SL Casino's and the US Government

We operate a RL internet casino group and have experianced the new US gambling laws first hand. In short, this effectively means that US residents can not use credit cards for the processing of casino currency.

What impact will this have on SL? We have spent a great deal of time with our attorney's reviewing this and in short it comes down to ownership of the SL casino. If the SL casino is owned or operated by a US ownership interest the it is illegal. Also, the lawyer mentioned that it is also based on where the casino is located. We originally purchased land beside an existing casino on mature mainland, however the lawyer stated that the location would depend on who your neighbors are. They gave a senario of an offshore interest operating a casino within a US neighborhood, again illegal.

What is the work around? The advice provided was this, first make sure avatar and group members are all non US residents and citizens. Secondly, offshore ownership in an area that supports internet gaming. Thirdly, operate the casino on a private island in which the whole island is under the control of the holding company (casino) and operates under the laws of the country in which the RL holding company is located, in other words do not sell any part of the island. Fourth, the island operation and laws (if any) should resemble the laws of the offshore area, (for us operating out of the British Virgin Islands with Antigua licensing - the island flies a British Virgin Island and Antigua flag and the roads have drivers on the left side - sound stupid but the lawyer stated that this goes to prove the intent of the ownership and operation of the island). Sixth, players at the island casino are to be informed of the gaming laws and their legal requirement to adhere to them. Seventh and perhaps the best one, make sure that holding company has a good lawyer, (pick the biggest, the best and one that does not operate in the US but has US legal connections - this is so that they can also provide assistance if you should be detained as what happended with a fellow casino operator we know out of London, UK as he was detained for 48 hours when he arrived at JFK airport in New York).

The lawyer also commented that even though the Linden currency is viewed as a point system in it's linden form, the fact that it is convertable back to US dollars does pose a problem with SL casino's. He suggested that converted currency from the casino (including reserves) not be held in US dollars but instead in Euro (as was mentioned for our real life casino operations).

For our operation, we have taken the advice and will operate under this. In the end what this might do to SL is clean up the casino operations. As a RL casino operator, we can only welcome this, but we have to agree that this clean up should not be at the hand of the US government.

I hope this help's everyone out. I know that the advice has been very general, the reason for this was that I am not a lawyer and are only reading from what our law firm provides to us. Secondly, after telling the law firm of our plan to post this thread, they strongly suggested only general information.

Hope this helps, it sure opened our eyes...

By the way, we have land close to another mainland casino up for sale, (just to throw some humour in to this)...

Azo

In order to provide a discussion on this, I have formed a group in SL for casino operators call "SL Casino Operators". Membership will be free but will only open to confirmed casino operators as well as confirmed RL lawyers etc.

There's a lot of debate as to whether the anti-gambling law applies to SL, but so far the consensus seems to be that it probably doesn't, since Second Life would have to be set up to be set up for the express purpose of supporting an inline gambling service for the law to apply. The law also appears to apply to bank and credit card companies, not to the users themselves.

It's simply never been tested against a virtual economic simulation like Second Life, so nobody really knows for certain what the courts are likely to do with it. However, the law does day that it's only illegal to use credit cards where Internet gambling is already illegal, and that's decided on a state-to-state basis rather than unilaterally across the country - and with money from various countries coming into Second Life to buy Lindens, the problem of identifying exactly who would be the lawbreakers in this anonymous sea of game points flowing this way and that becomes almost unsolvable. This one fact makes certain tracking of the flow of money involved in any sort of transaction in SL, gambling related or otherwise, into an extremely wiggly and uncertain problem.

Since it's a state level determinant and not a federal one, establishing jurisdiction becomes a significant factor as well. For example, gambling is legal in Texas, but not in California (unless it's Indian owned land). Linden Labs has servers in Houston and San Francisco. You might have to establish that the server hosting the gambling operation was installed in San Francisco to prosecute, and there may not be any way of establishing that for a certainty without doing extensive forensics.

Additionally, discovering who lived where and verifying it to indemnify yourself, for example, would be impossible given the Terms of Service sections on protection of privacy (the issue being not whether the ToS has legal standing to protect the users, but whether people would be willing to go around the ToS and give you identifying information - that and the fact that by asking, you'd be in violation of the ToS yourself before any other crime might be commited) and the ability of anyone to simply lie about it without being detected.

So while there is still that lingering doubt about the legality of SL gambling, the ramifications are probably not be terribly relevant at this time - it would appear that there are too many hurdles to overcome to meet the requirements of a successful prosecution, both legal and technical.

Does this mean that RL companies based outside the US that have recently been forced to ceaseoperating in the US will be able to set up a casino in SL and start operating again?

