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.

[Crossposted to Agoraphilia and The Technology Liberation Front.]

ABOUT BETCHA: I wish Nick Jenkins the very best.

BetBug (which billed itself as the “Kazaa of betting”, and thus thought that it was above the law):

Dear BetBug User,
It is with deep regret that BetBug has voluntarily chosen to stop publishing its peer-to-peer software and will stop populating the software’s wagering menu with events. The effect will be that users will no longer be able to use the software to find others with whom they can make personal and direct bets. As always, to process a withdrawal or other financial transaction, please login to your account at www.payp2p.com click on “Pay Out Money” and select the withdrawal method of your choice. Alternatively you can login to your BetBug application, click on “My Wallet” and select “Withdraw”. While 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. We hope to be able to reintroduce the software to the public at a later date.
BetBug Management

Previous: Nick Jenkins welcomes you to Betcha.com, America’s first person-to-person betting site.

UPDATE: Betcha.com’s Hack of Anti-Internet Gaming Laws – by law professor Tom Bell

Dear BetBug User,

It is with deep regret that BetBug has voluntarily chosen to stop publishing its peer-to-peer software and will stop populating the software’s wagering menu with events. The effect will be that users will no longer be able to use the software to find others with whom they can make personal and direct bets.

As always, to process a withdrawal or other financial transaction, please login to your account at www.payp2p.com click on “Pay Out Money” and select the withdrawal method of your choice. Alternatively you can login to your BetBug application, click on “My Wallet” and select “Withdraw”.

While 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. We hope to be able to reintroduce the software to the public at a later date.

BetBug Management

#1. John O’Malia, the BetBug founder, is a U.S. citizen.

#2. It was a special kind of betting exchange (real-money prediction exchange). All the payment administration business was outsourced to an offshore “escrow bank”.

“Another one bites the dust”, as the band Queen sang. (YouTube links: Video clip + Live at Wembley in 1986.)

Will TradeSports-InTrade, too, pull out of the US market? What is the real motivation behind the TradeSports-InTrade splitting up?