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Second Life bans gambling, predatory banks

Emily Crone

Second Life is an Internet-based, virtual world where users interact using avatars (a virtual character you use to represent yourself). Residents create goods (buildings, cars, clothes) and services, and buy and sell them. Members can buy virtual “land.” Religious groups meet and singles mingle. Several countries have virtual embassies and many real-world universities have virtual classrooms in Second Life. The virtual world has its own currency: the Linden Dollar. Second Life was once criticized for its lack of moderation, but due to the misuse of the Linden Dollar, it has recently banned virtual gambling and unchartered banks.

Real world currencies can be exchanged for Linden Dollars, allowing some savvy users to make real cash in the virtual world. In November 2006, Ailin Graef became the first person to make a million real-world dollars using Second Life. In 30 months, she was able to turn a $10 investment into a million-dollar corporation through buying and developing virtual real estate. She has invested in virtual shopping malls, virtual store chains and even virtual stock markets.

The legality of online gambling is a hotly debated subject right now, and Second Life is no exception. In 2007, virtual gambling was banned in Linden Land. No longer allowed was wagering on games of chance or games that rely on the outcome of real-life organized sporting events if they paid out in Linden Dollars, real-world money or anything of value. The ban was not received well. The lawyers of Linden Labs, the company that owns Second Life, have recently decided that certain skill games similar to Bingo (huh? That’s a skill game?) are allowed within the virtual world, though they are not allowed in all 50 states. Players and owners have to check local laws before rolling the virtual dice.

Now, Second Life is combating a new issue. Starting Jan. 22, it will be illegal to offer investment or any direct return on an investment, regardless of the currency (real or virtual), from any object located in Second Life (e.g. an ATM), without a charter. This policy was implemented to satisfy angry residents and the law. Many residents were complaining about “banks” defaulting on promises, including unusually high rates of return, going anywhere from 20 to 60 percent annualized. It didn’t help that Ginko Financial, a virtual bank, collapsed and left residents over $700,000 in the hole (yes, real money).

In the corporate blog, Linden Labs says the “banks” brought unique and substantial risk to Second Life, and that it was the company’s duty to intervene. “There is no workable alternative,” the blog says. “The so-called banks are not operated, overseen or insured by Linden Lab, nor can we predict which will fail or when. And Linden Lab isn’t, and can’t start acting as, a banking regulator.”

As of Jan. 22, virtual ATMs and other objects that facilitate in-world banking will be removed. In the mean time, Linden Labs asks that the banks “settle up on any promises they have made to other residents and, of course, off withdrawals.” Once the policy is in effect, Second Life may sanction violators with suspension or termination. Second Life will not apply the policy if a company submits a registration statement, charter or other applicable government license, or who are conducting marketing or education but not accepting payments.

Am I the only one who thinks this is all a little bit crazy?

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  • I’ve guess that game can be consider as gambling if their will be a money involved on it. But then as long as the people are enjoying on it why do they deprived the right to enjoy. It’s not a crime right?