Is Second Life gambling legal?

Stephen Withers
Thursday, 05 April 2007 11:21

Your IT - Home IT

US authorities are looking at Second Life as part of a crackdown on Internet gambling.

The Unlawful Internet Gambling Enforcement Act attempted to outlaw online gambling, and Linden Lab - the operator of Second Life - says FBI agents have visited casinos inside the virtual environment.

The Act covers online betting that involves "something of value," and Linden Dollars (Second Life's currency) are exchangeable with US dollars. Linden Lab opened a currency exchange in 2005, following the example of some Second Life participants.

Linden Lab takes the position that the Act does not apply to its activities, as it simply hosts the interactive environment, and that it has sought - but not received - a ruling from US authorities regarding gambling within the virtual world.

If Linden's view is accepted, operators of virtual casinos and other gaming establishments could be held accountable. However, the fact that it provides payment processing could make it vulnerable under the Act just as credit card companies are.

The convertibility of Linden Dollars into real-world currency has also drawn the attention of taxation authorities. The US and UK require taxpayers to declare income earned in Linden Dollars and converted to real currency, while the Australian Tax Office has ruled that income earned from a virtual business is taxable even if it is not converted.