Sports-betting site engaged in gambling, Wash. SC says

By Jessica M. Karmasek | Sep 13, 2010


OLYMPIA, Wash. (Legal Newsline) - The Washington Supreme Court, in an opinion filed earlier this month, concluded that a sports-betting website engaged in professional gambling, reversing a decision by the state's Court of Appeals.

In an opinion filed Sept. 2, Justice Tom Chambers wrote that the Court found Betcha.com -- an online, person-to-person betting website that charges its customers fees for connecting them to other online users wishing to wager on various events, including sports or political contests -- in violation of the state's gambling act.

Under the act, a person is engaged in "professional gambling" when the person "knowingly engages in conduct which materially aids any form of gambling activity," if he or she "pays a fee to participate in a card game, contest of chance, lottery, or other gambling activity," if the person "knowingly accepts or receives money or other property pursuant to an agreement or understanding with any other person whereby he or she participate or is to participate in the proceeds of gambling activity," or the person engages in "bookmaking."

Bookmaking is defined as "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." "Vigorish" means a change taken -- as by a bookie or gambling house -- on bets.

While customers are expected and encouraged to pay their bets if they lose, Betcha, started in 2007, "specifically gives bettors 72 hours to elect not to pay a losing wager with another customer."

For a fee, registered Betcha users could post proposed wagers on the outcomes of certain events. "Offerors" were able to set the terms of the wager, including whatever stakes and odds they concluded were appropriate.

Offerors were required to first fund an account with a credit card to ensure they had enough money to cover their bets if they lost. Those accepting an offer to wager also were required to have enough funds in their accounts to cover the bets.

Once a bet was accepted, the website placed the wagered funds into escrow and froze the account, pending the outcome of the event.

Betcha earned money from these transactions by charging a fee whenever a bettor listed a bet, accepted a proposed bet, proposed a counter-offer to a bet, or posted an offer in a larger font size or more prominent location on the site.

Once a wagered event was complete, bettors submitted claims that they had either won or lost the bets or that the bets were "ambiguous" -- that there was no "meeting of the minds" when the bets were made.

The losing "bettor" had up to 72 hours after a winning claim was made to choose not to pay the loss. If no decision was made within those 72 hours, Betcha would transfer the money from escrow to the winning claimant's account. Every registered user on the website was given an "honor rating," and those who refused to honor their bets were given a low rating, indicating to others the trustworthiness of the bettor.

Soon after Betcha's launch, the state gambling commission met with the company's founder and principal, Nicholas Jenkins.

The commission found he was engaged in professional gambling and ordered him to cease operations, but Jenkins argued because the bettors are not compelled to pay their losses, they are not gambling.

Betcha then filed an action for declaratory judgment and injunctive relief, seeking a ruling that its operations did not violate state gambling laws. Both the company and the commission filed motions for summary judgment, which the trial court granted in favor of the state.

However, in a split decision, the state's Court of Appeals reversed that ruling. The appeals court instead held that Betcha users had not "gambled" because bettors did not have an understanding that they "will" receive something of value, only that they might, if the losing bettor decided to actually honor the bet.

The appeals court also held that Betcha did not engage in "bookmaking" because that crime involves "accepting bets," which the court found to be ambiguous and construed in favor of Betcha.

The Supreme Court, in its ruling, found Betcha was engaged in professional gambling because it engaged in bookmaking as the term is defined under the state's gambling act. The appeals court, they said, did not properly interpret the definition of bookmaking in its decision.

"Based on this conclusion, we further hold that Betcha transmitted 'gambling information' and used 'gambling records' as part of its business," Chambers wrote in the opinion. "The Court of Appeals decision on these issues is reversed, and summary judgment in favor of the state is reinstated."

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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