Nick Jenkins’ Betcha (a peer-to-peer betting site, a.k.a. betting exchange or prediction exchange) was not aiding and abetting the transactions of illegal betting.
That’s what the Washington Court of Appeals has just ruled:
Because losers always had the right to click a button marked “I refuse to pay,” there was no guarantee that any money would actually change hands, the court said. “Accordingly, there is nothing risked, which is the essence of both the common law and statutory definition of ‘gambling,’ ” wrote Judge C.C. Bridgewater for the Court of Appeals Division II.
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PDF file of the court’s decision.
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Thanks to Deep Throat for the tip. 
And best wishes to Nick Jenkins. We wish we could re-connect with him.
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APPENDIX:
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Midas Oracle archives on Betcha
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Nick Jenkins’ LinkedIn profile
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An old news story about the Betcha case:
Washington State Gambling Commission investigators seized computers from a new Seattle-based Internet-betting site Monday, claiming the business violated the state’s 2006 online gambling ban — a contention the site’s founder strongly disputes. [...] “This is ridiculous,” Jenkins said. “I’m going to fight it. I don’t like the heavy-handed state coming down on entrepreneurs.” [...] “This is an honor-based betting platform,” he said. “How can you be gambling under a legal definition if you don’t have to pay when you lose?” [...] After assembling a team of investors and putting his own money on the line, he did a soft launch of the site three weeks ago, “to work on the bugs.” Soon after, he was contacted by the state. Two weeks ago, he explained his legal rationale to commission attorneys. On Friday, the Gambling Commission summoned Jenkins to Lacey to talk about his Web site. The meeting was quick. “They said shut it down or else,” Jenkins said. “I told them the law doesn’t apply to us. They said the law is a matter of interpretation.” The same day, Jenkins filed his lawsuit seeking to stop the state from applying the Internet gambling law to Betcha.com. The search warrant came three days after Jenkins and the state failed to reach agreement on the site’s legal status. He said the commission has lost perspective on which laws it should enforce and upon whom. “When you are a hammer, I guess everything looks like a nail,” he said.
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A 2007-circa legal analysis:
Law professor Tom W. Bell on Betcha.com.
Betcha.com recently began offering a U.S.-based, P2P, honor-based betting service. Its FAQ claims that Betcha.com avoids the reach of domestic state and federal anti-gambling laws because, “Unlike any other betting venue on the planet, Betcha bettors always retain the right to withdraw their bets . . . . Therefore, they are not ‘risking’ anything. No ‘risk;’ means no ‘gamble.’” Will Betcha’com’s hack of anti-internet gaming laws work?
Betcha.com has given that question a lot of thought. Its FAQ explains “(1) we spent thousands of man hours analyzing this and point and related ones, (2) our analysis encompassed U.S. federal law and the law of all 50 states, and (3) we are betting our very freedom that our analysis is spot on . . . .” As Betcha.com’s management realizes, however, even that effort cannot guarantee certainty; the quoted passage continues “. . . . [but] it isn’t as though some Almighty Power came down from the heavens and deemed us ‘legal.’ That’s not the way the law works.” (I have to think that Betcha.com’s founder, Nick Jenkins, wrote that bit. He describes himself as a “journeyman lawyer,” after all.)
Query whether Betcha.com can avoid the fate of the P2P betting service, BetBug.com, the owner of which at one time touted it as “the only legal way to offer online sports betting in the US.” Now, of course, BetBug has gone on hiatus, explaining that “[w]hile we continue to believe that BetBug’s true peer-to-peer software does abide by all major Federal gaming laws in the United States, the current legal environment seriously deters our chances of success.”
Betcha.com would doubtless argue that its honor-based payment system distinguishes it from BetBug.com. “If you don’t absolutely have to pay,” Betcha.com would explain, “it’s not gambling.” Note, however, that to say you don’t “absolutely have to pay” on a losing bet is not to say that you would risk nothing by so doing. To the contrary, you would risk seriously hurting the “Honor Rating” that Betcha.com assigns its users.
As Betcha.com’s FAQ explains, “A person’s Honor Rating is a measure of his trustworthiness on the Betcha Platform. Think of it as akin to a cross between a credit rating and a reputation score.” We might likewise analogize it to commercial goodwill—an asset that, while intangible, can be worth quite a lot. Someone with a poor Honor Rating on Betcha.com would, like someone with a low reputation score on eBay, effectively end up out of business.
The chink in Betcha.com’s legal armor thus lies in how authorities regard the Honor Rating. If they think it constitutes an intangible asset, one lost by customers who don’t pay off their bets, then Betcha.com might lose its gamble against the law. I’d regret that, naturally; we all lose when the law prevents us from peacefully disposing of our property as we alone see fit. But I have to say that, were I betting on legal hacks, I’d favor BetZip.com’s over Betcha.com’s.
