secondlife casino owners: you could get charged for rackeetering

You sure about that? A convincing argument can be made that *any* income made in SL is taxable regardless of whether it's converted to USD or not.

For those that might poo-poo this statement, I must concur with Ricky. The way I understand US tax law you own taxes on SL income irrespective of converting it to USD.

Now is the IRS going to come after you? I don't think so, or at least not today. But as virtual economies grow and become a larger part of the total GNP, at some point the IRS will start coming after virtual income.

Timmy, do your research.

The bottomline is very clear:

- the DOJ feels that internet casinos with american customers are illegal.
- The wire fraud act of 1961 makes it clearly illegal for sports betting, but not internet casinos which was overturned in a New Orleans court.
- A bill has passed in the house clarifying the act of 1961
- Another bill is before the senate and has been given *priority* by Frist and could be put into place before August

So it looks like a bill is going to probably get into the senate. Does it have enough votes? Not clear.

i get from Ginsu's post that its not Illegal as far as LL is concerned but l if your still unsure if its illegal consult your own attorney is the real answer

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So basically the waters remain muddy, OH well, so much for asking for and not getting a straight answer from LL, as in a simple YES or NO answer if SL gambling is Illegal.

I think I will take my chances with the few slots I have at the promenade mall not like I'm racking in the bucks with them there really just there for amusement for visitors any way.

Definitely, the waters are muddy. To some extent, that's what courts are for, to shift through muddy waters. Should you gamble (LOL) on being below the radar? I would say a few slots are going to be way down towards the bottom, but then, if you are not making much on them, why bother even having the slight risk?

Here is another example of a service provider allowing residents to sell virtual currency for US$:

http://eq2.stationexchange.com/

Like the L$, this currency can be used in world to gamble (there are gambling NPCs in world) and then exchanged via the same marketplace for US$.

In the above example, the company who does this actually provides the gambling games in world as well as the means of exchange... and gains direct monetary benefit from it. All on US soil.

If the argument comes up about whether gambling with virtual currency is the same as gambling with real money, it's going to be quite an issue and will have far reaching effects. That time has not come yet.

well regardless, if i have to claim any income made from sl, i can also wite off any expense incured by me to derive that income...its called the cost of doing buisness....so the way i see it...i should have a pretty good loss going for the next 5 years...from my isp charge all the way down to the new lease i just signed for the spare room my pc sits in..the expenses just keep mounting!!!!.just the facts!!!!

hope you have your ascap liscense or bmi....djing for profit requires you to have one...
just the facts!!!

btw, i just called my attorney...he laughed.. and asked me if i was serious!!! thats good enough for me...lmfao

This is quite correct. Monies earned in SL would be treated as business income and therefore any DIRECT cost can be deducted against that income.

And exactly what was the question you put to your lawyer? What are his qualifications to answer the question? Exactly how much research did he engage in? Certainly, if he had no knowledge of Internet law and spent no time on the question, he would laugh at it. I know my lawyer would laugh at it too, but his qualification to make a good assessment about legal issues regarding the Internet are zippo. He can barely manage email.

You are the best tax specialist ever! Can you file my 1040?

You'll have to hold a gun to my head first <g>

My lawyer went into a panic attack.

But a friend's lawyer was like, "zomg thats dum lolollolo!" In e-mail.

And a friend of a friend's brother's lawyer said she'd read up on it and get back later.

So I just don't know what to say. True stories, though. You can take my word for it because I posted them in a forum without naming any names.

I knew it! Most of the posters in this forum know more than most attorneys!

ONe problem with your line of reasonning...since the SL servers are in California, that amkes the location of the gambling subject o US law since those servers are based on US soil. Personally I will be glad if slots and such are banned since the vast majority in SL are riged anyway with Linden doing nothing to enforce any kind of fair gaming codes.

Next thing you know LL will be moving it's servers to a rez....

