Betcha.com's Hack of Anti-Internet Gaming Laws

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.

[Crossposted to Midas Oracle and The Technology Liberation Front.]