An unexpected ruling in a lawsuit against Big Fish, a leading social gaming site owned by Aristocrat Technologies, could change the world of social gaming completely.
In 2015, a player filed a suit against Big Fish, then owned by Churchill Downs, complaining that she spent more than $1,000 on the virtual chips offered at social gaming sites. Most sites give new players a certain amount of free chips that must be replenished when they are lost by either buying more chips or waiting until the social casino gives them more chips. The player complained that meant that the virtual chips are “things of value,” meaning her play in the state of Washington constituted online gambling, which is illegal in the state.
According to Washington state law, “the staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under the person’s control or influence, upon an agreement or understanding that the person or someone else will receive something of value in the event of a certain outcome.”
Judge Milan D. Smith of the U.S. Court of Appeals for the Ninth Circuit agreed, and pointed out that the way Big Fish set up the chip exchange was to encourage the player to continue to participate.
“The virtual chips, as alleged in the complaint, permit a user to play the casino games inside the virtual Big Fish Casino,” the appellate court ruled. “They are a credit that allows a user to place another wager or re-spin a slot machine. Without virtual chips, a user is unable to play Big Fish Casino’s various games.”
The player also complained that she could exchange her chips for real money on a secondary market, but the court rejected that argument because the Big Fish terms and conditions specifically prohibits that.
The ruling overturned a district court decision that ruled in favor of Big Fish.
Smith, however, was quick to point to the money made by Big Fish and other social gaming sites.
“Despite collecting millions in revenue, Churchill Downs, like Captain Renault in Casablanca, purports to be shocked—shocked!—to find that Big Fish Casino could constitute illegal gambling. We are not,” wrote Smith in his ruling.
“Without virtual chips, a user is unable to play Big Fish Casino’s various games,” the judge wrote. “Thus, if a user runs out of virtual chips and wants to continue playing Big Fish Casino, she must buy more chips to have ‘the privilege of playing the game.’
“Likewise, if a user wins chips, the user wins the privilege of playing Big Fish Casino without charge. In sum, these virtual chips extend the privilege of playing Big Fish Casino.”
The implications for the social casino industry would be huge it his decision is upheld. For years, the industry has insisted that playing at social casinos was not gambling, even though, as the judge pointed out, social casinos have become very lucrative for the operators (many of whom are casino operators or slot manufacturers).
Just the value of the social casino companies is an indication how successful they are. Aristocrat recently paid $990 million for Big Fish. Caesars sold Playtika, the leading online social gaming site, for $4.4 billion in 2016. IGT sold Double Down Casino for $825 million last year.
But if the sale of the virtual chips is deemed to be illegal gambling, the values of those companies could come crashing down.
