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In the SCA (at least in my area) Live Steel is permissable given a couple of limitations. Weapons are required to be peace-bonded (as mentioned above), and you must CLEARLY announce when you are drawing live steel (different areas may have differents terms). Part of the reason for the acceptance of live steel is the fact that most SCA events are camping events, and a good knife is necessary, as it is during feast.
For swords and such, they accept the fact that SCA geeks will likely want to draw the weapon and show it off when someone inevitably asks...
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