FBI peering into virtual casinos

"We have invited the FBI several times to take a look around in Second Life and raise any concerns they would like, and we know of at least one instance that federal agents did look around in a virtual casino," said Ginsu Yoon, until recently Linden Lab's general counsel and currently vice president for business affairs.

The largest poker casinos in Second Life are earning about $1,500 a month, insiders say. But since players are gambling with Linden dollars, not US currency, is it against the law? Probably so, say many lawyers. But if it is, what's Linden's liability and is this where the FBI will crack down?

"That's the risk; we have a set of unknowns and we don't know how they're going to play out," said Brent Britton, an attorney specializing in emergent technology at the law firm Squire, Sanders & Dempsey in Tampa, Florida.

Britton said Linden Lab could potentially face criminal charges under the 1970 Illegal Gambling Business Act or the Unlawful Internet Gambling Enforcement Act. The latter law, passed last year, takes aim at credit card companies and other electronic funds transfers that enable Internet gambling.

"What they did was go after the processors, and made it a crime to process payments that relate to online gambling sites. Linden could potentially be held as the same sort of processor," said Sean Kane, a lawyer at New York's Drakeford & Kane who has studied the legal issues of virtual worlds.

"If you're buying money on the Lindex (a virtual currency exchange) and utilizing it for gambling purposes, Linden could have a much higher level of responsibility," he added. "If they would be found in violation, that's difficult to say, but I can see a much stronger case being made."

Linden says they have no way to monitor illegal activity.