Linden Labs has announced that there will no longer be any gambling activities allowed in Second Life, citing the need for compliance with real world laws.

[UPDATE: Wednesday, July 25 4:47PM PDT] For those of you who find logging into the Knowledge Base to be sort of kludgy (and I know it is -- we'll find a better way!), I've pasted the text of the policy and FAQ below.

Several months ago we discussed the issue of gambling in Second Life (R) in a blog post, and at that time we let you know that we would no longer accept any classified ads, place listings, or event listings that appear to relate to simulated casino activity.

While Linden Lab does not offer an online gambling service, Linden Lab and Second Life Residents must comply with state and federal laws applicable to regulated online gambling, even when both operators and players of the games reside outside of the US. And, because there are a variety of conflicting gambling regulations around the world we have chosen to restrict gambling in Second Life as described in a revised policy which is posted in the Knowledge Base under "Policy Regarding Wagering in Second Life".

As you review this new policy, please remember that Resident compliance with real world laws has always been an integral part of our Terms of Service. We appreciate your cooperation with this policy, and your understanding that we believe this action is in the best interest of providing a successful Second Life service. Because this is an evolving area of law, we may continue to adjust and clarify this policy as we receive feedback from the community and from legal authorities, or as new regulations, industry practices and technology solutions come into effect.

Read The announcement here.