Big Fish Casino, the series of interactive social games once operated by Churchill Downs, was found to be “illegal online gambling” by a federal appeals court judge—at least under Washington state law.
On Wednesday, Judge Milan D. Smith of the Ninth Circuit of the U.S. Court of Appeals overturned a district court ruling that junked a 2015 case filed by Cheryl Kater against Big Fish Games’ then-parent company Churchill Downs Inc.
In her lawsuit, Kater claimed she bought—and lost—more than $1,000 worth of Big Fish Casino virtual chips. While they don’t have monetary value, the chips are required to be able to play in Big Fish Casino’s suite of games, which include slots, blackjack and roulette. If a player runs out of the chips, he will either need to purchase more or wait until the game offers free chips.
Kater wanted to recover the value of her lost chips, arguing that those chips represent “something of value” under the Washington Gambling Law. In 2015, a U.S. District Court judge in Seattle junked Kater’s lawsuit.
Smith, however, reversed the earlier ruling on grounds that “the virtual chips extended the privilege of playing Big Fish Casino,” meaning it fell under the Washington state law’s definition of a “thing of value.”
The Washington state law defined gambling as “the staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under the person’s control or influence, upon an agreement or understanding that the person or someone else will receive something of value in the event of a certain outcome.”
Based on this definition, Big Fish Casino constituted illegal online gambling, according to the appeals court.
“Without virtual chips, a user is unable to play Big Fish Casino’s various games,” Smith wrote in his opinion. “Thus, if a user runs out of virtual chips and wants to continue playing Big Fish Casino, she must buy more chips to have ‘the privilege of playing the game.’ Likewise, if a user wins chips, the user wins the privilege of playing Big Fish Casino without charge. In sum, these virtual chips extend the privilege of playing Big Fish Casino.”
With the reversal of the ruling, Kater’s case will be returned to district court for another round of hearings. Big Fish Games’ former owner Churchill Downs, which was named in the lawsuit, can opt to argue the case before an appeals court panel or straight to the U.S. Supreme Court. Churchill Downs sold Big Fish Gaming to Australian gaming technology firm Aristocrat Leisure Ltd. for nearly $1 billion in November 2017.
The results of this lawsuit could carry lasting impact to the social games market in the United States. If the final ruling favored the plaintiff, this could open up other online gambling companies to lawsuits from players who will want to recover what they lost in the games.
Smith pointed out that each state has different statutes and definitions for online gambling. In some federal courts, “free to play” games were not considered illegal gambling. However, in this particular case, the court “turns on Washington statutory law, particularly its broad definition of ‘thing of value,’ so these out of state cases are unpersuasive,” according to the federal appeals judge.
