Lobby Group Created to Protect Phone Betting
Insiders from the Washington state gaming industry have launched a new lobby group that seeks to protect smartphone-based gaming from restrictive gambling laws. The organization, called Game on WA, is being led by former government officials and was created as a response to a growing call in Washington to class “social-games” as illegal gambling.
The organization aims to deter the state legislature and the gambling commission from applying current gambling laws to these popular games. If they are to be unsuccessful, it could spell trouble for the local industry, which hosts 400 companies including Microsoft and Valve and employs 23,000 people.
Washington has become a major hub for the social games industry over the last ten years, where it was left to grow without gambling-level regulations. This all changed when a federal appeals court ruling in 2018 determined that these special games, which see players bet with virtual tokens, should be classified as gambling activities, leaving the industry in limbo.
Now, civic leaders, industry experts, and tech executives including the former Governor of Washington are spearheading the Game on WA group, positioning themselves as free-to-play entertainment advocates. Kristina Hudson, the co-chair of Game on WA, has stated that if Washington becomes the first state to ban these games, it may create a “geofence” around Washington that would prevent the industry from thriving.
“With the legal status of online games in limbo, the companies are likely going to protect themselves by geofencing Washington state, so our players will no longer have access to the games that they have been playing,” she said. This was also reaffirmed by co-chair Michael Schutzler, who stated that,“a potential misinterpretation of Washington state’s gambling statute by a federal court could mean Washington residents will lose access to their favorite apps.”
“This has caused uncertainty in the industry. Not only does this uncertainty make it difficult to retain and grow our local companies, but it also makes it difficult to recruit new companies to the region.”– Kristina Hudson, Co-chair, Gem on WA
The latest publicly available estimates show that the social gaming industry generated over $3.8 billion in worldwide revenue in 2016, with an expected growth of 10 percent predicted annually.
The Legal Issue History
The ruling in question that determined that social gaming was gambling stemmed from a case against Big Fish Casino, a Washington-based game developer that has created a number of titles similar to slots, blackjack, and roulette. These games are powered by virtual chips.
Players can only participate in these games if they have these chips. While players can not cash them out for real cash, when these chips run out they have the choice to either wait for more free chips to replenish or they can buy more chips with real money.
The court case was an appeal on a verdict handed down by a district court in 2015 to plaintiff Cheryl Kater, who was suing Churchill Downs, the former parent company to Big Fish Casino. Kater claims she had spent over $1,000 on these virtual chips, which she assumed represented “something of value.”
While the District Court judge threw the case out at the time, 2018’s federal court ruling upheld that this wagering of “something of value,” which is a notable defining clause in state gambling law, meant that the games met Washington state legal requirement to constitute gambling. Since this ruling, numerous social games have been sued for potentially offering illegal gambling.
While online gambling lawsuits are quite common, in the past, gaming companies have always been cleared of any wrongdoing. The Big Fish Casino case was one of the first notable exceptions, with the decision mainly based around the aforementioned vague clause that is unique to Washington. As there are no federal laws governing online gambling, this matter can only be determined on a state-by-state basis.
Game on WA’s Battle
While the lobby group has set to work on influencing both government and public support for the industry, they will need to wait for a future legislative session to introduce a bill to safeguard social games in the state.
According to Heather Songer, public information officer for the Washington State Gambling Commission, it’s unlikely the legislature will address the matter in the next session, as the main gambling focus seems to be on expanded gambling. This includes the passing of a bill that seeks to allow sports betting at tribal casinos.
Shortly after the appeals court case, Big Fish petitioned the gambling commission to classify social gaming as its own activity and not gambling. “Our commissioners heard arguments from both sides at a public meeting,” explained Songer. “They decided not to enter an order. The main reason for their decision was not wanting to interfere with ongoing civil litigation.”