A Ticket to Win: Are Travel Points a Thing of Value?

By: Abbey Block

With the end of summer drawing near, many American families may be hoping to book a last-minute getaway. Some of those travelers may be hoping to take advantage of credit card points to book their trips on the cheap. Credit card points have become a ubiquitous part of American capitalism – particularly those offered by airlines, often referred to as “travel points.” According to the Wall Street Journal, this summer’s travel season was “powered” by more than “$38 billion” worth of credit card-powered travel points.

Given the increasing popularity with which folks are accumulating and using these travel points, gaming companies may be wondering if there’s a way for them to get in on the action and asking whether their games could incorporate and award travel points, without running afoul of gambling regulations. At the risk of sounding too lawyerly, the answer to that inquiry is nuanced, and largely depends upon language of the state statutes governing gambling.

Generally, “gambling” requires three primary elements: (1) chance; (2) consideration; and (3) the award of a prize or a “thing of value.” An activity is typically not considered gambling if one of these three elements is missing. For example, sweepstakes are typically not considered gambling because people can participate for free – i.e., without providing “consideration.” Similarly, online social games or social casinos are generally not considered gambling because there is no “prize” awarded; rather, players receive only virtual coins or tokens that have no monetary value outside of the platform and cannot be cashed out or redeemed.

But some states have adopted a broader and more amorphous approach, expanding the definition of a “thing of value” to include not just prizes with redeemable monetary value, but also – for example – an “extension of a service or entertainment.”[1] By way of example, in a case out Georgia, Jenner v. State, the state’s Supreme Court held that a gaming machine which randomly awarded small metal tokens in addition to a package of mints, constituted a gambling device, even though the tokens had no monetary value and only provided for additional entertainment on the machine.[2] Similarly, courts in Kentucky have held that the award of free game play constituted the award of a thing of value.[3]

More recently, in the case of Kater v. Churchill Downs Inc., the Ninth Circuit considered whether a virtual chip – devoid of real-world monetary value – constituted a “thing of value” under Washington law, which defined the term as the following:

[A]ny money or property, any token, object or article exchangeable for money or property, or any form of credit or promise, directly or indirectly, contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge.[4]

The virtual chips at issue in Kater were awarded as part of a “Big Fish Casino” a “game platform that function[ed] as a virtual casino” in which users could play casino-themed games for the opportunity to win virtual “chips.” The chips could be used to continue gameplay on the platform, but could not be cashed out or redeemed for real-world prizes such as money or merchandise.[5] However, if a user ran out of virtual chips, they were required to purchase more chips in order to continue playing the games.

Overturning the lower court’s ruling to the contrary,[6] the Ninth Circuit concluded that the virtual chips constituted a “thing of value” under Washington law given that, “[w]ithout virtual chips, a user [was] unable to play [the] various games” on the platform.[7] The court explained that “if a user runs out of virtual chips and wants to continue playing [the games] she must buy more chips to have ‘the privilege of playing the game.’”[8] Thus, given that the chips provided users with an “extension of entertainment” the court concluded they constituted a thing of value under Washington law.[9]

But the Kater decision is certainly not the end of the story. Indeed, Kater’s ruling  appears to be an anomaly in a line of cases that reached the opposite conclusion. By way of example, in Mason v. Machine Zone, Inc., the District Court for the District of Maryland rejected the argument that the plaintiff suffered an “economic injury” when she lost virtual coins playing on an online gaming platform.[10] There, like in Kater, the virtual currency could not be redeemed for real world value or otherwise cashed out for use outside of the platform.[11] The court explained that because the virtual gold coins were used solely for “entertainment” on the platform, the plaintiff had not “lost” anything of economic value through her gameplay.[12] On appeal, the Fourth Circuit affirmed the lower court’s determination that a plaintiff did not “lose money” when she lost virtual currency while engaging in gameplay on an online gaming platform.[13]  Adopting the lower court’s reasoning, the court concluded that because the virtual currency could not be “easily converted to cash” and was not “authorized by a government as part of its currency” there was “no basis” to equate the virtual currency with “money”  as was required for liability under California’s loss recovery statute

Similarly, in the case of Coffee v. Google, LLC[15] the court considered whether virtual “loot boxes” constituted a thing of value under California law.[16] The loot boxes offered a chance to win virtual in-game items and features designed to “enhance gameplay or provide a competitive advantage.”[17] Loot boxes could be purchased with real money, but could not be cashed out or redeemed for pecuniary value outside of the gaming platform. The court concluded that because the virtual loot boxes lacked “any real-world transferrable value” they did not constitute a “thing of value.”[18] The fact that the players who purchased the loot boxes subjectively valued them did not alter the court’s conclusion.[19]

