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.”

The company’s Terms of Use, which users must accept before playing any games, stated that virtual chips have no monetary value and cannot be exchanged “for cash or any other tangible value.” But the game platform contained a mechanism for transferring chips between users, which according to the Court could  be used to “cash out” winnings. Then, once users sell chips on a secondary market outside the game platform, they can use the app’s internal mechanism to transfer them to a purchaser. Based on this, the Plaintiff alleged that the game company profits from such transfers because it charges a transaction fee, priced in virtual gold, for all transfers, thereby facilitating the process of players cashing out their winnings.

This case reaches a different result than other cases that we have previously reported on here and here. However, based on the Court’s findings the fact here are somewhat different than those other cases. Nevertheless, companies in the social casino game space or that offer gamblification mechanics should seek advice on their business model to assess whether this case poses any risks.