Online gambling activists fighting back in Washington

The state of Washington turned heads in June of 2006 by making Internet gambling a Class C felony, punishable by up to five years in prison and a fine of up to $10,000.

And that was just for the players.

After living with law for just over a year, gambling aficionados in Washington are beginning to fight back. Renton-based attorney Lee Rousso found the law so egregious that he's challenging it in court. Rousso, who would not say whether he continues to play poker on the Internet, says the law unfairly "makes (Internet poker players) look like criminals."

Nick Jenkins, meanwhile, was forced to shut down the wagering section of his two-week old startup, Betcha.com. While he hasn't been charged with anything, the 38-year Seattle native was told he could face up to 50 years in prison if he didn't stop users from making wagers.

Definition of gambling

"Gambling involves three elements: prize, chance and consideration (entry fee, wager, or anything of value). If one of these elements is removed, it is no longer a gambling activity. For example, if you pay a fee to a play a game of chance (such as poker, blackjack, bingo, roulette, craps, slots, etc.) for a prize, it is a gambling activity. However, if you play these games for free (no entry fee or wager) it is not a gambling activity and is okay to play on the Internet." – Washington State Gambling Commission publication on Internet gambling

When Betcha.com opened on June it offered a betting exchange, allowing users to make bets with each other, with Betcha.com charging a fee for the opportunity to list the bet. Jenkins contends that bets made between users on the site do not constitute gambling, since players are not obligated to pay their debts. The only drawback to welching on a bet would be negative feedback left by other users, which might make it more difficult to get other users to accept bets in the future.

"If they have the right to opt out of their losses, they're not risking anything," Jenkins said. "If they're not risking anything, they're not gambling."

The Washington State Gambling Commission felt differently, raiding Jenkins' Seattle offices and in effect shutting down the betting exchange just 13 days after it launched.

Jenkins has filed a lawsuit, seeking a declaratory judgment that the Web site's business model is legal.

Rousso, meanwhile, argues that the law violates the Commerce Clause, which states that Congress, and only the Congress, shall have the authority and power to regulate interstate and international commerce. The court would have to determine whether the law was protectionist, or created in order to protect local interests from outside competition.

"I think there are a lot of states that could pass a law making Internet poker a felony and they would have no Commerce Clause problem," Rousso said. "Here in Washington we have legal poker, we have legal Internet gambling on horse races, we have tons of legal gambling in Internet casinos, non-tribal casinos, card rooms, racetracks and lottery, so against that competitive environment, I think it becomes much more clear that this law is protectionist in nature."

Rousso's arguments may be valid, says Joseph Kelly, professor of Business Law at Buffalo State, but he might have a tough time getting the court to listen.

Risk to players

"Players gambling on the Internet, whether playing poker, slots or other gambling games, run a risk of a felony conviction. If players' names appear in an operator's seized records, the Gambling Commission would likely send the player a warning letter, notifying them that betting on the Internet is a felony. If a player's name appears again, charges may be filed. There is not an active campaign against regular players." – Washington State Gambling Commission publication on Internet gambling

"His problem is he hasn't been prosecuted," said Kelly. "Nobody's gone after him; nobody's confiscated his money, so therefore you can't show the injury in fact."

Rousso disagrees, saying that if he isn't playing Internet poker, the harm is that he's being deprived of his "Constitutional right to enjoy the fruits of the Commerce Clause."

And while Rousso and Kelly may disagree, they will likely agree that Jenkins certainly has suffered, as his computer equipment has been confiscated and his betting exchange shut down.

"Betcha should use some of the same arguments that (Rousso) is using," Kelly said.

Rousso has a hearing scheduled for Sept. 21 and believes that the court will reach a decision by early October at the latest. Jenkins also has a court date scheduled for his suit on Sept. 21.