So where do travel points awarded by credit card companies fall on the spectrum? Like the virtual tokens and loot boxes contemplated in the cases above, credit card points are typically acquired incidental to or directly through monetary transactions – either as a “bonus” for making purchases with a credit card, or even purchased directly from the airline itself.   And generally, the travel points often have a direct cash equivalent; users can often toggle between “cash” mode or “points” mode, and decide to pay for their travel using either cash or points – i.e., 40,000 “miles” or to $400. To this end, if a user wishes to pay for a flight with points or miles, she must have a minimum balance in order to do so; and if she doesn’t have enough points or miles, she can often purchase more directly from the airline. But once those points or miles are purchased, they can’t be reconverted back into cash or used outside of the airline.

Indeed, anyone who has used travel points to book a trip knows they aren’t exactly a cash equivalent, and they certainly aren’t without their limits. For example, airlines may restrict the dates upon which you can use your points to book travel. Credits cards may also impose caps, limitations, and exclusions on when and how points can be earned and spent.  And generally, once the credit card points have been converted into “travel points” or “miles” there’s no way to redeem them directly for cash.

Thus, while travel points may have substantial practical value to consumers, that does not necessarily make them a “thing of value” for purposes of gambling law. Unlike cash or property that can be freely transferred or redeemed, travel points are subject to significant restrictions governing how, when, and for what they may be used, and they generally cannot be converted directly into cash. Moreover, they do not provide an “extension” of a service, entertainment, or the “privilege of play” as was the case in Kater.  They are simply a form of “virtual currency” that can be used only in the “universe” of the airline – i.e., for booking flights, upgrading seats, checking bags, or indulging in in-air snacks and beverages. In this regard, they are akin to the “loot boxes” contemplated by the Court in Coffee, given that they can enhance a consumer’s experience with the airline, but cannot be “cashed out” for use in the outside world.

While some states adopt a more expansive approach to defining a “thing of value” typically, the determining question is whether the “thing” is freely transferrable and capable of being redeemed for cash value. Because travel points are more of a “perk” than a redeemable or transferrable “prize,” they should not be considered a “thing of value” under the traditional legal frameworks governing gambling.

In an industry that is constantly evolving, finding new ways to excite and engage consumers is more important than ever.  Gaming companies may find it advantageous to get creative by partnering with airlines or credit card companies to integrate these travel “points” into new or existing online games. Blending the gaming industry with the travel industry seems like a promising way to invite consumers to hop aboard and take their gameplay to new heights!

[1] See, e.g.,  Haw. Rev. Stat. § 712-1220; Ky. Rev. Stat. § 528.010(11).

[2] 159 S.E. 564, 565 (Ga. 1931).

[3] Steely v. Commonwealth, 291 Ky. 554, 164 S.W.2d 977 (1942).

[4] 886 F.3d 784, 787–88 (9th Cir. 2018).

[5] Id. at 785

[6] Kater v. Churchill Downs Inc., 2015 WL 9839755, at *3 (W.D. Wash. 2015) (“Here, extended gameplay does not satisfy the prize element because unlike with the game in Bullseye, Big Fish Casino is free to play and there is never a possibility of receiving real cash or merchandise, no matter how many chips a user wins. While the chips do allow users to continue playing the game, extended gameplay cannot result in any gain to the user, pecuniary or otherwise, aside from the amusement that accompanies continuing to play a game that is already available to play for free.”).

[7] 886 F.3d at 787.

[8] Id.

[9] Because the Kater court considered the meaning of a “thing of value” under Washington’s statutory language specifically, the court’s decision is not binding in other jurisdictions, even within the remaining states comprising the Ninth Circuit.

[10] 140 F.Supp.3d 457, 465 (D. Md. Oct. 20, 2015).

[11] Id.

[12] Id. (rejecting argument that plaintiff suffered “economic injury” because she was “not wagering with dollars; she was playing with virtual gold.”).

[13] 851 F.3d 315, 319 (4th Cir. 2017).

[14] Id. at 320 (virtual currency not considered “money” under the statute because it could not be “easily converted to cash” and was not “authorized by a government as part of its currency.”).

[15] 2022 WL 94986, at *1 (N.D. Cal. Jan. 10, 2022).

[16] Id. at *12.

[17] Id.

[18] Id. at *13.

[19] Id.