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Peer-to-Peer Gambling Wins in the Washington Court of Appeals

Adding to the flurry of gambling news of late, the Washington Court of Appeals issued a decision today that found peer-to-peer betting company (betcha.com) did not violate Washington state gambling laws.  Access the decision here [pdf].

The Setup:  Betcha.com ran an “honor-based” system where users could sign up to bet with other users.  The terms of use expressly provided that the winner may not get paid, and Betcha offered no contractual assurance in this regard.  It did have a rating system under which users can be rated as to their propensity to welsh or pay.  The Washington gambling authorities got wind of this, ordered Betcha to shut down, and actually raided its operations, effectively shutting it down.  [1983 claim anyone?]  Betcha sued to obtain declaratory relief in Thurston County Superior Court (Olympia).  The trial court granted summary judgment for the state (the gambling authorities) and Betcha appealed.  In a 2-1 decision, Division II ruled in favor of Betcha.

Analysis:  Washington has in place a gambling statute.  A recent amendment (widely panned) regulates the dissemination of gambling-related information.  Whether Betcha violated these statutes depended on whether the underlying activity fit the definition of gambling.  (The information dissemination statute will likely be challenged later or separately on First Amendment grounds, if it has not already.)  The court ran through the gambling analysis and found that the Betcha activities did not fall under the statutory definition of gambling.  Why?  Because there was no “agreement or understanding that [the participants] will receive something of value in the event of a certain outcome.”  As the court noted, users who sign up to use the Betcha site agree that “all bets made on the website are non-binding.”

The state also argued that Betcha violated the “bookmaking” rules, which prohibit “the acceptance . . . [of] bets, upon the outcome of future contingent events, as a business or in which the bettor is charged a fee or ‘vigorish’ for the opportunity to place a bet.”  The court notes that it’s unclear exactly what the statute means when it says “accepts”—this could speak to accepting a bet as a player or stakeholder or as an intermediary (without having any interest in the outcome).  The court applied the rule of lenity and construed the statute against the state. Accept was construed to mean “take a position in the bet,” and since Betcha was an intermediary it did not fall within the statute.

The court runs through some other issues underlying the statute, but the net result is that Betcha is off the hook… for now.  Judge Houghton dissented, noting that in her view “the legislature did not intend that Betcha.com, while running its operation on foreign-based servers, could provide an unregulated platform for internet wagering that undoubtedly will result in unpaid wagers being collected through unlawful means.”

I’m guessing there will be a further appeal, but we’ll see.

By Venkat Balasubramani, Tech-Internet Lawyer at Focal PLLC

Follow Venkat on Twitter here.

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