I'd call this a meta-loophole!

Also, are RL operators somewhat frustrated by the fact that gambling in SL is less regulated? I would be very annoyed if I wasn't allowed to offer some kind of product in RL but do so in SL (as well as anyone with scripting abilities). The arguments would be interesting to hear and I think these would be articulated on a philosophical level too.

While I'm not entirely convinced that the scenario provided above is necessarily correct, I'm *very* glad to see someone trying to do things the right way.

One concern I would have would be this:

If United States customers use your island for gambling, thus buying $L with credit cards, it could be that:

1) The Company as our service provider risks having its credit card processing privileges revoked, by law, for processing the transactions.

2) Customers of the grid at large would ultimately foot the bill for our service provider's legal defence, and/or recovery of its credit card processing abilities.

3) Since $L sales are technically customer-to-customer, one possible interpretation is that *individuals* will be faulted for unlawful gambling cashout, as strictly speaking, it's another player that allows you to 'cash out' on LindeX, not our service provider! Does anyone ever know who, exactly, sold them $L?


It's a huge re-assignation of risk. I worry about how many times the Company will be taken to court, when a 'business experiment' goes awry and embroils the Company in consequences. Something to think about. Still glad to hear that someone is trying to 'do things right' though!

Fire your lawyer, they don't know what they are talking about.

Online gambling or operating an online gambling site is NOT a violation of U.S. law.

What is illegal is either a) using "wire" services for sportsbetting (specifically wagering on who wins in a sports event -- i.e., being a "bookie", or b) processing credit cards or other financial transactions for online gambling (over concerns about money laundering). Linden Labs may or may not be on the hook for b), although they can argue their TOS explicitly states L$ does not have value.

People are confused about this, but in fact NOT ONE SINGLE PERSON in the U.S. has EVER been convicted of online gambling. Online casinos face legal issues only in processing credit cards for online gaming. In fact the famous prosecution of non-U.S. residents arrested while travelling through the U.S. were for sportsbetting operations.

The fact is the "Wire Act" under which online gaming is attacked is at very best murky, and the only successful prosecutions involve processing credit cards. Linden Labs will be the first one under scrutiny legally if and when U.S. authorities decide to do something about it.

Fire your lawyer...

You need to read the rider on the safe port act.
First of all the act itself is not necessarily about poker or casino's its specifically there for sports booking. Which is why the owner of Bodog.com could not enter the country without a FBI team descending on him the second he hits American soil.

I'm in the industry, if you want to talk about this please sent an PM

Your both fired. Cause I said so.

Yeah, well - maybe they will. I still think that the fact that you can't trace which Lindens were used for gambling and which weren't, and which were paid for and which weren't, is probably enough of a hairball to figure out that you wouldn't have enough of a case to try and prosecute even if you wanted to. I could be mistaken and they could raid LL tomorrow, but I'm not losing sleep over it.

Staying up all night yakking on the forums instead of hitting the sack, THAT I'm losing sleep over.

Had a good chuckle reading the posts that we should fire our lawyer. The legal opinion we received is from one of the largest law firms in Canada. The issue really has nothing to do with Linden Labs as they only provide the platform for all of us to form our homes and businesses in Second Life. The issue comes back to the casino operator. If an american opens an online casino in Second Life, you are still bound by the same laws as if you opened the casino as a regular internet (non-Second Life) or for that matter a real brick and mortar casino. The same oviously goes for someone from any other country. The fact that Linden's are not traceable as mentioned does not hold any water when it comes to going to court.

The question of whether companies who closed US internet gaming operations due to new US laws will be able to open a Second Life casino (and be oustide of the laws), the answer is a big no as the platform is the same - the internet!

Is it risky to operate a casino within Second Life, the answer is the following:

US resident or citizen, a big YES. If you do not believe me contact me and we will refer you to our lawyer who will provide binders full of case law regarding this.

All others, note my first posting regarding our lawyers recomendations. There is more to it that what I posted as some additional recomendations we few as lawyer-client privileged advice (and if we released all the recomendations - we would be the one left with the big legal bill while other SL casino's simply implemented our lawyers recomendations). The other reason is because we would be stupid if we did not realize that while other Second Lifer's are reading this that government authories are not also taking a serious look at this... Need I remind you that recent news reports noted that the FBI, IRS and other US departments have either allocated staff time or have established precence within Second Life...

My suggestion, get some solid legal advice. Not just a local lawyer, but a large law firm that has indepth experiance in both US gaming laws, Wire Act as well as intellectual properties etc. Basically start with the largest law firm and go from there...

Off topic for this forum. No forum where it is on topic to move it to.
*locks & submits to LR*


Torley Linden:
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