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September 03, 2010
P2P Gambling Site is Illegal Bookmaker--Betcha v. Washington
By Eric Goldman
Internet Community & Entertainment Corp. v. Washington State Gambling Commission, 82845-8 (Wash. Sup. Ct. Sept. 2, 2010)
Betcha is one of those too-clever-by-half dot com ideas that practically beg VCs to roll the dice. Rather than allow illegal gambling on its site, Betcha styles itself as a P2P betting platform. Effectively, it is a messaging service for people making bets with each other, where Betcha charges the parties to talk with each other. Betcha also escrows the wager, but it allows the losing bettor to renege. Exercising that right, however, has bad reputational consequences that I suspect are tantamount to on-site seppuku.
From a realpolitik perspective, we all know what's going on here (i.e., illegal gambling). Betcha crapped out at the district court, but the appellate court reversed in a split opinion. Unfortunately, Lady Luck has stopped smiling on Betcha as the Washington Supreme Court reversed 9-0. I guess if you're going to lose, you might as well lose big. This makes me wonder: did any Betcha users make bets on the outcome of this case? Maybe someone other than the lawyers got lucky from Betcha's legal misfortune.
The court's opinion makes it clear that expansive anti-gambling laws leave almost no room for entrepreneurial yet legal Internet gambling enterprises. Here, Betcha is tripped up by the definition of "bookmaking," 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." This strikes at Betcha's model of charging the parties to communicate with each other regarding betting. The court is not swayed by Betcha's formalist argument that because the loser could renege on the bet, the wager did not meet the statutory definitions for gambling. The court says the bookmaking definition applies whether the bets are made for money or not.
The statute also restricts sending or receiving "gambling information." The court said that because Betcha was running a professional gambling site (under the statutory definitions), it also tripped over this definition. This confused me because this provision should be preempted by 47 U.S.C. 230, at least as applied to Betcha. The court says the "information on wagers and odds it received from its users must be presumed, under the plain terms of the statutes, as intended for use in professional gambling," but that goes straight into a 230 immunity. However, 230 wasn't discussed at all. Because this was only one of several legal problems for Betcha, a 230 immunity on this point would not have changed the outcome.
The court also said that Betcha illegally possessed "gambling records." It wasn't clear if this referred solely to user information or to Betcha's own business records, so I couldn't tell if 230 (also not discussed) would have been relevant.
With the court's expansive definitions of bookmaker, gambling information and gambling records, my not-so-creative mind could not easily think of any easy ways to circumvent the statute and legally run a P2P site enabling betting or gambling. However, I would love to see a more cogent discussion about the 230 overlay before reaching a definitive conclusion.
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