All Bets Are Off (Online Gambling 5 of 8)

Over the first four blogs, I have forced American and foreign laws on you. Rather than continue to look at policy, this fifth serial blog is going to center on gambling in virtual worlds such as Second Life and EVE online. Remember from previous blogs, the Unlawful Internet Gambling Enforcement Act (UIGEA) did not define online gambling nor did it make it illegal to participate in online gambling. Instead, the UIGEA went after the providers and money transfers. Specifically, the U.S. Treasure states, “The Act prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”[1]  Well what if you are not playing or transferring actual currency? What if you are gambling online for Linden Dollars? Does this create a difference?

Before we get tangled into the past and current state of affairs of gambling in Second Life. I first wanted to look at World of Warcraft. WOW’s Terms of Use  (TOU) and End user License Agreement (EULA) do not specifically mention gambling. Perhaps, this is due to the fact that Blizzard controls the gold and property creation in their virtual world. Despite not listing gambling, the TOU AND EULA both do state that property and gold may not be exchanged for real world currency. It goes on to say that no virtual world service may be provided in exchange for real world currency. Although this does not ban services for WOW gold, as the TOU and EULA also ban the selling of WOW gold for real world currency, it would appear that these provision would eliminate any potential for gambling within WOW.[2]

Well, what about in EVE online? We have discussed in class about the more devious actions that take place in EVE. Gambling would seem to fit in a world that encourages spying, betrayal and deception. Again, there is nothing in their Terms of Service or End User License Agreement that even discuss much less ban gambling within the server .[3] They do ban selling items or services for real world currency but do allow exchanges for in-world currency. But as I believe there is no way to turn EVE currency back into real world currency (except for a black market on another web site), this does not present a UIGEA problem. As all server content is created with the approval of EVE directors, users cannot build their own casino.

Finally, lets look at Second Life. Gambling within Second Life has a rich history. Currently, Second Life devotes an entire section of its Terms of Service to its gambling policy, which can be found here. It even has a frequently asked question webpage for gambling in Second Life. Second Life as we know allows financial transactions and promotes the ability to make real world currency in the virtual world. As users can also code and create items and environments, not only were casino games created in Second Life but casinos were created as well. By 2007 there were hundreds of casinos offering poker, blackjack and slots with the three largest poker casinos bringing in $1,500 a month in revenue.[4] Second Life was able to make money off this as well as they charged the casino providers a fee.[5] All this changed when the UIGEA passed. Hoping to show their virtual world was complying with the new law, Linden Lab took the FBI on a virtual tour of a casino operating in Second Life in the spring of 2007.[6] Specifically, Linden Lab was asking whether they were potentially liable if they allowed the user made casinos to operate and served as the financial processors.[7] Linden Labs directors were also concerned that they could possibly face criminal charges.[8]

I guess they did not like what they heard from the government because just a few short months later, in July of 2007 Linden labs banned gambling within Second Life. In their press release, Linden Lab cited “conflicting gambling regulations around the world”.[9] If users refused to remove their gambling content, Linden Lab stated they remove would the equipment themselves and would consider suspending or terminating the user’s account.[10] If the user still resisted, Linden Lab stated they would even consider reporting the user to the authorities.[11] The ban applied to all wagering in real money or Linden Dollars on games of chance taking place in Second Life or the outcome of a sporting event in the real world.[12]

Not surprisingly, many Second Life users were not happy with this change. In mass, users began to message Linden Lab claiming the change restricted their freedom. They also complained that they had lost the capital and time they had invested into creating virtual casinos. Others were happy about the change, having complained to Linden Lab in the past after having been “cheated” by the virtual casinos.[13]

As the UIGEA began to flounder in Committee and the implementation of rules stalled, Second Life looked poised to relax its ban on gambling as 2011 began. A partnership with gambling and money processing company Gisland/888 appeared to be in the works.[14] However, around this time the United States government became more serious about enforcing the UIGEA and consequently the Second Life gabling lax never occurred. Second Life now states that have no plans to alter their 2007 ban on gambling.[15]

In our textbook, Benjamin Duranske claims that the Department of Justice views gambling in virtual worlds as illegal.[16] Further, commentators agree that if the virtual casino offers a cash-out option allowing users to exchange the virtual currency they won or purchased in order to gamble for real world currency, the user is then in violation of the UIGEA.[17] What does our class think? Does the cash-out option make the act illegal? And if the cash-out is the action that violates the UIGEA, if there is no money transfer should online casinos be allowed to operate? Are the actions of Second Life appropriate or are they being overly cautious? If they are being overly cautious what options do Second Life users have?

That wraps up serial blog five. For blog number six I hope to look into money laundering. We have discussed the dangers technology provides in regards to money laundering. Moreover, past blogs has detailed how money laundering is often a concern stated by the United State’s legislature when outlawing online gambling. But is there statistics or documentation to back this up? How exactly could gamblers money launder and has it happened in that past? I hope to address these questions in the next blog of my online gambling series.


[1] United States Treasury, Unlawful Internet Gambling Enforcement Act, Examination Handbook Section 770.

[2] See World of Warcraft Terms of Use. Access at: http://us.blizzard.com/en-us/company/legal/wow_tou.html. See also World of Warcraft End User License Agreement. Access at: http://us.blizzard.com/en-us/company/legal/wow_eula.html.

[3] EVE Online Terms of Service. Access at: http://www.eveonline.com/pnp/terms.asp. See also EVE Online End User License Agreement. Access at: http://www.eveonline.com/pnp/eula.asp.

[4] Adam Pasick, FBI checks gambling in Second Life virtual world, Reuters, April 4, 2007.

[5] Duncan Riley, Second Life Bans Gambling Following FBI Investigation. Access at: http://techcrunch.com/2007/07/25/second-life-bans-gambling-following-fbi-investigation/.

[6]  Pasick, supra note 3.

[7]  Id.

[8] Riley, supra note 4.

[9] Rachel Konrad, Second Life ban angers virtual world, Associated Press. Access at: http://www.msnbc.msn.com/id/20077727/ns/technology_and_science-internet/t/second-life-gambling-ban-angers-virtual-world/#.TrtF7-vgJok.

[10]  Id.

[11] Id.

[12] Thomas Claburn, Second Life Gambling Ban Gets Mixed Reaction, InformationWeek. Access at: http://www.informationweek.com/news/201201441.

[13] Id.

[14] Tateru Nino, Linden Lab has plans to relent on gambling ban in Second Life in 2011. Access at: http://dwellonit.taterunino.net/2010/12/08/linden-lab-has-plans-to-relent-on-gambling-ban-in-second-life-in-2011/.

[15] Id.

[16] Benjamin Duanske, VIRTUAL LAW: NAVIGATUING THE LEGAL LANDSCAPE OF VIRTUAL WORLDS, (2008) at 205.

[17] Id.

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~ by jramsey5213 on November 10, 2011.

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