This paper deals with networked applications in the emerging field of online virtual worlds. Example applications include, e.g., Massively Multiplayer Online Computer Games (MMOG), networked e-learning, training and simulations, etc. Highly interactive virtual worlds bring a new security challenge: the multiple participants of such applications do not always show cooperative and intended behavior, but rather may act in an illegal way (cheating) which is harmful for other participants, thus intentionally or accidentally procuring illicit advantages for themselves. The paper studies the new challenge of cheating in virtual-world applications in three areas: a) system and application programming, b) economics, and c) law. The main contributions of our work are as follows: 1) We present a systematic classification of cheating threats in virtual worlds, and describe software solutions that help prevent them in future Internet-based applications; 2) We enhance the classical economic analysis of crime and punishment for applying it to virtual worlds; 3) We describe our development approach for networked virtual worlds and its implementation as the Real-Time Framework (RTF) which has been designed at the University of Muenster; 4) Finally, we explore the law aspects of cheating in virtual applications in the context of the legal system in Germany. The consideration of informatics aspects together with the corresponding problems of economics and law allows us to tackle virtual-world security in a holistic, systematic manner.