Analysis | Wins Big

12 February 2009
The Court of Appeals of the state of Washington -- the state that makes it a felony to play poker on the Internet -- just ruled that gambling is not gambling if the loser is not required to pay the winner.

The case started in 2004, when Nick Jenkins came up with the idea for

Here’s how the Court of Appeals described it: “ is the creation of its founder and CEO Nicholas Jenkins. Jenkins conceived the honor-based betting model in 2004, and launched the site three years later after he researched its feasibility under Washington law and consulted a gambling law expert.”

I think that gambling law expert was me.

Nick and I exchanged lots of e-mails and phone calls, although I never gave him a formal legal opinion. Nick was a lawyer, having practiced with one of the leading law firms in Los Angeles. So he was able to do a lot of the legal research himself.

Still, it took him three years to get off the ground.

And then it only flew for a month. opened its website to the public on June 8, 2007. Two weeks later, agents from the Washington State Gambling Commission visited Nick in his Seattle office. The Commission had concluded that was engaged in “illegal professional gambling” and they told him to stop all operations, return all fees it had collected from its customers, and get legal counsel. Two weeks later, the Commission served Nick with a formal cease and desist letter.

On July 9, 2007, the Commission raided's headquarters. They seized the company’s computers and documents. Nick notified the commission that he had shut down the company's Web site, and filed suit.

Since there were no facts in dispute, there was no need to have a full trial. So, both and the Commission moved for summary judgment, arguing that they were entitled to win as a matter of law.

Washington state statutes define gambling as " . . . risking something of value upon the outcome of a contest of chance . . . upon an agreement or understanding that the [winner] will receive something of value. . . " if he wins.

But with, winners might not get paid, because losers were not required to pay losing bets. Over and over again, made it clear on its Web site that it was an honor system: is a person-to-person betting platform . . . For legal reasons, betting on Betcha is done on the honor system -- bettors who pay build their reputations (called "Honor Ratings"), bettors who don't may find it tough to get action in the future.

The FAQ page included the question: “What if the person I'm betting against doesn't pay?” The Answer: “You are basically out of luck.”

“A losing bettor can decide that, for whatever reason, he just doesn't want to pay.” argued “there can be no understanding that a bettor will receive something of value where the website stresses that all bets are non-binding.” The Court of Appeals agreed.

The Commission argued the definition of gambling, that the winner “will receive something of value,” simply meant it happens after the bet was decided. The Court of Appeals said this was a possibility, but still wins.

Criminal statutes have to give notice to everyone of what acts are forbidden. This means words have to be easily understood, and not just by lawyers and writers of dictionaries. If a word or sentence can be read two different ways, then the court is required to construe the language in the way that will favor the criminal defendant. This is known as the rule of lenity.

It’s possible the Commission could appeal the case to the Washington Supreme Court. But at least for now has won, proving that words, and laws, do matter.

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