How The Ninth Circuit Big Fish Casino Decision Could Impact Online Free Casino Offerings Across The U.S.

by Dickinson Wright
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Dickinson Wright

Virtually every significant gaming operator in the United States has some form of “free to play” online casino offering. Because no purchase is necessary to play (no consideration) and no valuable prizes are offered (i.e., you cannot trade your free play credits for a comped hotel stay), these offerings have generally met with green lights from state gaming regulators.

Enter the Big Fish Casino decision: On March 28, 2018, the 9th Circuit Court of Appeals released an opinion that found the Big Fish site to be an illegal gambling game under Washington law.

If the Big Fish casino offers free play, how did this happen?

The Big Fish Opinion

Similar to most online “free-play” casinos, the Big Fish site uses virtual coins as the basis for game play. The virtual coins, which are issued for free at signup and replenished for free at periodic intervals, cannot be converted to money or valuable prizes through the Big Fish site. If a player runs out of virtual coins, the player cannot play games on the Big Fish site until the virtual coins are again replenished. As mentioned, replenishment occurs at various times for players with a zero balance, but players may also purchase virtual coins as a convenience rather than waiting.

The state of Washington, however, has a very liberal definition of “thing of value” for the purposes of consideration in gaming. Its state law defines a “thing of value” as:

[A]ny money or property, any token, object or article exchangeable for money or property, or any form of credit or promise, directly or indirectly, contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge.

Therefore, the Court held that the virtual coins were a form of credit involving the extension of a service, entertainment, or a privilege of playing at a game or scheme. The Court supported its opinion by stating that when a player ran out of virtual coins the privilege of playing was withheld; thus, the virtual coins had “value” because they allowed continued play and games could not be played when a player ran out of virtual coins.

Additionally, the Big Fish site allows transfers of virtual coins between players, with a transfer fee being collected by the site operator. This creates a risk of third-party markets where virtual coins can be sold for money. Such a third-party market was an indicator that the virtual coins had value, and the transfer fee collected by Big Fish supported such an argument.

Big Fish Aftermath

Following the Big Fish decision, many online free-play casino operators have blocked Washington State residents from their sites or changed the way their free-to-play sites operate. But with more Big Fish-style lawsuits pending – two more Washington State residents have filed lawsuits against free-play casino sites, including Double Down Interactive, Playtika, High 5 Games, and Huuuge Games – is that enough?

The Big Fish decision is not the first time that the legality of the free-play casino offerings has been tested. Over the years, there have been a number of regulatory and court opinions on the topic, with most courts and regulators finding that the games lack the elements of either consideration and/or prize.

As many gaming law scholars may know, there were opinions from the early days of coin-operated video games that held games like Pong, Asteroids, and Space Invaders to be gambling machines, because players paid to play and could win extra lives. Ultimately, courts moved away from viewing free lives or extended play as a valuable prize; however, such older court opinions remained apparently good law. Big Fish, however, is the first case in recent history where a court has found this to apply to an online free-play site.

Because gaming is largely governed by state laws, the Big Fish decision is, on its face, limited to the state of Washington. This means that blocking play by Washington residents is a good first step. Any companies that participate in the free-play casino space should also update their state-by-state legal research to reevaluate where the risks are highest (for example, which states have similar definitions of “thing of value” to Washington and/or case law where their courts have found free play to be a “thing of value”) and review their online game rules of play to help determine the best strategy to minimize risk.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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