In Kater V. Churchill Downs, the 9th Circuit Court of Appeals has ruled that the ‘fun-to-play’ Big Fish Casino violates Washington state law. The panel’s decision, issued March 28 reverses a 2016 decision from a U.S. District Court Judge in Seattle.

Big Fish, which Aristocrat Leisure purchased from Churchill Downs earlier this year for about $900m (€754.2m) offers a variety of online slots, roulette, and card games that are played with virtual chips. Players are given a few free chips when they sign up, but they have to pay cash to get more if they want to continue playing when they run out. Players can spend anywhere from $1.99 to $250 when buying chips from Big Fish. Alternately they can wait for the game to issue more free chips.

Players are also able to transfer winnings to a ‘black market’ operating in violation of Big Fish terms of service where other players can buy the chips. The Big Fish app contains a mechanism for the transfers and the product charges transfer fees.

The unanimous decision by the court means that Big Fish must return to district court to face a proposed class action suit which began in 2015 when Cheryl Kater sued, stating that she had purchased and lost more than $1,000 worth of the chips. In order to seek recovery, she claimed that the virtual chips represented “something of value”. The appeals court agreed.

In his written opinion (pdf) Judge Milan D. Smith waxed dramatic: “In this appeal, we consider whether the virtual game platform “Big Fish Casino” constitutes illegal gambling under Washington law. Defendant-Appellee Churchill Downs, the game’s owner and operator, has made millions of dollars off of Big Fish Casino. However, despite collecting millions in revenue, Churchill Downs, like Captain Renault in Casablanca, purports to be shocked— shocked!—to find that Big Fish Casino could constitute illegal gambling. We are not.”

The decision was narrow and only addressed Washington state law where any form of online gambling is a felony, placing Kater in a precarious position. The lawsuit contends that Churchill Downs, through former subsidiary Big Fish Casino, violated Washington’s Recovery of Money Lost at Gambling Act (RMLGA); the Washington Consumer Protection Act, and enriched itself unjustly.

Aristocrat now runs Big Fish Casino globally alongside their Plarium and Product Madness social offerings. They acquired Plarium for $500m in October 2017 and now have the second largest social casino platform behind Double Down Casino, which IGT purchased in 2012 for about $500 million and agreed to sell to South Korea’s DoubleU Games for $825 million in 2017.

Appeals court says Big Fish Casino offers illegal gambling