secondlife casino owners: you could get charged for rackeetering

1 : the extortion of money or advantage by threat or force

2 : a pattern of illegal activity (as extortion and murder) that is carried out in furtherance of an enterprise (as a criminal syndicate) which is owned or controlled by those engaged in such activity —see also Racketeer Influenced and Corrupt Organizations Act in the IMPORTANT LAWS section —compare ORGANIZED CRIME


And you are comparing this news article to SL Casinos?

*grins*
I'll take that bet as well.

If you read the ToS (which you agreed to by simply signing into SL), LL has covered thier postieriors with diamond armor plating. LL can not be held accountable for anything a residnet does. If it is brought to thier attention (by external, legitimate, law enforment agencies) they will ban/suspend a resident as required, but there is absolutely no legal ground to hold LL on.

And the L$ does not have any real world value. Reguardless of wether anyone thinks it does or not since we pay real currency to gain it, nor from the fact that people will give us real world currency for it. Linden Labs does not buy L$. Only other residnets. The L$ is not on the stock market, only the Lindex (made solely for the L$). So it has no more value in the real world than gold bought over e-bay for Ultima, or WoW or Diablo2 items, or any other virtual property.

~Jessy

If I may make a few observations here...

- The argument on whether the Linden is legal tender or not is a complete red herring. I've done a little research and can't find any law that states gambling is defined by the exchange of legal tender. It's typically defined by the exchange of value (actually the term I ran into was "money or anything of value", so if I bet a chicken on the World Series (here, chicken, chicken, chicken), it's still gambling. The Linden has value as exhibited by the fact that I sold Lindens for cash just yesterday, so it definitely qualifies.

- A private contract cannot negate the law. I've heard arguments that the TOS somehow protects Linden Labs. It does not and cannot. If Linden Labs is engaged in an illegal activity, any agreement between itself and a third party is irrelevant.

- The servers are in the United States and Linden Labs is incorporated under US law, and as such strongly puts SL under US law.

- The arguments that Linden Labs is just a service provider is rather weak in my opinion. For one thing, Linden Labs also acts as a banking and transaction agent thus making them intimately involved in the gambling process.

- Currently SL is flying under the radar, both because the sums are small and there is the outside view that SL is a 'game'. But if the Feds decide that they need an example in this gray area, Linden Labs is a perfect scape goat. The Feds don't even have to be legally right and they still could shut down SL.

I'm not a high priced lawyer for which I hope Linden Labs has plenty, I'm just a lay person with some experience with the law and politics. However, from where I sit I'm afraid that my best advice to Linden Labs is to publicly outlaw any gambling.

Well, the guy in the news article is based in Costa Rica and has no operations in the U.S., and yet he was indicted. I don't think being based in Europe will protect you unless you commit to never stepping foot in a place where U.S. authorities can grab you.

Time and time again, the United States government tries to legislate something it doesn't strictly control: the Internet. The laws they come up with usually demonstrate that they haven't got clue one about what the Internet is or how it works.

To assume that they'd have any interest or understanding of what goes on in a virtual world is stretching the limits of belief by quite a lot, in my opinion.

Further, racketeering charges with respect to casinos specifically stem from the violations of individuals' right to property and equity in contractual or business relationships with said casinos, either as a vendor or as a customer.

For racketeering charges to be made, one would first have to prove that Lindens were money and had real value, exchangeable for real goods or services (SL is a VIRTUAL world, not a real one, so this would be a very tough one to prove), and then one would have to have substantial proof that a Second Life casino owner was coercing people out of their money in some way.

Gambling at all, on the other hand, may be an issue at some point, but probably not today. SL isn't set up as a gambling service, they just provide the tools. So the casino owners would be directly responsible. Even then, just because the servers are in the U.S. doesn't mean the casino owners are, or that the customers are. Where, then, would the crime be taking place? How would one set the venue of the crime, and whose laws would apply?

Any time any one sovereignty tries to claim dominion, the law they try to establish is either written so they can say they tried to do something and is completely unenforceable, or doesn't even pass the giggle test and never makes it into law in the first place (the one obscene exception being the DMCA, which is being slowly dismantled, clause by clause, as DMCA cases are tried).

