District Court Declines (Again) to Certify Double Down's Gambling Questions

BIG PICTURE

Sometimes the third time isn’t always a charm. In the third such motion filed by a casino game operator, the U.S. District Court for the Western District of Washington denies Double Down’s motion to certify gambling questions to the Washington State Supreme Court. In its order, the District Court specifically rejected Double Down’s attempt to lump gambling games in with the broader video game industry.

BRIEF CONTEXT

The plaintiffs in this case sued Double Down in April of 2018, alleging that Double Down’s casino game constitutes illegal gambling under Washington law. Double Down’s casino game involves virtual “chips” that may be purchased in the app after players run out of their free, initial allotment. Although players cannot redeem the chips for real money, the plaintiffs alleged that they nonetheless constituted a “thing of value,” for purposes of the gambling analysis, because they can be used to continue playing. As a result, the plaintiffs seek to recover the “money” they lost playing under Washington’s gambling loss recovery statute.

Double Down lost its bid, both before the District Court and the Ninth Circuit, to send the case to arbitration, bringing the fight about whether Double Down Casino involves “gambling” back to the District Court. In its order, the District Court observes that “[t]his is the third such motion that has been filed by a defendant in the many cases before this Court challenging casino-gaming apps; the wild card this time is the fact that Double Down, unlike those other defendants, never filed a motion to dismiss Plaintiffs’ claims on the merits.” This matters because the “presumption against certifying a question to a state supreme court after the federal district court has issued a decision does not apply here.”

MOTION TO CERTIFY

Double Down moved to certify six questions to the Washington Supreme Court:

1. Whether the sale of virtual items for use solely within video games that do not award or allow any real money or prize constitutes unlawful gambling under Washington law?

2. Whether the sale of a virtual item for use solely within video games that do not award or allow any real money or prize constitutes unlawful gambling under Washington law, where the user did not run so low on virtual items that he or she could not have continued to play?

3. Whether the in-app purchase of virtual chips on such websites is a ‘bona fide business transaction,’ and therefore excepted from Washington’s definition of gambling?

4. Whether offering a casino-themed video game is the type of ‘illegal’ activity RCW 4.24.070 prohibits, when the game offers no real money prize?

5. Whether a person who purchases virtual chips on such websites can bring a civil claim to recover amounts spent under the [RCW 4.24.070] or CPA?

6. Whether, when the Commission has advised that such websites do not engage in gambling and the Commission has taken no criminal or civil action to enforce the gambling statutes against such websites, civil actions by plaintiffs to recover under [RCW 4.24.070] and the CPA are precluded by the rule of lenity?

Double Down’s frequent use of the term “video games” rather than “gambling games,” especially as contrasted with the District Court’s phrasing, indicates Double Down’s desire to frame the issues as affecting the entire video game industry, instead of just gambling games. In its brief, Double Down uses phrases such as “Double Down’s games, like many video games…” and it writes about the video game industry generally, how it employs “94,200 Washingtonians,” how Washington “ranks third in the country in the total number of active video game developers,” etc., all in an attempt to blur the line between gambling games and regular video games.

Double Down’s gamble did not pay off, though.

CORE ISSUE

The District Court declined to adopt Double Down’s view of a broad impact on video games and instead concluded that the core issue involved was: “whether a casino-gaming app that does not award money prizes constitutes illegal gambling under Washington law.”

This narrow issue, of course, was already decided in Kater v. Churchill Downs Inc., 886 F.3d 784 (9th Cir. 2018) where the Ninth Circuit reasoned that virtual chips that extend gameplay are a “thing of value” under RCW 9.46.0285, making Big Fish Casino “gambling” under RCW 9.46.0237 and allowing the plaintiff to recover money lost purchasing chips under RCW 4.24.070. In Kater, the Ninth Circuit didn’t feel this issue was “substantial” enough to certify it to the Washington Supreme Court.

Here, Double Down failed to “suggest a persuasive alternative reading of the statute.”

DOUBLE DOWN’S ARGUMENT THAT THE BROADER VIDEO GAME INDUSTRY COULD BE IMPACTED

Double Down also argued (among many other things), that this decision could reach far beyond casino games and affect the mainstream video game industry as well. The District Court disagreed, finding that although “these issues have significant ramifications for companies that produce casino-gaming apps, it is far less clear that other video gaming companies could be affected.”

The District Court first reviewed Washington’s statutory language which limits the definition of gambling to “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.” The Court further observed that Washington defines “contest of chance” as “any contest, game, gaming scheme, or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.”

With those definitions in mind, the District Court distinguished gambling games from in-app purchases more generally:

There is a stark and obvious difference between Double Down’s games, which are 100% based on chance, and other app-based games that involve “micro-transactions” to continue play. No Washington court has interpreted the term “contest of chance” to encompass non-traditional gambling games without some form of betting. See Rousso v. State, 149 Wash. App. 344, 360 (2009) (holding that poker qualifies as a “contest of chance”). Of course, it is possible that future lawsuits will allege that more skill-oriented games also qualify as illegal gambling under Washington law. However, those cases would turn on a novel interpretation of RCW 9.46.0225, not RCW 9.46.0285’s definition of a “thing of value.”

In simpler terms, gambling games involve betting and normal video games don’t. This decision comes as a welcome relief to the broader video game industry which has watched anxiously at Double Down’s attempt to muddy the line between gambling games that involve betting and regular games with microtransactions.