Online Social Casino Was Illegal, US Federal Judge Rules

A computer with casino games

A popular social casino’s games constituted illegal online gambling under Washington’s laws, a US federal appeals court judge has ruled.  

In an opinion filed Wednesday, Judge Milan D. Smith of the Ninth Circuit of the US Court of Appeals reversed a district court’s dismissal of a class action filed by Cheryl Kater in 2015 against Churchill Downs, which then operated Big Fish Casino, before selling it in January of this year.

Kater claimed in her lawsuit that she had bought and lost more than $1,000 (£711) worth of virtual chips while playing at Big Fish Casino. A social casino can be thought of as playing casino games among friends via an online community or network.

What is a social casino?

Created by Seattle-based casual gaming company Big Fish Games, Big Fish Casino provides free-to-play versions of popular casino games, such as blackjack, roulette, and slots. While the chips don’t have any monetary value and can’t be exchanged for cash, they are needed to play between different games and can be transferred between users.

According to the appeal, if users sell their chips on a secondary “black market” outside of Big Fish Casino, the app can be used as an internal mechanism to transfer the chips to a buyer. Kater alleged that through this process the platform profited as it charges a transaction fee, priced in virtual gold, for all of the transfers. In other words, it “facilitates the process” for players who cash out their winnings.

Not only that but, if a person runs out of chips, they can either buy some more or wait until the game provides additional free chips. These can be purchased for prices ranging from $1.99 (£1.42) to $250 (£178). Users can also earn new chips as a reward for winning games.

Kater, who started playing Big Fish Casino in 2013, wanted to recover her lost chips, arguing that they represented “something of value” under Washington law. In 2015, though, Kater’s case was dismissed by a US District Judge in Seattle. The argument at the time was that, because virtual chips aren’t a “thing of value”, Big Fish Casino did not constitute illegal gambling.

What was the judge’s ruling?

Judge Smith has now reversed the 2015 ruling on the grounds that “virtual chips extended the privilege of playing Big Fish Casino” and that they fell within Washington’s law as a definition of a “thing of value”. In his opinion, Smith said that in the appeal they considered whether Big Fish Casino constituted illegal gambling under Washington law, adding that, despite the platform making millions in revenue, the platform “purports to be shocked to find that Big Fish Casino could constitute illegal gambling”.

But Judge Smith added: “We are not. We therefore reverse the district court and hold that because Big Fish Casino’s virtual chips are a ‘thing of value,’ Big Fish Casino constitutes illegal gambling under Washington law.”

The appeal adds that Churchill Downs’ argument that virtual chips don’t extend playtime, but only enhance it, fails, stating that a user needs the chips in order to play the various games that are included in Big Fish Casino. As a result, the appeal found that Kater can recover the value of her chips that she lost at the casino from Churchill Downs, the appeal read.

The ruling in favor of Kater could potentially open up the floodgates to other online gambling companies with lawsuits from players who want to recover their money that has been lost in the games. However, even though Kater was successful in this case, each US state will have a different statutory law in place and may not consider “free-to-play” games as illegal gambling.