Washington Federal Court Finds Social Casino Games Not Gambling
In late November, a federal court in the Western District of Washington dismissed a class action complaint seeking recovery of monies paid to a social casino game provider because the monies were lost to an illegal gambling operation. The court determined that the complaint did not state a plausible claim for relief because the provider did not award something of value (requisite prize element under definition of gambling), and therefore, the game was not illegal gambling under Washington law. As all of the plaintiffs claims were contingent on a finding of illegal gambling, the court dismissed the entire complaint. In addition to this conclusion, this decision was noteworthy because it reinforces the legality of monetizing social casino games, as long as certain criteria are met.
The class action suit claimed that under Washington state law, social casino games using purchasable virtual casino chips constituted illegal gambling. Therefore, under Washington's Recovery of Money Lost at Gambling Act (RCW 4.24.070) they should be allowed to recover the amount of the money or the value of the thing lost in the defendant's illegal gambling operation. Such recovery requires that there first be a finding that the defendant was engaged in gambling.
The arguments in this case focused on the prize element, and centered on whether or not the social casino service awards a prize constituting something of value. The plaintiff alleged that the virtual chips won in the social casino games had value even though they could not be exchanged for cash or merchandise, since the chips: (1) allow users to extend gameplay, and (2) can be sold to other users for actual money on a secondary market that the defendant facilitates and profits from.
As for their first contention that the chips allow users to extend gameplay the plaintiffs pointed to the definition of thing of value under Washington's Gambling Act (RCW 9.46.0285), which in pertinent part, includes anything involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge. The defendant (successfully) argued that the definition of thing of value was adopted after courts in Washington and throughout the county found that some businesses were attempting to circumvent anti-gambling laws that prohibited them directly awarding cash or prizes by awarding free plays that later could be exchanged for cash. Therefore, the focus of the analysis should not be on whether extended plays are awarded but whether those extended plays could eventually result in awarding cash or prizes.
Plaintiffs have appealed this decision to the 9th Circuit Court of Appeals. However, it is important to note that, in a separate action, the Washington State Gambling Commission came to the same conclusion.
For more information on this decision, social games or Lewis Roca Rothgerber Christie's interactive gaming services, please contact: Tony Cabot at ACabot@lrrc.com or Karl Rutledge at KRutledge@lrrc.com.
Gambling means: (1) staking or risking something of value (2) upon the outcome of a contest of chance or a future contingent event not under the person's control or influence, (3) upon an agreement or understanding that the person or someone else will receive something of value in the event of a certain outcome. RCW 9.46.0237; State ex rel. Evans v. Bhd. of Friends, 41 Wn.2d 133, 150 (1952) (all forms of gambling involve prize, chance, and consideration).