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The House Loses at Churchill Downs Virtual Casino

By William Vogeler, Esq. on April 03, 2018 | Last updated on March 21, 2019

It was a classic case of illegal gambling, and it began with a classic movie line:

"I'm shocked, shocked to find that gambling is going on in here!" Captain Renault proclaimed in "Casablanca."

So quoted the U.S. Ninth Circuit Court of Appeals in finding that Churchill Downs has been running more than fast horses. Only the court was not surprised there was an illegal gambling operation at the track's "Big Fish Casino."

Fast Horses

For more than a century, Churchill Downs has been the premier location for thoroughbred racing. It is the site of the Kentucky Derby, the most famous horse race in the United States.

According Kater v. Churchill Downs Incorporated, it turns out the company also owns the site of an illegal gambling operation. It is virtual gambling at Big Fish Casino, which is owned by the Kentucky company.

Cheryl Kater lost more than $1,000 in virtual chips at the virtual casino, according to the complaint she filed in Washington federal court. A district judge dismissed her case, but the appeals court reversed.

"Because the virtual chips are a 'thing of value,' we conclude that Big Fish Casino falls within Washington's definition of an illegal gambling game," the panel said.

Big Fish

The Ninth Circuit also cut to the chase regarding damages. Under Washington's gambling statute, the court said, she can recover the value of the virtual chips from Churchill Downs.

She didn't lose a lot of money, but the attorneys bet on a class action and won. The company -- and similar game companies -- are still assessing the damage.

Churchill Downs purchased Big Fish Games for $885 million in 2014. It sold the games and casino three years later for $990 million.

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