One way to discourage racism on XBL would be to create immediate repercussions agains the person. In Halo, for example, if someone tells a racist joke have everyone go after that one person, even if it is in a team battle and they're on your team. This is unlikely to change their rasist attitudes, which is the true issue, but at least it should show them that it's unacceptable and will hopefully discourage them making racist remarks.
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