25,000L per month. That translates to $1000 US per year. Would any US prosecutor’s office spend the man hours for $1000 per year per individual? I understand the concept of “broken windows” but with everything else that’s going on in the world, time is better spent elsewhere.
The IRS would be different because then there would be interest and penalties on unreported income on both the casino owners and players. (Which is a big maybe only due to when is the income taxable and this is why I’m not going to be a tax attorney.)
Finally, Linden Labs is only getting an official opinion. Its a little early to be worried about enforcement just yet.
Jessica Holyoke
Apr 4th, 2007
tp
Congress and the IRS are working on ways to tax SL. Just wait.
JD
Apr 4th, 2007
Tenshi there are like 45 or so people named bond in sl. Draco bond, jaws bond, oddjob bond, etc.
Do you have any real reason to think he is fbi other than the spy shit in his profile?
dandellion Kimban
Apr 4th, 2007
My question is why are LL are doing that? Who is crazy enough to call the feds to its own party?
Are they are gambling with sucha move and why? My two cents are here: http://metaverse.acidzen.org/2007/gambling-the-big-game
dandellion Kimban
Apr 4th, 2007
jayson, tax and gambling are two different things but they are based on the same money. If that monry, called Linden dollar is accepted as real money for gambling then it is real money for paying taxes. And in that case it is not 1000$ per person per year. Than it is all the SL’s economy.
Artemis Fate
Apr 4th, 2007
I don’t really have a problem with Poker gambling, I don’t think something like that needs regulation. Slots and Blackjack on the other hand, all of those one person to machine gambling, DEFINITELY needs regulation. There’s absolutely nothing to stop me from making a machine that pays out maybe 20L$ every so often to keep you hopeful, but otherwise you have absolutely no chance of winning anything serious, but me advertising that you do.
I can only imagine how many places out there operate like that right now.
Tenshi Vielle
Apr 4th, 2007
Well, two months ago when I found it, he was the only Bond in SL.
Prokofy Neva
Apr 4th, 2007
>Is there something going on that is making the Linden dollar, to go down in value.
Yeah. Supply Linden is *printing Lindens out of thin air* and devaluing our labour. In one month, he printed over *one million US dollars* out of thin air. Go read the statistics and LindEx page to see what he’s up to. That’s your answer.
So the bottom line is that you can gamble, but not cash out. So that will lead to money-laundering activities. The first place they’ll head is to the land auction where there are auctions denominated in Lindens to launder out the money and exchange it for land they can then even get more money for.
How will the Lindens be able to tell which people are cashing out from gambling and which from object sales they created? By tagged items? Will they license casino equipment now?
dandellion Kimban
Apr 4th, 2007
well, licencing casino equipment is not bad idea for the reasons pointed by Artemis Fate. Some regulations about scripts that runs gambling and other things connected to money are needed.
Jayson Watkin
Apr 5th, 2007
dandellion,
First, Congress and the IRS are already looking at taxing SL earnings.
Second, here’s a funny example of what I was thinking of. Homeland Security and the former INS, currently CIS I believe, tracks down illegal immigrants or undocumented workers. However, the IRS will accept tax returns from undocumented workers and not turn them over to CIS, even though filing a return is an admission of being here and working without proper documentation. This is one example of how one government agency can do one thing and another government agency do something completely different.
Third, you are right about finding out if the Linden is “real money.” And the Linden’s are doing the right thing by finding out if they are properly complying with the law. No one knows how to treat Linden’s.
James
Apr 5th, 2007
Hey, does this mean we should be contacting the FBI telling them what casinos we lost our Lindens in with the hopes that when they’re prosecuted we will get our money back? I suggest for folks who gamble to keep track of how much you lost and where in a journal, take screenshots, etc. could get your money back one day… and if the casinos are discovered to be using rigged machines, well that’s going to upset a lot of avatars…
Anyone know how the machines work? Like who programed them and are they either contracted like you get a commission for having them on your property or are they purchased outright allowing any coder to muck with the odds?
dandellion Kimban
Apr 5th, 2007
yes, I know they are looking to tax the second life. But they are still not and the reason for that is that U.S. goverment is not sure (like nobody else is) if it is a good moove to declare microcurrencies a real money. But that is not something that is dependable on certain agencies. If one declare that L$ is money than it is, at least in anglo-saxon law.
