Online Gambling

Pretend Gambling Meets a Pretend Gambling Ban

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The FBI reportedly is investigating gambling in the online virtual world Second Life, which includes casinos where players can place bets using virtual dollars. To me it seems pretty clear that such gambling does not violate federal law, which bans interstate sports betting via a "wire communication facility" but does not prohibit online games of chance. (Contrary to the impression left by a lot of the news coverage, last year's Unlawful Internet Gambling Enforcement Act did not change that fact.) But if we accept the Justice Department's implausible reading of the Wire Act, according to which the phrase "bets or wagers on any sporting event or contest" covers games such as poker, blackjack, and roulette, why wouldn't gambling houses in Second Life, where betting is done with "Linden dollars" that are purchased with and can be converted back into real dollars, be just as illegal as any other online casino?

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  1. The feds may catch me, but they’ll never catch my winged avatar in Second Life!

  2. I think the JD is up against it because of the fact that game money and objects now have real world exchange value.

    You can sell items from games in real life, either through a game marketplace maintained by the game company or via EBay. This means that “Linden dollars” are potentially convertible to real dollars.

    And if Linden dollars are convertible to real dollars, that makes them for all practical purposes “chips”. All that gambling happening in Vegas isn’t happening in real dollars either – they use “chips” too. The distinction between an online credit with convertibility to real money and a round piece of plastic you can convert to real money is too esoteric for the law to acknowledge.

    Hopefully the absurdity of extending gambling law into online symbolic systems will bring down gambling laws, and not bring down online symbolic systems.

  3. Would now be a good time to point out that US Dollars and Linden Dollars are both based on the same commodity? If we’re dealing with fully exchangable fiat currency then it would be rational to treat gambling with Linden dollars as we would treat gambling with Euros. The value of a Euro is also drawn from the same source as the US Dollar.

    This is not to say that a gambling ban is right or reasonable. It is only to say applying it to gambling with Linden Dollars would be as rational, or irrational, as applying to to gambling with US Dollars.

  4. The FBI should vigorously prosecute Second Life gamblers; this would be a great constituency for libertarians to target after their favorite pastime is ruined by the government.

  5. Jesse,

    IANAL, but does the word “sporting” modify both event and contest in the act, or is “sporting event” one prohibited betting scenario, and “contest” the other? My blackjack strategy books refer to each round of blackjack as a “contest”, specifically using that word, and I’ve seen it used in context to refer to the outcome of a roulette wheel spin as well. For an example, the author of the very informative http://www.wizardofodds.com site uses the term “contest” throughout his articles.

    If the text of the law is as you quote it, it seems to me to be the common understanding of casinos and the ecosystem of authors who write about casino games that the English word “contest” refers to any table game outcome. DoJ’s position doesn’t sound implausible at all.

  6. “””And if Linden dollars are convertible to real dollars, that makes them for all practical purposes “chips”.”””

    Sort of, chips with the cash value of green stamps or store coupons.

    I’ll bet you 15 Cat Chow coupons…

  7. Anyone know where I can redeem my S&H Green Stamps?

  8. According to Google, $30 US gets you 10000 Linden dollars.

    There are real currencies out there with a worse exchange rate.

  9. They really need a resolution upgrade.

  10. ahem,
    [whisper voice]keith, this is Sullum’s post [/wv]

    I agree, if it applies to U.S. dollars it applies to Linden dollars. I await the day Linden dollars are floated on the international exchange.

  11. One thing that is important not to mischaracterize in this story…the FBI was invited by Linden Labs. They weren’t out looking for new ways to bust people. I suspect this was a CYA move by Linden.

  12. “””According to Google, $30 US gets you 10000 Linden dollars.

    There are real currencies out there with a worse exchange rate.”””

    $1 = $333.33

    Not a trick question but I have to ask. How many Linden dollars does it take to get back $30?

  13. Whoops, my bad! Thanks Warren!

    Sorry for the misattribution, J-Men.

  14. Can one bet on sports in these casinos?

  15. Tricky –

    No, that’s exactly the right question.

    But I didn’t take my figure from the company [which presumably can set any arbitrary price it wants for the purchase of Linden dollars from the “company store”] but from a 3rd party site. It appeared to be an exchange price.

  16. Oh no! All those online role playing games are illegal, too! When you kill a dragon or demon, you are RANDOMLY rewarded with various amounts of gold and treasure. Since people actually sell the gold and loot via Ebay and other mechanisms, clearly, playing these games is a form of gambling. Better get the nanny-nazis on the case as soon as possible.

  17. Next up–a Federally mandated “minimum wage” for camping chairs…

  18. Pretend gambling with pretend money. Can’t they just pretend to ban it…

  19. i think in cerulean city in the pokemon world you can play slot machines.

    when are the feds going to come confiscate my old game boy?

  20. Mr Crane,
    Thanks for the tip.
    We’ve also got a warrant for your Yahtzee set.

  21. …and soon a heavily armed, helmeted, shielded SWAT team will pretend to kick down your door and shoot you.

    Play dead.

    Special Agent CB

  22. Regarding the comment by keith about the use of the word “or” before “contest,” the 5th Circuit Court fo Appeals has already ruled that, despite the arguments of the DOJ, the Wire Act only covers betting on sports.

    But hey, why should the DOJ worry about what the Courts say – those judges will all be replaced in few years anyway.

  23. “””But hey, why should the DOJ worry about what the Courts say – those judges will all be replaced in few years anyway.”””

    Your confusing the judges with the attorneys. All the attorneys will be replaced in a couple of years.

  24. >Oh no! All those online role playing games
    >are illegal, too! When you kill a dragon or
    >demon, you are RANDOMLY rewarded with various
    >amounts of gold and treasure.

    The difference is that in most games (World of Warcraft for example), the company running the game explicitly forbids this trade in game objects and spends a lot of time shutting down accounts for people caught doing it. Linden Labs, on the other hand, is running the exchange itself and actively encouraging the trade for game objects in real dollars.

    This opens Linden Labs for issues such as this gambling one, but also creates a lot of income tax issues for its players.

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  28. all is the same whether we talk about teh virtual or real because afterwords those virtual also are cashed as real dollars at some worse exchange rate but still its not any virtual . its just the mode of playing thru chip or plastic coins

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