Federal Judge Decides: Big Fish Casino Offers Illegal Gambling

In what could prove to become a landmark decision with troubling connotations for the social games business, a federal judge in Washington state has ruled that social casino app Big Fish Casino constitutes illegal online gambling.

Judge Milan D. Smith from the Ninth Circuit US Court of appeals stated this week that the virtual play chips utilized in Large Fish’s Casino games can be regarded as as “something of value,” despite a lack of direct monetary worth, which indicates they can be classed as a gambling “stake” below state law.

Washington state defines gambling as “risking something of value around the outcome of a contest of chance or perhaps a future contingent occasion not under the person’s control or influence to receive something of worth within the event of a certain outcome.”

“Despite collecting millions in income, Churchill Downs, like Captain Renault in Casablanca, purports to be shocked – shocked! – to find that Big Fish Casino could constitute illegal gambling. We’re not,” wrote Smith in his ruling.

The Kentucky casino and racetrack operator Churchill Downs Inc bought Seattle-based Big Fish 3 years ago for $885 million. In 2015 the company was sued by one of its former players, Cheryl Kater, who claimed to have spent more than $1,000 on virtual chips at Big Fish Casino.

She claimed that the games violated a number of Washington state statutes, including the Recovery of Money Lost at Gambling Act (RMLGA) and the Washington Customer Protection Act.

In 2016, a U.S. District Court Judge in Seattle tossed the case, as judges have carried out with similar instances in other states. Smith’s surprise judgement this week reverses that ruling.

It is a choice that could have legal ramifications not just for social casinos but for all games that employ purchasable in-game virtual products and provide chance-based rewards.

“Without virtual chips, a user is unable to play Large Fish Casino’s numerous games,” reasoned the judge. “Thus, if a user runs out of virtual chips and desires to continue playing Big Fish Casino, she should purchase 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 with out charge. In sum, these virtual chips extend the privilege of playing Large Fish Casino.”

“We therefore reverse the district court and hold that because Big Fish Casino’s virtual chips are a ‘thing of worth,’ Large Fish Casino constitutes illegal gambling below Washington law.”

While Churchill Downs has not officially commented around the ruling, it has recourse to appeal and is likely to do so.

Judge Smith dismissed an additional claim by the plaintiff that players are able to “cash out” the virtual chips and sell them for genuine cash by transferring them to third parties.

Smith noted that these transactions are a violation of Big Fish’s terms and circumstances.

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