Churchill Downs has filed a Petition For Rehearing En Banc, seeking to overturn the Ninth Circuit decision in the Big Fish case. As we previously reported, The Ninth Circuit Court of Appeals reversed a district court’s dismissal of a purported class action and held that a social casino game constituted illegal gambling under Washington law. According to the Court, all online or virtual gambling is illegal in Washington state. The panel held that the virtual chips extended the privilege of playing the game and fell within Wash. Rev. Code § 9.46.0285’s definition of a “thing of value.”

Churchill arguments include the following.

  1. The panel opinion has misinterpreted Washington State law to treat as gambling a wide variety of popular online video games that millions of people throughout the country play on a daily basis.
  2. The panel’s ruling already has had adverse consequences for businesses offering such games and the individuals who play them – shortly after the panel issued its opinion, five class actions were filed against various companies offering online video games in Washington.
  3. The district court correctly rejected the claim that the online video game at issue here constitutes gambling under Washington law. The court held, consistent with the interpretation of the Washington State Gambling Commission, that the video game does not meet the prize requirement to constitute gambling under Washington State’s Gambling Act, Wash. Rev. Code (“RCW”) 9.46.0237, i.e., that a person receive something “of value. ” The district court correctly concluded that the virtual credits for additional playing time within the game, referred to as “virtual chips,” do not meet the statutory definition of “thing of value,” RCW 9.46.0285, because they have no monetary value outside the game, and because use of the virtual chips within the game, regardless of how acquired, results only in “the amusement that accompanies continuing to play a game that is already available to play for free,” not a pecuniary gain to the user.
  4. The panel, however, reversed and adopted a contrary interpretation, with scant statutory analysis, that pays no heed to fundamental principles that govern a federal court’s interpretation of state law. The panel summarily rejected as too informal the interpretation of the Washington State Gambling Commission. And the panel misconstrued state law in a manner fraught with potential adverse consequences given that the state gambling statute, Chapter 9.46 of the Washington Revised Code, imposes liability on gambling activities in a number of different circumstances under both civil and criminal law.
  5. The Washington State Gambling Commission has interpreted the state statute for years in a manner that conflicts with the panel’s interpretation. Since March 2014, information to guide the public and online video game providers about the scope of the state gambling law has been set forth in a Commission brochure entitled Online Social Gaming: When is it legal? What to Consider (March 2014). The brochure discusses the ever-expanding range of online video games, “from tending a farm to playing a soldier in combat,” and explains that games permitting users to buy in-game “virtual money, points, and other items” that cannot be redeemed for “‘real’ money or a prize” are “not gambling” under state law and therefore are legal. The brochure explicitly states that such games are “OK To Play”:
  6. Many in the industry hope and expects this decision to be overturned. If the request for rehearing is denied, it is not “game over.” The underlying decision was an appeal of the district court granting a motion to dismiss the lawsuit. This was not an appeal from a final decision following a trial on all of the issues. Should this case return to the district court, there are a number of additional issues that will likely be addressed.The Commission’s interpretation is wholly consistent with the stated purpose of the Washington Gambling Act, which is “to keep the criminal element out” of gambling, in particular “organized crime,” and to restrain “professional” gambling, but “at the same time,” to “avoid restricting participation by individuals in activities and social pastimes, which . . . are more for amusement rather than for profit, do not maliciously affect the public, and do not breach the peace.” RCW 9.46.010.