Im so glad i live in the UK or should i watch for me extradition papers

If I can summarize some conclusions I've made from this discussion:

- Is what is occurring in Second Life gambling? - It appears so. Gambling is defined as risking money or valuables on the outcome of a game.

- Is the gambling on Second Life illegal? - Probably, although it is somewhat confusing. Linden Labs is incorporated under US law and the servers are in the US so US law definitely applies. The US laws are inconsistent when it comes to Internet gambling and there are both federal and state laws to consider. Sports betting however is definitely illegal (is there any sports betting in SL?). Now the DOJ has has recently declared all Internet gambling to be illegal, but that has yet to be proven in court.

- Is the Linden money? - Definitely yes. Generally, most definitions of "money" as something like this "Money is any marketable good or token used by a society as a store of value, a medium of exchange, or a unit of account.", a definition for which the Linden meets. The Linden is NOT however legal tender which is defined as "Currency explicitly determined by a government to be acceptable in the discharge of debts."

- Does the argument that gambling is done with the Linden have legal weight? - Almost certainly not, most gambling laws say "money or value". The Linden fits both definitions easily. As mentioned above, the Linden is not legal tender but it is money. Claims that the Linden has no value is ridiculous considering the Lindex and the actual traffic of buying and selling of Lindens for US currency.

- Is Linden Labs implicated in the gambling? - Probably yes. The fact that they knowingly host the casinos, they act as the casino's bookkeepers recording all gambling transactions, and the profits for the casinos goes through LL's hands all argue against the service provide arguments.

- Are the Feds going to take legal action against the Casino Owners and/or Linden Labs? - Probably not, or at least not in the short term. The monies involved are relatively small, and there is an outside perception that SL is a 'game'. Both of which makes prosecution very unlikely. However, most prosecutions in grey areas like this are motivated by politics. If some ambitious prosecutor sees political gain in prosecuting Second Life, he will.

"Virtual" playing cards aren't the same thing as real playing cards. You need a different (real world) license to operate a video poker machine than you do to run a card game. The card house thing just doesn't apply to LL.



Californian penal code 337j:

"It is unlawful for any person to knowingly permit any controlled game to be conducted, operated, dealt, or carried on in any house or building or other premises that he or she owns or leases, in whole or in part, if that activity is undertaken by a person who is not licensed as required by state law. Any person who violates, attempts to violate, or conspires to violate this section shall be punished by imprisonment in a county jail for not more than one year, or by a fine of not more than five thousand dollars ($5,000), or by both that imprisonment and fine."

Wait she's a SET up!! A bet is a form of Gambling and you could be ARRESTED..

LL can not transfer money into ones bank, though. Nor can LL transfer money into your paypal account can they?

I think they only send checks. I could be wrong.

Paypal can transfer your credit to your bank account (they certainly do in the UK anyway - that's how I cash out). Also, depending on the money laundering laws of the country you live in, paypal are obliged to report your income to the tax office once you've hit a certain threshold. If you haven't declared your SL income as a taxable asset, or haven't complied with any appropriate local business legislation by the time they do this, you could be in serious trouble.

My understanding is you can only claim expenses if you are a licensed business. Keep in mind, I am not an accountant in RL, I just play one on the intraweb.

I'm not an accountant either, but I belive this is wrong (if it's right, I'm in trouble with the IRS).

First, there is no such thing as licensing of a business with regard to the IRS. Or at least if it's a sole proprietorship (i.e the simplest form of business organization). Corporations are a little different. You may however want to get a tax ID number if you don't want to use your own name on the business. Basically, the tax ID replaces your social security number. But it's not required.

States have certain registration and licensing requirements, but that's typically registering the name of the business so that the state knows it exist (it cost me $5/year to register my business with Colorado and I'm not even sure it's required).

If you are a sole proprietorship, you simply fill in Schedule C in your income tax form. The form is basically gross income less expenses equals taxable income or loss. You do have to show a profit in the first three years of a business, or the IRS says it's a hobby, not a business.