BETCHA.COM ISSUE RESURFACES (Update)

13 February 2009

Appeal court rules it's not online gambling if the participants can renege on a bet

 

A case in Washington and Louisiana - states notorious for hardline stances on Internet gambling - resurfaced after two years this week with a favourable appeal court ruling, reports Techdirt.

The case involved an innovative online 'betting' site called Betcha.com, launched by a Washington state lawyer called Nick Jenkins back in 2007 and closed after predatory raids by police, egged on by the local gambling authority and a sting operation involving a single Louisiana State Trooper. Speculation at the time was that the Washington and Louisiana state authorities may have indulged in some collaborative enforcement designed to put the troublesome and defiant Jenkins out of business.

The irony, as always in American politics and government, is that Washington state benefits from taxation on almost every other form of land-based gambling....but back to Nick Jenkins and Betcha.com. His concept was that his person-to-person betting site fell outside the definition of "illegal gambling" because punters could renege on their bets...therefore removing the risk required in wagering. As Techdirt describes it: "...if you lost a wager, you could click a button saying "I refuse to pay."

The catch was that the site had a rating system, and if a 'gambler' reneged, it was likely to harm his or her rating, and others might refuse to bet against them in future. Betcha claimed that the presence of the renege button meant that it wasn't actually gambling, because the punter never actually had to bet any money.

The state of Washington not only disagreed with Jenkins's view, it took only a little more than a month before state authorities threatened the entrepreneur. When he refused to back down, and apparently at the request of Louisiana law enforcers who had mounted a one-trooper sting operation to establish 'wrongdoing,' Seattle officials raided the company premises, confiscating equipment and arresting employees, and making it practically impossible for the enterprise to continue.

Techdirt correctly comments that these official actions seem pretty extreme for what appeared to be a rather open question in the law.

Louisiana then asked for the cooperation of Washington state in 'extraditing' Jenkins and colleagues Josie Imlay and Peter Abrahamsen to face illegal gambling charges in Louisiana. Despite appeals for support by Seattle-residing Jenkins, Washington state Governor Christine Gregoire refused to set aside the extradition order, allowing this flimsy case to proceed. Jenkins and his employees then travelled to Lousiana to give themselves up and were subsequently released on bail and persuaded to enter a plea.

The case has some similarities with that of the then Sportingbet chairman Peter Dicks who in 2006 was detained on arrival in New York on a sealed warrant from Louisiana after state officials placed 'sting' wagers on the UK website. However, New York governor George Pataki refused to permit the extradition, and the case was eventually resolved through a $400 000 settlement with the Louisiana officials.

In the Betcha.com case there were hints of official collusion between the Washington State Gambling Commission and the Louisiana Special Gaming Enforcement Division after Jenkins took issue with the former over the legality of his Betcha.com site, which provided an online venue for mainly prop deals between individuals but did not itself offer gambling services.

Soon after the WSGC clash the site facilitated $35 in bets from a single Louisiana resident, netting the company a total of 70 cents on the transaction. The Louisiana resident was subsequently revealed as an undercover trooper with the Louisiana Special Gaming Enforcement Division (SPGED), taking part in a month-long joint 'investigation' conducted by the SPGED and the Washington State Gambling Commission (WSGC).

"The only customer Betcha.com had in Louisiana was the state trooper, and the transaction that the state trooper did at the obvious instigation of the [WSGC] netted Betcha.com $0.70," Betcha.com's lawyer Lee Rousso said at the time. "These are the facts; these are the undisputable facts. This was a misuse of government resources and government power."

Too late to save Betcha.com - now long closed - but perhaps forming a platform for personal claims against the authorities, the issue saw a conclusion in the appeal courts this week.

The court found that the Betcha founder was right all along; the presence of the renege button meant that the site was not a gambling site.

The court ruled: "Accordingly, there is nothing risked, which is the essence of both the common law and statutory definition of 'gambling.'"

So the Betcha.com founder and his employees were threatened, harassed, arrested, deprived of business property, thrown in jail, extradited to Louisiana and charged with gambling-related felonies that finally forced them to negotiate a plea bargain to be rid of the matter.

To quote Techdirt: "Way to go Washington State - you tossed a guy in jail for a completely legal web business."

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