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The copy of the original Betcha website:
Betcha.com is the world’s first honor-based, person-to-person betting platform. We connect people who like to bet. Betcha works like an auction site, minus the hassles and inventory. As a Betcha bettor, you: (a) offer and accept bet propositions on anything that comes to mind; (b) negotiate and counteroffer odds with would-be betting partners; then (c) settle your bets when the time comes — shipping, handling, and trip to the post office not required. For bettors who prefer to just place their bets and be done with it, we offer Pools. As an open, honor-based betting platform, Betcha is like an auction site, Las Vegas, a marketplace of ideas, and The Golden Rule — all rolled into one. [1]
Betting on Betcha offers several advantages over betting with a bookie or on an illegal offshore gambling site — not the least of which is that you aren’t limited to our odds, spreads and subject matters. And in contrast to gambling venues, we like to think Betcha does our bettors (and society) some good. About the only way Betcha resembles gambling venues is its requirement that bettors must fund their accounts to obtain betting privileges. [2]
Our founder [Nick Jenkins, a former lawyer], a non-gambler but eager social bettor (click here to view his blog, here to view bets he’s offering), conceived of Betcha as a place to meet other people who like a friendly wager (in his case, mostly wagers on the PGA Tour). Betcha is owned by Internet Community & Entertainment Corp., a privately-held corporation. We are located in Seattle, Washington and began matching bettors in June 2007.
[1] “The Golden Rule” refers to the idea that you should do unto others as you’d have them do unto you. It is the fundamental principle behind most of the world’s major religions. And while we aren’t here to push religion on anyone, doing well by others is a principle we’d like to see more of. (Read more about our social mission.)
[2] This requirement guarantees that your betting opponents actually have the money they bet. It also protects you from getting into financial trouble: unlike betting with your local bookmaker, you can never bet more than you have.
[...] It’s not run by shady characters in the Caribbean. Most online betting sites are run by expats hanging out in the Caribbean. Betcha’s location — out in the open, Seattle, Washington. It’s legal. Because betting on Betcha operates on the honor system, it does not meet the legal definition of gambling. No gambling — no orange jump suits.
There are two types of bets on the Betcha Platform: person-to-person bets — the ones where bettors bet at arms length against other bettors — and Pools, in which one host(ess) lets bettors take any of a number of positions on a given proposition.
Yes. There are at least five reasons why the Betcha Platform falls outside legal [prohibitions] against gambling. While most of them are technical legalese, one isn’t — it isn’t “gambling.” Although there are a few variations in [syntax] depending on the jurisdiction, the legal (and common sense) definition of “gambling,” at bottom, requires that you (1) risk (2) something of value (3) on the result of a future event beyond your control. Betting that doesn’t have all of these elements may be betting, but it isn’t “gambling” and, therefore, isn’t illegal.
You are already familiar with some betting that isn’t gambling. For example, if you run a race against a friend for $100, you control the outcome, so while you’re betting, you aren’t gambling. (Element [3] is not met.) When you make a handshake gentlemen’s bet for no money on a football game, you are betting, but not gambling, because nothing of value is at stake. (Element [2] is not met.)
Bets on Betcha are a third type. Unlike any other betting venue on the planet, Betcha bettors always retain the right to withdraw their bets and, for up to three days, not pay their losses. (Try that at a casino.) Therefore, they are not “risking” anything. No “risk” means no “gamble.” (This last reason, we think, is why mayors and governors can bet with impunity on the outcomes of Super Bowls and World Series and not get themselves arrested.)
Please note: This is our opinion only. Although (1) we spent thousands of man hours analyzing this and point and related ones, (2) our analysis encompassed U.S. federal law and the law of all 50 states, and (3) we are betting our very freedom that our analysis is spot on, it isn’t as though some Almighty Power came down from the heavens and deemed us “legal.” That’s not the way the law works.
Will bettors/speculators abide by an honor system?
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UPDATE: Nick Jenkins sends me the link to his earlier blog post…
[...] This one — an objection to the Betcha Platform from my oldest, dearest friend. Let’s call him Cole Sparrow. (Name changed to protect the innocent.) Mr. Sparrow, not an investor, informed me over a Christmas family dinner that no one will use Betcha because they’ll never know for sure whether their betting opponent(s) will welch on them.
Three problems. The first is that, as David Bunnell pointed out in his excellent “The eBay Phenomenon” (2000), they said the same thing about eBay — and then some:
The odds against the success of this venture would have seemed substantial back in 1995 ad 1996. The market for the sale of goods over the Internet, particularly through person-to-person trading, was new, and did not enjoy widespread acceptance. Buying something of [substantial] value, often sight unseen, from a total stranger thousands of miles away did not fall into the category of [natural] acts. Further, the growth of Internet use would have to continue if the auction market hoped to gain real size. And there was no assurance that it would. (Emphasis mine.)
Suffice it to say, these concerns of 1995-96 are concerns no more. Moreover, the p2p trading market caught on despite the fact that innocent parties in fraudulent trades usually end up out something real — their money. In the case of p2p betting, a stiffed bettor loses only something he never had in the first place — the win on his wager.
Second, most customers think there’s more to life than metaphysical certainty of, in effect, order fulfillment. For example, despite the fact that they may get stiffed by sellers, people still use eBay. Reason: it’s fun. If we do it right, Betcha will be fun, too. (Indeed, we view “fun” as our top selling point.)
Third: there are many places on the Betcha Platform where bettors can be assured they’ll get paid on a win. They’re called “Pools.”
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