Internet Community & Entertainment Corp. v. Washington State Gambling Comm'n

Citation: Internet Community & Entertainment Corp. v. Washington State Gambling Comm'n, 2010 WL 3432595 (Wash. Supreme Ct. Sept. 2, 2010).

Factual Background
Internet Community & Entertainment Corp., d/b/a Betcha.com was an “on-line, person-to-person betting web site” that charged a fee to connect users desiring to make wagers with one another. According to the site’s operators, Betcha.com did not engage in any illegal gambling activity because (1) Betcha.com was merely providing the forum for its users to make and accept bets, and (2) while users were expected and encouraged to pay losing bets, they were not directly required to do so by Betcha.com. Soon after its launch, Betcha.com was investigated by the Washington State Gambling Commission, which determined that the site was engaging in professional gambling. Betcha.com subsequently filed an action for declaratory judgment and injunctive relief, seeking a ruling that its operations did not violate state gambling laws. The trial court granted summary judgment in favor of the State. The Court of Appeals reversed the lower court’s decision based on the principles of strict construction and the rule of lenity but the State Supreme Court ultimately reversed and the site was shut down permanently.

Betcha.com users would deposit money into their online account in order to make wagers. Users were free to create, or accept, any type of bet that they could think of. Betcha.com would charge a fee for users to post these wagers and to accept them. Once a bet was lost, the losing user would have 72 hours to confirm acceptance of the loss. If the user accepted then Betcha.com would transfer the wager to the winning user less its fee. If the user rejected without reason then their “honor rating” within the Betcha.com system would decrease, which would be an indication to other users that this might not be the kind of person you want to make a bet with, but Betcha.com would not enforce any kind of rule requiring payment.

Trial Court Proceedings
The trial court ruled against Betcha.com in regards to five sections of Washington’s gambling act and held that Betcha.com was engaged in “gambling” as defined in RCW 9.46.0237, that Betcha.com transmitted and received “gambling information” under RCW 9.46.240, that Betcha.com engaged in prohibited “bookmaking” as defined in RCW 9.46.0213, that Betcha.com’s activities were illegal “professional gambling” as defined in RCW 9.46.0269, and that Betcha.com used “gambling records” as defined in RCW 9.46.217.

Appellate Court Proceedings
The Court of Appeals reversed holding that users had not “gambled” because there was no understanding that a user “would” receive something of value, only that it was possible if the losing user decided to honor the “bet.” The court further found the Washington Statute’s requirement of “accepting bets” to be ambiguous and held that Betcha.com did not engage in “bookmaking.”

State Supreme Court Proceedings
Under Washington’s Gambling Act, a person is engaged in “professional gambling” when:

(a) Acting other than as a player or in the manner authorized by this chapter, the person knowingly engages in conduct which materially aids any form of gambling activity; or (b) Acting other than in a manner authorized by this chapter, the person pays a fee to participate in a card game, contest of change, lottery, or other gambling activity; or (c) Acting other than as a player or in the manner authorized by this chapter, the person knowingly accepts or receives money or other property pursuant to an agreement or understanding with any other person whereby he or she participates or is to participate in the proceeds of gambling activity; or (d) The person engages in bookmaking.

Accordingly, a person can be involved in “professional gambling” if they are engaging in various forms of “gambling activity” prescribed by the Act, or if they engage in “bookmaking.” Under RCW 9.46.0213, “bookmaking” is the act of “accepting 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.” This is the definition that the Court of Appeals had ruled as ambiguous, holding that “accepting bets” had two reasonable interpretations: either as a player or stakeholder who takes a position in the bet or as a service fee from someone without an interest in the wager (as Betcha.com had acted). However, because the statute very clearly outlines two situations where a person or entity can be engaged in bookmaking, and one of those situations is charging fees for the opportunity to place a bet, the State Supreme Court ruled that Betcha.com was unambiguously engaged in bookmaking. Betcha.com also argued that it could not have engaged in bookmaking unless it was first engaged in gambling activity. According to its argument, the word “bets” necessarily implies “gambling bets” and that because its users were not required to honor bets made through the site, no gambling had taken place. The Court, however, found this argument unpersuasive, and noted that the bookmaking statutes only requires the charging of a fee “for the opportunity to place a bet,” and makes no reference there to “gambling” bets. Because the Court held that Betcha.com was engaging in bookmaking, it was also held that it was engaged in professional gambling. Similarly, the statute for transmission of gambling information only required the transmission of “any wager made in the course of and any information intended to be used for professional gambling.” As such, Betcha.com was also held to have transmitted gambling information by virtue of its acts of professional gambling and bookmaking. Finally, Betcha.com was held to have possessed gambling records as defined as “any record, receipt. ticket, certificate, token, slip or notation given, made, used or intended to be used in connection with professional gambling.”

Postscript
"Following the State Supreme Court decision Betcha.com’s site was removed and replaced with the following message from its founder, Nicholas Jenkins:

We regret to inform our friends and followers that the Washington State Supreme Court ruled that Betcha.com violated numerous provisions of Washington's gambling law. To cut to it, the Court ruled that Betcha engaged in bookmaking and that, accordingly, we engaged in professional gambling. This, even though (1) no one was actually gambling (the Court said that didn't matter), and (2) betting exchanges like Betcha are considered the chief competitive threat to bookmakers.

For those of you interested I've broken down the Court's opinion on my family blog. In my view the Court's opinion suspended basic rules of grammar, not to mention a bit of common sense. But the Court's word is final, and we are bound by its decision.

Five years of our lives, considerable investor capital, multiple trips to jail as fugitives from a state we'd never been in. Now, according to the state supreme court, Betcha was a professional gambling operation -- even though no one was actually gambling.

To our friends, investors and followers - I thank you for your support. It means more to me than I can put to words. We gave it our best shot, but there really isn't much more we could have done.

Nicholas Jenkins Founder Betcha.com"