Michigan Appeals Court Rules Loan for Bitcoin Gambling Not Enforceable

News | February 21, 2024 By:

On Thursday, February 15, 2024, the Michigan Court of Appeals upheld the dismissal of a lawsuit involving a disputed Bitcoin investment.

The case originated in Washtenaw County Circuit Court, where Kevin Thomas Vayko sued Jennifer Tanoury, claiming she failed to repay a $7,430 loan. Vayko said the money was provided “on the return guarantee of $28,000 via various Bitcoin ventures such as Bitcoin mining in addition to Bitcoin Casino winnings.” He argued the parties had a valid contract based on text message exchanges where Tanoury agreed to repay him after using the money for Bitcoin-related gambling.

However, the lower court granted Tanoury’s motion for summary disposition, finding Vayko failed to state a valid claim. On appeal, the Michigan Court of Appeals agreed that no enforceable contract existed based on the facts presented. The three-judge panel analyzed the text messages submitted as evidence and found they did not establish mutual assent or a meeting of the minds on essential terms like what each party was offering or promising in return.

In its ruling, the appellate court also noted that Michigan’s public policy rejects the enforcement of contracts related to gambling. The court pointed to a state law that voids “notes, bills, bonds, mortgages, or other securities or conveyances” if any part of the consideration involves gambling or reimbursing money used for gaming. Here, Vayko claimed only part of the funds were intended for Bitcoin gambling pursuits. But the Court of Appeals stated even partial gambling consideration runs afoul of the law.

The case highlights ongoing legal risks in the cryptocurrency space. Many early Bitcoin adopters financed their crypto holdings through high-risk investment schemes or paid others to mine on their behalf, with rewards to be shared. But without clear written agreements, it can be difficult to later prove the existence of a binding contract if disputes arise. Additionally, Bitcoin and other digital assets remain unregulated, so activities like using crypto for online gambling exist in a legal gray area. As the industry continues to mature, more definitive laws and regulations are needed to better resolve these types of contractual and consumer protection issues.

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