Didn't Linden Labs provide a subsidy for Second Life users who built up areas of the world that attracted lots of users? The idea being to give people interesting things to do in SL without having to build content themselves. Inadvertently this created lots of gambling and strip clubs because this was an easy way of attracting people and earning your subsidy.
The subsidy (monthly lot population -> payout/discount) that danw is referring to happened many years ago now (2005? 2004? earlier?), long before they outlawed gambling. The lot-use subsidy DID result in a lot of casinos and 'strip clubs', but it also resulted in shops creating community events - weekly giveaway parties, etc.
While it can be argued that the subsidy resulted in some shady areas of SL, it should be noted that the massive decline in SL's popularity happened after they were removed, gambling was banned, age verification happened, etc etc. So it's hardly arguable that the subsidies killed SL.