I think the casino owners in SL are about as safe from RL prosecution as it's possible to be with respect to racketeering. This is a tempest in a teapot.

I would imagine that the crime would be defined as happening where the servers are located. That said, there does need to be a recognised legal and policing body for the internet, just as we have in RL. where such a body would be based is another question. And, as the internet goes beyond the limitations of nation-states, it would need to have jusrisdiction anywhere on the planet as well as extraterrestrial locations connected to the terrestrial internet. I always suspected that the internet was the harbinger of the post-nationstate era but was unsure as to how it would be ushered in.

Quoted for truth.

Puerto Rico is a commonwealth of the United States. The FBI has authority there

Agreed.



Yes, but LL is not gambling. Nor do they,nor are they required by law, to police a virtual world to ensure none are doing so.



LL does not act on a banking and transaction agent. They us a system that paradies the NY Stock Market to exchange thier goods and services (ie L$). They do not charge intrest, they do not run the stocks (not with L$ at any rate). You can no more say gambling is illegal here than you can in WoW, or TSO. Everything is an enclosed system. Yes, RW money is exchanged for L$, but not bought directly from LL themselves. Teh simply provided a service to allow for protected trade between residents to remove the possibility of con artists and thives reneging on trades. See UO for simular systems.



The best advice is for LL to not become involved in gambling. Which they already advocate such a stance. I asked about an in-world lottery some time back (sounded like a great idea for a money sink and some fun). LL was advised by thier lawyers not to, due to all the legal issues invovled. Those same lawyers have covered this ground of in-world gambling, and I imagine are following that news broadcast, US law, and even this thread.

The point is, LL is truely seperate from the in-world gambling. If the US would deciede to sue LL for allowing gambling in it's virtual world, a good lawyer could argue that opens up the US itself to be sued for all the illegal gambling that takes place within the US boarders. Asinine, yes, but on the same level. One is a real world, and one is a virtual world, true, but the differences in laws are becomming less and less these days.

~Jessy

You well point out the fact that identifying where the Internet crime takes place is a hard problem - is it where the perpetrator is sitting at his or her keyboard performing the questionable activities? But if the crime crosses international boundaries, whose laws apply? The country where the perpetrator sits? Or the country where the victim sits?

And to play the devil's advocate, taking your example as the template, one could also argue that if an illegal business transaction were arranged over a transatlantic telephone call, and that a computer in a satellite relayed the information from one ground station to another, that the crime took place in orbit.

The old rules simply don't apply, as you point out.

And where, pray tell, is Linden Labs headquartered?

Those servers running SL casinos aren't sitting in Costa Rica, my friend.

Neither are the chips from any casino. You think the court would buy that argument if I started up one in a state where casinos are illegal?

-Pall

The process of gambling in SL proceeds as follows:

- LL charges my credit card and credits tokens to my account
- I engage in prohibited gambling activities using services hosted by LL
- LL debits tokens from my account and sends US$ to my PayPal account

How exactly can LL claim to have clean hands in this transaction? From my accounting/billing point of view, my cash transaction occur *only* with LL, and they are taking a cut of the proceeds of gambling.

They'd be crazy if they didn't. Even if they could successfully make their legal case (and I *seriously* doubt any court would buy that obvious "but Linden $ doesn't technically have any value" BS for even a microsecond), their "victory" would still come long AFTER all their servers were seized and their company went belly-up.

I don't know if they have stockholders, but I sure wouldn't want to be holding stock in a company looking to thumb its nose at the U.S. government, especially these days.

I too expect an announcement soon banning gambling in SL.

-Pall

On the first and last point, LL is essentially functioning as an escrow service for two parties to exchange wealth, not as the wealth provider themselves.

Jessy, I follow your arguments but I don't believe they would have much weight in court. If I own a property for which has an illegal casino on it. If I then also keep the books for the casino and all of the money goes through my hands (LL keeps records of all transaction activities, and the money that is shown on your client is maintained and processed by LL), it's going to be hard to argue that I am completely innocent.

But more to the point, if property is used in an illegal act, the government has the right to seize the property without due process irregardless of the owner being criminally liable or not. (I find this to be a horrible law, and I think everyone should write their congressman about it, but it is the law). As such, if the government believes illegal activity is ongoing in Second Life, the government can seize it and then LL will have to go to court and prove there was no illegal activity to get SL back.

