Nick Jenkins, the founder of a person-to-person Internet betting exchange called Betcha.com, scored a huge victory when a Washington state appeals court ruled 2-1 Tuesday that his site was not a gambling operation. The ruling overturned a 2007 decision by a lower court that said Betcha.com's activities amounted to professional gambling.
"Because Betcha.com customers agreed in advance that participants were not required to pay their losses, Betcha.com was not engaged in "gambling" as defined in the Gambling Act," wrote Judge C.C. Bridgewater in the majority opinion. "Also, the listing of bets for a fee was not 'bookmaking' because bookmaking rests upon Betcha.com engaging in 'gambling.'"
The judge also wrote that since users the Web site were required to "acknowledge and agree" that all bets made on the site were "non-binding" bettors could not have an understanding that they would "receive something of value" if they won.
"Accordingly," the ruling read. "There is nothing risked, which is the essence of both the common law and statutory definition of 'gambling.'"
The court's strict adherence to the definition of gambling doesn't come as surprise, says Buffalo State business law professor Joe Kelly.
"Criminal law must be strictly interpreted in favor of the accused," Kelly says. "Any ambiguity is resolved in favor of the accused."
Judge David Armstrong concurred with the majority opinion, while Judge Elaine Houghton wrote the dissent.
Houghton's dissent was unusual in that she indicated that the majority opinion was the type of ruling she would typically favor.
"I respectfully dissent from my colleagues' decision that allows Betcha.com to operate as it intends," Houghton writes. "And although, in my usual judicial course, I follow the majority's cited statutory construction principles, I cannot do so here."
Houghton's chief argument is that that the Washington legislature never intended for any unregulated gambling to take place in the state of Washington. And allowing Betcha.com to operate violated the spirit of that law.
"Certainly the legislature did not intend that Betcha.com, while running its operation on foreign-based servers, could provide an unregulated platform for Internet wagering that undoubtedly will result in unpaid wagers being collected through unlawful means," said Houghton. Most certainly this is not the result the legislature intended when it set forth its strong declaration of public policy against unregulated gambling. Thus, I dissent."
Kelly said he was surprised at the language used at the end of Houghton's dissent.
"That the criminal element can get involved in something like betcha.com is a bit bizarre," Kelly said.
Jenkins launched the patent-pending Betcha.com in June of 2007 as the "world's first honor-based betting exchange." The site allowed users to register, provide a credit card number and open an account. They would then find other users interested in wagering with each other on anything – including sports, politics or even the weather. Bettors, however, were not obligated to pay when they lost.
"We hope they will, of course," the Betcha.com Terms of Service stated. "Not because they have to, but because they should. In any case, bets made on Betcha carry no term, express or implied that winning bettors will be paid when they win."
Betcha.com charged fees for placing bets based on how much money was being wagered. It was Jenkins' claim that since nobody from Betcha.com actually accepted real money bets and the bets were "non-binding," the operation was legal.
But the Washington State Gambling Commission (WSGC), disagreed. In July of 2007, Jenkins' office in Seattle was raided and agents warned Jenkins to shut down his site. Jenkins responded by filing a lawsuit against the WSGC hoping to receive a court order saying the site was legal.
The next month, Jenkins and two of his employees - Josie M. Imlay, 24, and Peter M. Abrahamsen, 25 - were charged with breaking Internet gambling laws in the state of Louisiana after a Louisiana state trooper, acting with the Washington State Gambling Commission, accepted four bets.
In October, Jenkins and his two employees surrendered and voluntarily flew to Louisiana where they were charged and booked for illegal gambling by computer. Jenkins spent four days in jail before working out a deal with prosecutors to drop the case if he complied with certain conditions.