About IRS and CIS… If I remember right there was a story about year ago about drug dealers are to pay taxes in some states. They do that anonimously, and paying taxes doesn’t mean coke dealing is ok on, it is just that if they get caught they will be prosecuted just for dealing not for dealing AND not paying taxes. After that, I cannot be surprised by anything that certain agencies of U.S. goverment do.
Nacon
Apr 5th, 2007
James said “Hey, does this mean we should be contacting the FBI telling them what casinos we lost our Lindens in with the hopes that when they’re prosecuted we will get our money back?”
Well geez… don’t gamble next time if you don’t want to lose your money.
(That’s an idiot falling in a manned trap.)
Marsellus Wallace
Apr 5th, 2007
The problem is the fact Linden Lab allows you to sell/buy the currency. Just about every online game maker out there frowns upon this. Electronic Arts for example states there is no value in their online game currencies. Ebay will not allow you to sell game currency no more either. This would make the act of selling the virtual currency, not necessarily a criminal act, but puts it as a violation of Terms of Service.
In the case of Second Life though, the game maker is stating that the virtual currency is worth something and even have a system to determine it’s current US dollar value. This gives the government the edge they need to take action against virtual casinos in the game.
One thing to note though is that they are trying to get this section of the Safe Port Act removed in Congress. But becuase of the wording, I closed down all of my casino operations once the law was passed and have pretty much gone legit across the board. As I told Ginsu on the phone when we discussed this with him, it’s not worth going to Jail over a video game. Why take the chance?
More importantly… If they are able to due this for casinos in the game, this opens the legal flood gates for fraud, extortion, etc involving Lindens. Whatever happened to role playing? That is the whole point of playing a game. To be somebody different or do something you can’t do in real life. Frankly, if it happens in the game, it should stay in the game.
In regards to poker specifically whether it be in Second Life or not, this is a shitty law. For hundreds of years lawyers, judges, generals, presidents, etc have played poker. It is a game of skill. Sure there is some luck involved, but it is a 95% skill game. Why do you think the same people always make it to the World Series of Poker?
Marsellus Wallace
shockwave yareach
Apr 5th, 2007
Perhaps a workable solution for making gaming pass muster is to make all games work in Tokens instead of Lindens. You buy 1000 tokens for 100 lindens and play with those. Tokens then are not redeemable for any lindens or currency. Gaming then is just for fun with nothing of value coming back to the winner.
Take it a step further and make a pokerchip whose size varies with value, up to max. While it would have no monetary value, a fence made of 100,000 token tall poker chips would make for some bragging rights, especially if you can’t buy chips above 10,000 in value and can only earn them above that.
Marsellus Wallace
Apr 5th, 2007
Shockwave,
I think your token idea is a good idea, however besides visitors, what is the enticement for casino owners to use this system? You would also need to make them non-transferable, otherwise you will find people are still able to sell their tokens for Lindens on the gaming black market as I like to call it. If they are non-transferable, how do casinos then payout winners?
Marsellus Wallace
whateva
Apr 5th, 2007
ROFLLMFGAOLOL HAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!!!!!!!!!!!!!!!
quoting Marsellus:
“But becuase of the wording, I closed down all of my casino operations once the law was passed and have pretty much gone legit across the board. As I told Ginsu on the phone when we discussed this with him, it’s not worth going to Jail over a video game. Why take the chance?”
