Pandora's Box

Linden Dollars are not real money. As noted in Section 1.4 of the terms of service, Linden Dollars represent your limited license right to use an aspect of Second Life, i.e. the aspect that simulates a real-world economy. Linden Lab does not provide any right of redemption for Linden Dollars - you cannot demand that Linden Lab provide you any sum of money in exchange for your Linden Dollars. Linden Dollars are a software license right, not money.

I should note here that there appears to be some confusion about Linden Lab's position as to whether Linden Dollars have value. It is undeniable that people are willing to pay money for Linden Dollars. People buy Linden Dollars from us, they buy Linden Dollars from each other - obviously, value can be attributed to Linden Dollars. In this sense, Linden Dollars obviously have value.

But this is a completely separate issue from whether or not Linden Lab will ever provide a right of redemption for Linden Dollars. We do not provide any right of redemption of Linden Dollars for monetary value. Along with Section 1.4, Sections 5.2 and 5.3 of the terms of service make clear that Linden Lab will not provide or guarantee any value for any data (including Linden Dollars) residing on our servers; and the service of Second Life is provided on an "as is" basis.
[Unquote]

If investigations into SL conclude that there is a case for prosecution under the 2006 Internet Gambling Act, or that virtual profits ARE subject to IRS rules, then the disclaimers by LL in their TOS and in statements made by their lawyer (above) could be overturned by the US Courts. In other words, if Linden Dollars ARE deemed by the Courts to be *funds or credits* then the Internet Gambling Act 2006 applies, and the IRS would be quick to follow.

But what are the wider implications of all this?

Other TOS provisions (condensed, see the TOS for full details), such as:

1.6 Linden Lab has the right at any time for any reason or no reason to change and/or eliminate any aspect(s) of the Service as it sees fit in its sole discretion.
2.6 Linden Lab has the right at any time for any reason or no reason to suspend or terminate your Account, terminate this Agreement, and/or refuse any and all current or future use of the Service without notice or liability to you. In the event that Linden Lab suspends or terminates your Account or this Agreement, you understand and agree that you shall receive no refund or exchange for any unused time on a subscription, any license or subscription fees, any content or data associated with your Account, or for anything else.

and particularly provisions 5.3 - 5.5

5.3 All data on Linden Lab's servers are subject to deletion, alteration or transfer.
When using the Service, you may accumulate Content, Currency, objects, items, scripts, equipment, or other value or status indicators that reside as data on Linden Lab's servers. THESE DATA, AND ANY OTHER DATA, ACCOUNT HISTORY AND ACCOUNT NAMES RESIDING ON LINDEN LAB'S SERVERS, MAY BE DELETED, ALTERED, MOVED OR TRANSFERRED AT ANY TIME FOR ANY REASON IN LINDEN LAB'S SOLE DISCRETION.

5.4 Linden Lab provides the Service on an "as is" basis, without express or implied warranties.
LINDEN LAB PROVIDES THE SERVICE, THE LINDEN SOFTWARE, YOUR ACCOUNT AND ALL OTHER SERVICES STRICTLY ON AN "AS IS" BASIS, PROVIDED AT YOUR OWN RISK, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OR CONDITIONS OF ANY KIND, WRITTEN OR ORAL, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF TITLE, NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

5.5 Linden Lab's liability to you is expressly limited, to the extent allowable under applicable law.

IN NO EVENT SHALL LINDEN LAB OR ANY OF ITS SHAREHOLDERS, PARTNERS, AFFILIATES, DIRECTORS, OFFICERS, SUBSIDIARIES, EMPLOYEES, AGENTS, SUPPLIERS, LICENSEES OR DISTRIBUTORS BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION ANY DAMAGES FOR LOST PROFITS, ARISING (WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE) OUT OF OR IN CONNECTION WITH THE SERVICE (INCLUDING ITS MODIFICATION OR TERMINATION), THE LINDEN SOFTWARE, YOUR ACCOUNT (INCLUDING ITS TERMINATION OR SUSPENSION) OR THIS AGREEMENT, WHETHER OR NOT LINDEN LAB MAY HAVE BEEN ADVISED THAT ANY SUCH DAMAGES MIGHT OR COULD OCCUR AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY. IN ADDITION, IN NO EVENT WILL LINDEN LAB'S CUMULATIVE LIABILITY TO YOU FOR DIRECT DAMAGES OF ANY KIND OR NATURE EXCEED FIFTY DOLLARS (U.S. $50.00).


All the above provisions could be subject to challenge, if the US Courts determine that L$ = *funds or credits* . After all, when you deposit money into a bank, the actual money, i.e the bills with their serial numbers, is not maintained in your name, rather they are added to a pool of money, and your credits and funds are simply data on the bank's servers, this does not mean that your funds and credits are now 'virtual', they are very much 'real'.

If LL are managing real assets on their servers, rather than virtual assets, with the responsibility that that entails, it could generate a whole rethink of 'virtual' games. Residents could sue each other in real courts for breaches of contract. Residents could find themselves being arrested for theft or fraud, even if committed within a 'virtual' world. (I won't go down the road, however tempting, of discussing here the other possible 'virtual' offences that this could open the door to, such as virtual harrassment, virtual stalking, virtual indencency in a public place, virtual underage sex, virtual bestiality, virtual murder!!!).

So folks, keep you eye on this one. If SL casinos are held to be under the purview of the The Unlawful Internet Gambling Enforcement Act of 2006, then this could just be the first chink of light coming from under the lid of Pandora's Box. What do YOU think?

Rock