I agree that this is how things are portrayed to work. My question though is that given the fact that LL is the *only* counterparty with whom I transact when buying/selling L$, is that a valid claim? Or am I in fact buying and selling only from/to LL, with their "L$ clearinghouse" bookkeeping irrelevant in this matter? I have to admit, my knowledge of the admin/legal realities surrounding trade matching and such transactional issues in securities brokerages is somewhat limited.

Actually there is a huge difference. First of all, a chip in the casino has a gauranteed redemption value by the casino, you own that chip and can do with it as you please until it is redeemed for its equivilant cash value. Meaning the casino gaurantees to pay you the full value of what that chip represents in USD at the time of redemption.

However, Linden dollars have no gaurantee. In fact, you have to sell linden dollars to an interested party to get any real life currency and since Linden dollars can only be used in-game and not in any real life economy it has no bearing on any real life government regulation. In fact, you are not even gauranteed by linden labs that you will be able to find a buyer for your Linden dollars. So what it amounts to is this, you are selling play money for a game platform that has no real value and is not redeamable by the owner for real life currency. You do not even own the play money, it is owned only by Linden Labs to do with as they see fit. The Linden dollar has no value outside of Secondlife and therefore the means of aquiring it is basically open to whatever your imagination can come up with. Selling lindens that you aquire has no bearing on any of the laws in place regarding online or in person gambling becasue at that point all you are doing is selling tokens to be used in game platform on whatever the buyer chooses to use them for.

Well, there is at least one alternative to LindeX still around, so...

Its only a matter of time before some SL casino owner is arrested. If you live in the United States and operate a casino in SL, I'd seriously consider closing shop.

Lindens aren't legal tender and have no real guaranteed cash value therefore its not money hence no illegal act takes place.

"What matters is what people put in their bank accounts" is correct, so if you live in the U.S. and youre selling virtual furniture,homes,photoshoots,weapons,clothing, textures or cybersex and making L$ and cashing the out for real US$ with out claiming it on your taxes as income then you too are guilty of tax evasion this goes across the board for all sl business not just casinos.the government doesnt really care how you got your money as long as they get a cut.

L$ are exchanged for valuable services that one would otherwise pay cash for. Therefore, they are "representative of value". They don't need to be legal tender to be considered valuable. If I'm gambling and wager a year's worth of lawn cutting service against a year's worth of laundry service, that's still gambling in spite of the fact that neither laundry not grass cutting services are legal tender.

Your second point is correct. If people earn profit in SL they should definitely be reporting it as income. In fact, I would go so far as to suggest net L$ income should also be taxed at the fair market value, regardless of whether it is converted to L$ or not. And I'd bet dollars to doughnuts that the various tax collection agencies would agree with me.

Well, up to now the internet (and SL) had been pretty much 'wild-west' style anarchy for the most part. But for the internet to be an integral part of modern life all the usual aspects of real life such as laws, taxes, etc., will have to apply. Otherwise it will become a black hole sucking out the wealth of a planet.

I know some libertarians and anti-state anarchists would welcome such a thing but a modern technologically-based civilisation requires a functioning infrastructure which, if not directly set and managed by the state, will at least be regulated by the state. Schools, hospitals, roads, police, courts and all the trappings of a modern society cost money to run. Money which comes from taxes. So it stands to reason that governments will eventually band together to ensure that money that could be collected in the form of taxation will be collected. That as well as regulating and upholding laws across the internet.

The supra-national nature of the internet is unique and it could well be the spur to force governments to co-operate and harmonise their laws and tax regimes, but such things are a long way off. But then again, I'm a post-nationstate world citizen and I make no bones about it.

Ah, but this is just the type of thing so many here love to feed on, Kalel! Leave the armchair lawyers alone... I'm having fun watching them!

Perhaps we are armchair lawyers, but then you're clueless newbies who have no idea who's making how much in SecondLife.

Take for example, the casino who happens to be paying 75K L$ every week for a top add spot in the classifieds. They're making probably 1/10 what the top casino is making in SL.

That money is going to come to the attention of the feds .. especially because it is virtual money. Do your research, and you'll find that the fbi is all over virtual currencies (for example, e-gold) and its connection with organised crime.