ARE YOU SERIOUS MARSELLUS????? Your now going to pass off the whole reason you shut down your Casino (casino not casinoS cuz you only had one in the first place) you closed down your casinO and left the game because:
1. Once you realized you had no pull or power like you claimed you had in TSO, you abandoned the game for wait let me think a moment here, what was it you said back then, oh yeah I remember now, it was “for real life reasons” or something along that line (example: you were to busy in RL to devote time to SL)
2. You found out quickly that roleplaying Mafia in SL is extremely different from TSO, in SL basically the Mafia’s are nothing more than people in a group owning big laggy weapons that don’t do anything other than teleport your ass home.
3. You never had the money or the resources to get your lame ideas to develop in SL because NOBODY would help you and NOBODY cared. Remember you going around asking mafia roleplayers to lend you money?
And last but not least:
4. You closed your casino cuz NOBODY CAME TO IT!!LMFGAO!!!
Now Marsellus try not to get upset and start whining to Uri like you did before. It’s all out in the open the REAL reasons Marsellus left the game and closed his one prim box casino. Don’t let him try to claim otherwise cause I can certainly prove he is bullshitting as always.
shockwave yareach
Apr 5th, 2007
Marsellus: They would have to be transferable, yes. But what possible reason would a black market have for buying them from people in the first place? I don’t doubt a black market will exist for anything of value, but who would want said tokens? Would the Russian Mafia start offering 25L for every 1000 tokens? What would THEY do with them then? How would anyone be able to take stacks of game tokens (which will accumulate with time so don’t increase in value) and make Lindens or cash out of them? LL won’t accept them as payment for anything under any circumstances, you know.
Best value I see in the tokens is their obvious size. Make the script in the token set its Z size to 1m/10000credits. If you are skilled and have a dozen 10m tall credits in your place, you’ve got something to show and brag about (in this case, size DOES matter). Users then have something of show value for their efforts and their money, much like BlingBling stuff in the clubs.
dandellion Kimban
Apr 5th, 2007
“Whatever happened to role playing? That is the whole point of playing a game. To be somebody different or do something you can’t do in real life. Frankly, if it happens in the game, it should stay in the game.”
That is why Sl has 5 million registrations, why is media full of it and why companies buys islands. It is not just the role-playing. It is not just a game, nor just games platform.
Marsellus Wallace
Apr 5th, 2007
I love the anonymous posters who never provide fact, just fun fiction. =) They always get so animated over someone who supposedly never did anything. It’s like Jack Sparrow says in Pirates of the Carribean when the captain tells him he is the worst pirate he has ever heard of. Jack replies, “Ahhh, but you have heard of me.”
Now, back to the topic at hand… Shockwave, there will always exist a black market for items that people want that have value. Just because e-bay shut down World of Warcraft currency trade (among other games) does not mean someone right now is not gold farming and selling the virtual currency. I think the idea of tokens is a good one in theory, but it really is no different than going into a casino and buying playing chips. Technically, those chips are worth nothing. The casino says they are worth something though.
Marsellus Wallace
whateva
Apr 5th, 2007
Marsellus what i stated above was not fun fiction those are facts – you did go around asking people for money when you were in SL and you did leave SL because of RL (those were your own words). Stop trying to pass this off as the reason you left was because of the law LMFGAO! that’s all I ask. And your wrong I never heard of you, I knew you thru a mutual friend and seen you personally in game when you made your once a month appearances. I’ve also had you dealt with several times in game, sometimes unknowingly to you =)
P.S. I’ve been posting under this name for over a year now and will continue to do so because I can – I’m sorry anonymous posters bother you but until Urizenus fixes this to where you can’t post anonymously I will use my nickname that most know me as anyway. Besides I would think a genious Godfather that you claim to be would know who I was by now.
Marsellus Wallace
Apr 5th, 2007
Hmmm, if you have your facts so straight how come I am on quite often and have been for some time. Both under Marsellus and my alt. More so on my alt. Anyway, I just find it amusing that people who claim I have done nothing, complain the most about me and try to remain anonymous when they do it. If I have done nothing, there is nothing to complain about. I’ll let you continue your lil rant though because I find you quite amusing as usual. =)
Marsellus Wallace
P.S. I love topic derailers.
