PostHeaderIcon SL Economy Reliant on U.S. Congress

EconomyTateru Nino is a respectable reporter. Very good, in fact. not alarmist, doesn't use the terms 'can' and 'will', but rather uses 'could' and 'might'. This is proper reporting and because of this, she is probably my favorite of all Second Life commentators are is highly respected by all.

So the current 'big' political news has to do with the "Unlawful Internet Gambling Enforcement Act" (UIGEA) - which is just as stupid and damaging as the "Digital Millenium Copyright Act" (DMCA). The problem is that the U.S. Congress tries too hard to placate the loudest whiners (can you say music and movie industries?)

Unfortunately, with such overbearing and complicated laws, there always are too many loopholes and there will be those who game the laws in real life. Example: music industry suing a 12-year-old girl for having a half-dozen MP3 files in the sharing folder of her computer.

So, in the interest of protecting us from ourselves, (yes that is really the whole reason and purpose as insinuated ,) we now have the UIGEA. The problem is that because internet gambling sites are usually based outside the United States and untouchable by U.S. laws, the UIGEA goes after U.S. financial institutions directly if they transfer money to these site or for these purposes.

It's as though it is illegal for you to buy candy, but if I give you money and you choose to spend it on candy, I get arrested for providing you the money you use to break the law. Or better yet: the gun manufacturer should be tossed into prison because you aimed it at a human being instead of a bear or dear or duck, regardless if you pulled the trigger or not.

There is real money involved, so these financial institutions will overreact to leave absolutely nothing to chance. Even if there is the slightest fraction of a percent that they could be fined for being on the wrong side of this law, they will move quickly to avoid it - proactively. It is far easier to punish the majority because there is the slightest chance the minority could cause trouble - no matter how realistically unlikely it might be.

So, the fear is that the UIGEA is not completely worded properly and thus there is an "emergency" session by Congressional committee to 'fix' it. Okay, Tateru: I'm not so sure the word 'emergency' really applies here.

I won't go into how all this applies to Second Life because Tateru has done an outstanding job:
Tateru nino of Massively sez: "Most obviously affected are some fantasy sports activities, and assorted fictional stock-exchanges, various other online games (backgammon, bridge, and poker -- ostensibly primarily a game of skill), and quite possibly any number of otherwise legitimate business activities in virtual environments from land speculation and rentals, to the manufacture and sale of clothing.It all depends on exactly what the wording says. Certainly it is causing a stir among some Second Life and Entropia Universe users who are concerned that this will break their respective digital economies."

Because this is a huge political season, there are those who will proclaim this as the Bush Administration attacking or otherwise looking to quash Second Life - which I quickly put the querbash on at my other blog (warning if you go there - it's far edgier and quite uncouth - I don't hold my opinions back!) For the record, the Presidential Administration has nothing to do with U.S. law other than to enforce it. It is the Democratic Congress that is behind this S.N.A.F.U.

The fact of the matter is this: the chance that Second Life's virtual economy or that of Entropia or any other virtual economy will be affected by anything like this at all is next to nil and here's why: in the case of Second Life - all legal tender is traded with Linden Lab - not the other individuals in-world.

Thus, it can easily be argued that any money you earn through Second Life is simply money that the company Linden Lab owes you. It is a credit, rather than a debit. No difference than a cash rebate one might get from buying a car or new television or a new bed or whatever.

Once in-world, all 'trading' is done by the digital equivalent of plastic tokens. A lot like the arcade place in the local shopping mall: you buy the tokens and then the tokens are used to play games or buy trinkets or whatever. The main difference is with Linden Lab, you are allowed to get a refund on any remaining tokens. Yes, this is over-simplifying the way all this works, but you get the idea.

Even if this argument doesn't fly with the overly nervous and on-the-verge-of-panic financial institutions, I still wouldn't worry and here's why: Congress, and the states are watching all that money being thrown around through Linden Lab and others. They are so itchy to get their hands into that pot that it's secretly driving them crazy with greed.

I have no doubt whatsoever that Congress is dreaming-up some kind of legislation to accomplish this goal. There is no way in hell that they will allow the Second Life or other virtual economies falter. There is simply too much money at stake. Especially with the huge numbers LL throws around with regard to the number of people and amounts of 'profit' being made in their spinning of public press releases.

At the very least, I see legislation whereas Linden lab will be required to report to the Internal Revenue Service the names and amounts earned of people who ever cash-out their credit from Linden Lab. Especially with all those shrill whiners and critics of LL who constantly proclaim proudly how they are making a living through Second Life and how it's their primary or sole income. I'll bet a penny to a dollar not a single one of them have voluntarily paid the taxes due.

Be careful what you say. Be careful what you wish for. Be very careful, people.

Congress already has had a 'virtual meeting' session inside Second Life. The whole secondary premise of the UIGEA and real purpose in my own suspicion is this: It provides a means to require all financial institutions to monitor all monies coming and going through the internet, from and where to and by whom, especially institutions like Linden Research and Second Life.

This is a prerequisite to getting the needed data in order to track you, specifically for the purpose of taxing you later. I would not be surprised to see in the news how some Second Life resident is being sued by the I.R.S. for tax evasion because they did not report the income received from Linden Lab, which they did not first put-into Linden Lab: a.k.a. profit.

Mark my words.
It's coming.

And when it does, it will be a bittersweet vindication for me, as I'll be just as frustrated, angry and completely pissed-off as all the rest of you. The difference with me is that I never cash-out my Linden Lab credit. That money sits there, paying my tier fees. The question is whether the greedy politicians will find a way to call that income, even though I never received it, but solely because it's in my name.

I await the day that the law will require Linden Lab to report all legal tender credit they owe you to the I.R.S. When that happens, 'big brother' will be a step closer to the big brother of George Orwell's Nineteen Eighty-Four.

Tateru's Report

This subject as referenced at:
Socially Mundane blog (Warning - vitriolic ranting here)

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