The United States District Court for the Western District of Washington recently weighed in on the line between permissible unregulated social gaming and illegal gambling, suggesting some video game developers and publishers may have been dealt a better hand in the state of Washington than previously thought.
In Wilson v. PTT LLC, Plaintiff Sean Wilson brought suit against developer PTT LLC ("High 5 Games") under Washington's recovery of money lost at gambling statute ("RMLGS"), Washington's Consumer Protection Act, and for unjust enrichment, claiming High 5 Games' casino-style video games games constituted illegal gambling under Washington law. After litigation lasting the better part of two years, High 5 Games filed a motion to certify the following issues in the suit to the Washington Supreme Court:
- Are virtual coins used to play High 5 Games' casino-style games "things of value" when players can play the game in question without paying for any coins, additional coins can be obtained without payment, and coins cannot be converted to cash, redeemed for prizes, or transferred to other users?
- Does the in-app purchase of virtual coins constitute a "bona fide business transaction" explicitly exempt from Washington's definition of gambling?
- Is playing an online, casino-themed video game a type of "illegal" activity Washington's gambling loss recovery statute when the game offers no prize?
In its order denying High 5 Games' motion, the Court noted that High 5 Games had already raised the issues for which it sought certification in a motion to dismiss previously denied by the Court and that High 5 Games could not overcome the Ninth Circuit's strong presumption against certifying questions to a state supreme court after a federal district court has issued a decision upon them. Further, the Court noted that the core issue raised by High 5 Games (whether virtual coins were a "thing of value" under Washington's definition of gambling) had already been decided by the Ninth Circuit in Kater v. Churchill Downs. In Kater, plaintiff player of defendant's suite of casino-style video games (similar in nature and function to High 5 Games' own offerings) brought suit under Washington's RMLGS, alleging in part that the virtual chips offered by the defendant to play its casino video games constituted a "thing of value" sufficient to subject defendants' games to Washington's gambling law. There, the Ninth Circuit held virtual chips extending the privilege of playing a game constituted such a "thing of value."
Post-Kater, there has been considerable ambiguity surrounding the applicability of its holding outside of casino-based video games. However, the Court in Wilson offered a brief glimpse of clarity, suggesting in passing that "Washington's definition of 'gambling' only reaches '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....' Most games not derived from casinos involve some amount of skill and would thus be unlikely to meet the statutory definition."
While not a royal flush, the Court's statement offers some clarity to developers and publishers concerned about operating in Washington in a post-Kater world and doubles down on the notion that for operators of certain types of casino-style games, it may be time to cash out.
Originally published 2 May 2020
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