Tuesday, April 10, 2007

If a crime falls in the forest . . . ?

That vaguely Zen-ish caption is my way of launching this exploration of the possibility of using real-world law – specifically, U.S. federal law – to prosecute people who run virtual casinos in places like Second Life.

As The Register noted, this possibility raises the prospect of “virtual prosecutions” and of “virtual FBI agents kicking down virtual doors”. As The Register also noted, “the mind spins.”

The context here is that Linden Labs, operator of Second Life, has recently invited FBI agents to “take a look around” in Second Life and “raise any concerns” they may have about gambling going on there. According to a Linden Lab representative, the agents “did look around in a virtual casino” but no made no arrests.

The reason for that, of course, is it is far from clear whether gambling in Second Life, or in any other virtual would, would violate U.S. law. If it did, prosecutors and agents would then have to figure out how to enforce the law in this context, which is an issue I’ll get to in a minute. I want to start with whether virtual world-based gambling is, or should be, a crime. I’ll outline what the law is first, and then throw in my own two cents.

There are basically three federal statutes that could (emphasize “could”) be used to prosecute gambling in Second Life. One is the Travel Act, 18 U.S. Code § 1952. The Travel Act basically makes it a federal crime to travel in interstate or foreign commerce or use the mail or any facility in interstate or foreign commerce with to (i) distribute the proceeds of or (ii) otherwise “promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity”. 18 U.S. Code § 1952(a). “Unlawful activity” includes gambling that is carried on in violation of the laws of the state in which it occurs. ” 18 U.S. Code § 1952(a). So, to qualify for prosecution under this statute, gambling in a virtual casino in Second Life or in any other online world would have to violate the law of the “state in which it occurs” . . . which raises a very interesting question.

Does the gambling that goes on in Second Life occur “in” any U.S. state? Linden Labs itself is located in San Francisco. I don’t know where the Second Life servers are located, but for the sake of analysis let’s assume they are also located in California. And let’s make this analysis even easier by assuming the kind of gambling that goes on in Second Life casinos does violate California state law (again, that’s just an assumption).

Okay, let’s further assume that John Doe (our favorite person to pick on in law school) operates a casino in Second Life. Doe lives in Maine, and his customers come from various U.S. states (including California). They also come from outside the U.S., from countries where online gambling is, let’s say, either legal or has not been declared to be illegal. Can Doe be prosecuted for violating the Travel Act?

We have no indication he traveled in interstate commerce as part of operating his online casino, so that option is out. Using the Internet would qualify as using a facility in interstate or foreign commerce, so if we can say he used the Internet to carry on or facilitate the conduct of a gambling operation that violated California law, then he could, it seems, be prosecuted for violating the Travel Act. Doe, who lives in Maine where, we’ll assume, this type of gambling is not illegal, might argue that what he was doing is legal in the state where he lives . . . and, besides, he’d argue, how can anyone say that the online gambling that occurred “in” Second Life took place in California? Doe was never in California, nor where most of his customers (a few were, just to make things interesting).

That raises a very interesting issue, one that runs through a lot of legal analysis involving online activities. We’re dealing with an emergent reality here – with a virtual construct that becomes the scene of conceptual human activity as surely as the real, physical world is the scene of physical human activity. Do we treat this emergent reality as a “real” reality or do we reduce it to a physical reality? That is, do we say that the gambling going on in Doe’s casino occurred in Second Life and nowhere else . . . which would put it outside the scope of the Travel Act? Or do we say it occurred, presumably simultaneously, in California and in any other venue where one of the players was physically located?

These are very important questions because the other two federal statutes that could criminalize gambling in virtual worlds such as Second Life also require that the gambling have been illegal under the law of a U.S. state. 18 U.S. Code § 1955 & 31 U.S. Code §§ 5362(10), 5363 & 5366. So whether or not this type of online gambling can be prosecuted under current federal law depends on how we answer the questions I posed above? (Whether or not a state, such as California in this hypothetical, could prosecute will also depend on how we answer these questions.)

This is where we come to my two cents. It seems incredible to me that we would create these complex, heterogeneous online worlds and then attempt to reduce them to parochial venues. As far as I can tell (having dabbled a bit in Second Life), one reason, if not the principal reason, people participate in Second Life is to have experiences that transcend what is available to them in their localized physical reality. For that matter, many of the experiences people can have in Second Life transcend what is available to anyone in any physical reality currently existing anywhere on the globe, which makes it even more interesting.

