As of yesterday, Linden Labs no longer allows gambling or wagering.
Gambling is defined as any game that relies on "chance or random number generation to determine a winner", or relies on the outcome of real-life organized sporting events, and provides a payout or prize in either Linden dollars or any real world currency.
Games that are now verboten include baccarat, blackjack, craps, keno, poker, and slot machines. Casinos will have a hard time figuring out any way to stay open. Offering merchandise instead of lindens, and games of skill instead of chance might be one way, but will that draw avies like games of chance and the possiblity of winning oodles of lindens?
The policy goes into effect across the grid, regardless of where individual members reside in first life. I wonder if chips count as Lindens or real life currency.....
Blog entry: Wagering In Second Life: New Policy