Nacon
Apr 6th, 2007
HAHAHHAHAHA Time to do your homework now, Herald.
http://blog.secondlife.com/2007/04/05/advertising-policy-changes/
shockwave yareach
Apr 6th, 2007
Marsellus: It’s anologous to the chips only in that you can trade money for the chips. If you can’t sell the chips back, then you have worthless chips unless you can find someone willing to buy them from you. Nobody is going to buy your chips unless they are a) rare, b) worth something, or c) provide a function.
A stack of chips isn’t going to help slay the dreaded Frost Dragon, or do anything else except allow a user to gamble a lot. So you won’t find anyone to sell them to like you would a rare Blade of Vorpal Bunny Teeth.
Marshal Cahill
Apr 7th, 2007
What is interesting about this is the precedent. Just as gambling is illegal under US law so are a number of other things, which occur in Second Life. As I read this development -once you can establish that the Linden dollar has real value -then US anti-gaming laws apply. Therefore, presumably if you can show any kind of financial loss inworld then US criminal law applies. The question of if US law should apply in virtual worlds has been worked through in numerous law schools over the past few years so maybe LL lawyers should let us know if US law will apply in SL – that might prevent some problems!
dandellion Kimban
Apr 7th, 2007
But, as always with internet, what happens with non-U.S. residents. Just yesterday I met a guy in-worls who was building a casino. He wasn’t aware of all those new tings about gambling and when I told him in short what is happening he answered: “I don’t care. I’m a French.” So, can somebody halp me with this I am not lawyer, what happens if I as non-U.S. resident gamble in casino owned by other non-U.S. resident?
FrankenSense
Apr 8th, 2007
>Is SL gambling illegal – yes
Should it be stopped/does it hurt people – yes
Should it be legal if regulated – no
Is Linden Lab responsible or liable – no
Linden Lab is in no way an enabler of gambling,<
Of course they are. They’re providing the platform, the currency, the scripting language, the monetary exchange system– and KNOWINGLY allowing casinos on their board. If they said, “Gambling and casinos are illegal and can result in permaban” and then followed through on that threat, then no, they wouldn’t be an enabler.
But under the current circumstance, I don’t see how anyone can possibly believe that LL isn’t responsible. Despite popular fantasy-based opinion, LINDEN LAB IS RESPONSIBLE for knowingly allowing illegal activity to take place on their board. If they go to court and claim “Oh, we didn’t know virtual gambling was illegal”, first question the prosecutor is going to ask is, “Didn’t you have company lawyers to advise you? Are they unable to examine case history?”
Is there legal precedence? You bet. Know what happens to a house that is rented to a meth lab? The owner loses the house. Know what happens to a car that you loan to a friend, which is then used to rob a bank? You lose the car. In both cases, you don’t even have to be aware what’s going on; you’re still considered an enabler, and responsible.
News flash people: no matter what LL claims in their TOS, they are legally responsible for what happens on their board. There’s a ton of case history that has already established that fact. Anyone silly enough to believe otherwise is silly enough to go to jail.
Ian Betteridge
Apr 17th, 2007
“It’s anologous to the chips only in that you can trade money for the chips. If you can’t sell the chips back, then you have worthless chips unless you can find someone willing to buy them from you. Nobody is going to buy your chips unless they are a) rare, b) worth something, or c) provide a function.”
Or the other option: you’re selling them at less than the casino is. Then people have the option to either by chips from the casino for 100 per chip, or you at 90 per chip. People will, of course, by from you.
Of course, this only works for winners: If you’re cashing out chips that you bought, you’re losing money. But if you bought 100 chips and gamed that into 10000, you’d be nuts not to sell them (bar a small stake) for 90 per chip.
nunya
Jul 26th, 2007
FUCK YOU ONDER. your a fucking moron