The U.S. Supreme Court has implicitly recognized that it will have to deal with this issue in a different context – in the matter of defining what is and is not obscene. For some reason, in the U.S. we still criminalize matter that is “obscene” but do not criminalize mere “pornography.” The Supreme Court long ago articulated a test for determining whether something is obscene, a test that incorporates local community standards as one of the factors it considers.

Now, that test may have made sense when sexually-oriented material was only available in hard copy and had to be physically shipped to a location and displayed there for sale. In that world, the material itself came into the community which, at least arguably, could give the community the interest and the right to exercise some control over it.

The migration of sexually-explicit material online makes that standard changes that equation and makes that standard essentially meaningless. The material does not come into the community; the community (or those members of the community who are interested in such material) seek out this material by going online. This means that they gain access to something that is being distributed for a much wider audience – a global audience, in effect. As the Supreme Court has intimated, it is clear that relying on the community standard to define what is and is not obscene is an obsolete artifact of a different world. What made sense when New York City and Peoria (sorry, Peoria) were physically and culturally isolated makes no sense when precisely the same material and same experiences are available online to people in either city.

Obviously, I think the current federal approach to criminalizing gambling should not apply to activity in Second Life or in any other virtual world. So far I’ve based that argument simply on parsing the language of the applicable law, with a gloss added as to how we interpret when – if – virtual activity occurs “in” a physical venue.

Let’s go beyond that now and discuss a related issue: If online gambling occurs purely online, and if it only involves the use of virtual currency, what, then, is the “harm” with which the law should be concerned? I’ve never been quite clear as to what “harm” is involved in real-world gambling. The social concern seems to be to protect people from themselves, i.e., to protect people from gambling away all their money.

I don’t see why we need to be concerned with this victimless crime, when people are quite free to fritter away their money on cars, worthless real estate, jewelry, or their latest infatuation. Nor do I see how criminalizing gambling can be justified selectively; as we all probably know, in the U.S. many states conduct lotteries and/or operate casinos, which is quite legal. It’s just illegal, outside a couple of states, if private parties do that.

But let’s go with the premise that there is some justification for criminalizing gambling in the real-world because of the loss of “real” assets. The proponents of online gambling might point out that in Second Life, anyway, the gambling involves the use of Linden dollars, not U.S. dollars or any other real-world currency. They could use this to argue that whatever “harm” is involved in real-world gambling does not exist for online gambling.

The opponents of online gambling would no doubt point out that gambling in Second Life involves the use of Linden dollars which can be “exported” to the real-world. Their argument, then, would be that the same “harm” targeted by real-world gambling (whatever it is) results from online gambling because people can (I assume) move real-world currency into Second Life and use it for gambling . . . and there irresponsibly dissipate their assets. If you buy the argument for criminalizing gambling in the real-world, you’d no doubt buy that argument. If, of course, a virtual world only allowed gambling to be conducted with virtual currency that was not transportable into or from the real-world, the validity of this argument radically erodes.

Let’s still assume, for the purposes of analysis, that there is a valid reason to criminalize gambling in virtual worlds like Second Life and that we have figured out a rational way to apply federal law to this end. One logical possibility would be to quit using state law as a definitional component of the statue criminalizing online gambling and just adopt a federal statute that made online gambling a crime. There are reasons why that approach might be problematic, but while we’re hypothesizing let’s just assume that was done and it worked. This brings us to the enforcement issue.

If everything else is in place, how would federal agents enforce laws criminalizing gambling in Second Life (and similar online venues)? The obvious way to do this is to put pressure on Linden Labs to crack down on virtual casinos. Since Linden Labs is located in the United States, and since Linden Labs has a real, external presence in the territory of the United States, federal agents and prosecutors could tell Linden Labs to shut down virtual casinos in Second Life or face prosecution. The government’s theory there would be that Linden Labs was liable for aiding and abetting illegal gambling if it did not shut down the illegal virtual casinos. (The government could also argue that Linden Labs was conspiring with the operators of the virtual casinos to violate the federal law we’re assuming applies here.)

If that were to happen, I’m sure Linden Labs would comply, to the best of its ability. The problem is, as a Linden Labs representative recently pointed out, since there are millions of registered accounts in Second Life and millions of places and objects in Second Life, it simply would not be feasible for Linden Labs to be able to keep track of every virtual casino that cropped up . . . especially not if the operators took steps to conceal what they were doing.

So, what would be the solution? As
The Register said in the quote I began with, we’d presumably wind up with virtual federal agents conducting virtual undercover investigations (virtual snitches?) in Second Life. I don’t know about you, but I’m just not persuaded that we need to go there.

No comments: