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Washington State comes down against online gambling

By J. DeVoy

Today, in a unanimous decision authored by Justice Tom Chambers, the Washington Supreme Court dealt a blow to online gambling.   Internet Community & Entertainment Corporation, doing business as (“Betcha”), has been under the scrutiny of the  Washington State Gambling Commission since shortly after its 2007 launch.  Now, the Supreme Court has ruled that Betcha’s services constitute bookmaking under RCW § 9.46.0213, and thus the site’s operations constitute “professional gambling” as defined by RCW § 9.46.0269(1).  The full opinion, Internet Community & Entertainment Corporation v. Washington State Gambling Commission, No. 82845-8, is available here.

This entire dispute centers around a unique characteristic of Betcha’s business model — losers are not required to pay their bets.  When signing up for an account at Betcha, subscribers were required to provide credit card information to provide sufficient funds to cover an offered bet.  For a fee, Betcha would post the bettor’s offer to its site.  If an offeror lost a bet, however, he or she had 72 hours to refuse to pay.  If the loser did not refuse to pay within that time, the money in his or her account would be transferred to the winner.  In order to keep serial losers from defaulting on bets, Betcha had an honor ranking, similar to eBay’s user feedback, which assessed how trustworthy other bettors were in paying for the bets they’ve made.  This honor ranking was determined based on the bettor’s repayment frequency, amount wagered, and number of bets made.

At the trial level, Betcha sought declaratory relief in the form of a court order finding that its site did not violate state gambling laws, as well as an injunction against the state’s prosecution of the site.  On cross motions for summary judgment, the trial court found that Betcha was engaged in gambling and bookmaking, that its activities constituted illegal “professional gambling,” it transmitted and received “gambling information,” and the site used “gambling records,” all of which are illegal.  The Court of Appeals, in a split decision, reversed the trial court.  By the Appeals Court’s logic, Betcha’s users had not gambled because they did not have an understanding that they would receive something of value for winning, as loser’s could back out of payment.  This created ambiguity as to whether Betcha was truly accepting bets as part of its business, and the Court of Appeals resolved this uncertainty in Betcha’s favor.

Today’s Supreme Court decision reverses that thinking in a few important regards.

First, Because Betcha was receiving fees for posting the bets – whether they were gambling wagers or not – the Supreme Court found that this constituted bookmaking under the RCW.  RCW § 9.46.0213 considers only the “opportunity to make a bet,” rather than whether the bet was paid or even a gambling bet upon which the loser is financially liable.  Even though bettors could back out of payment, Betcha still facilitated the making of bets on its website, and accepted fees for doing so.

Because this behavior constituted bookmaking, the court found that was engaged in “professional gambling” under RCW § 9.46.0269, and it did not have to reach the question of whether Betcha’s conduct was “gambling” under a broader definition.  Since Betcha’s actions were considered professional gambling, it was further held to have engaged in the transmission of gambling information, defined as “any wager made in the course of and any information intended to be used for professional gambling.” RCW § 9.46.0245.  Similarly, the Supreme Court concurred with the trial court’s finding that Betcha was in violation of the law for possessing gambling records in its business, which are defined as “any record, receipt, ticket, certificate, token, slip or notation given, made, used or intended to be used in connection with professional gambling.” RCW § 9.46.0253.

This first raises a surprisingly profound question: When is a bet a bet?  In Washington, apparently any wager is, which is a dangerous precedent that may be used by zealous District Attorneys to criminalize poker nights in smokey basements, or a justification for more insidious rights violations, such as home searches premised on ill-defined betting.  Depending on how liberally fees for the opportunity to place a bet are defined, you may want to tell your friends to leave the beer and pretzels at home the next time they come over for a game of cards.

Second, this throws online gambling back a step.  Betcha’s premise of not being required to pay for losing a bet – but possibly being shamed off the site for backing out of too many of them – was supposed to circumnavigate exactly these types of challenges.  Generally, money must be at stake for gambling to occur.  But now, as seen in Washington, the ambit of anti-gambling laws goes farther than the guaranteed transfer of money from one consenting party to another in a game of chance, but extends to all wagers, whatever the consideration.  Betcha’s situation is somewhat unique in that it required a fee for the bet to be placed, which is how it presumably covered its operating costs.  Still, criminalizing a fee needed to facilitate the non-monetary wagers of willing parties seems silly, and beyond the ambit of what gambling laws are supposed to be.

Coming back core principles of free expression and economic liberty, this is a violation of both in a way Betcha specifically tried to avoid.  While not all of its bets were gambling wagers that required a loser to pay, Betcha provided a service that allowed individuals to pass the time and perhaps expand one another’s knowledge with information germane to the wager’s subject, whether it was a political race, the next day’s weather, or some broader event.  Second, this is an interference with Betcha’s founders’ ability to earn a living through electronic commerce and to express themselves in a way that doesn’t resemble traditional gambling.  This raises serious concerns for membership organizations, message boards or other pay services where wagers are made even without the owners’ encouragement, as they too may be culpable for professional gambling.

This case was ultimately one of statutory interpretation, rather than a clash of morality.  Such a ruling is heartening to the moral warriors who seek to limit arbitrarily defined vices while ignoring their own glaring shortcomings, and may be promoted in other states as a means to stop or slow the spread of gaming.  For that reason, especially close attention should be paid to any revisions to state gaming laws or cases on the topic in the foreseeable future.

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