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.
About the Authors:
Jennifer Gaynor represents clients before the Nevada Legislature in Carson City, Nevada. She also practices before various professional and licensing boards and state and local tax authorities, and represents clients on matters involving First Amendment law, public records and open meeting law, gaming law and regulatory agency actions. In addition, Jennifer has been a guest lecturer on Gaming Law at the University of Nevada, Las Vegas, William S. Boyd School of Law. She is a frequent writer on gaming and regulatory matters. Jennifer may be contacted at 702-550-4462.
Kate Lowenhar-Fisher is a leading Nevada gaming attorney who counsels many of the world’s premier gaming companies on regulatory issues in connection with mergers and acquisitions, corporate restructuring, reorganizations and financings. She has extensive experience advising clients on issues related to Internet gaming, social gaming, fantasy sports, parimutuel products, liquor licensing, sweepstakes, contests, and promotions. She regularly represents individuals and businesses before regulatory agencies, including the Nevada State Gaming Control Board, the Nevada Gaming Commission, the Clark County Liquor and Gaming Licensing Board and the Las Vegas City Council. Kate may be contacted at 702-550-4459.
Greg Gemignani’s practice focuses primarily on intellectual property law, gaming law, technology law, internet law, online gaming law, and online promotions law. He has represented many clients ranging from the largest casino companies to start-up internet ventures. Greg is a member of the International Association of Gaming Advisors and the International Masters of Gaming Law. In addition, he is an Adjunct Professor at the University of Nevada, Las Vegas, William S. Boyd School of Law, teaching gaming law and gaming law policy courses. Greg may be contacted at 702-550-4468.
Jeff Silver’s practice focuses on every aspect of gaming, liquor licensing and regulatory law, as well as planning and zoning matters, contractor licensing and transportation law. He has testified before the Nevada Legislature and U. S. Congressional sub-committees on gaming law issues and has consulted on gaming regulatory matters in several jurisdictions. Jeff was the resident Las Vegas Member of the Nevada State Gaming Control Board during the state’s tumultuous period of developing regulatory oversight. He is a Member, Counsellor and former President of the International Association of Gaming Advisors. Jeff may be contacted at 702-550-4482.