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Three lawsuits in Washington state relating to social casino products have ended in settlements.
Two involved casual games developer and publisher Big Fish Games (BFG) and its current and former parent companies. A settlement for these cases was reached back in May and approved last month. The same district court judge, Ronald Leighton, approved the settlement for the third on Monday. The defendants in that case were Caesars Entertainment and third party content provider Playtika, which supplies its social slots product.
The allegations in all three suits were similar. The plaintiffs, who spent large sums of money playing the games, argue that they constitute illegal gambling. This argument hinges on the idea that the ability to play a game is a “thing of value.” Play money chips can’t be sold or redeemed for cash, yet if the game can’t be played without them, then the requirement to put them at risk in order to play could constitute gambling, as it is defined under Washington law.
BFG and its co-defendants Churchill Downs and Aristocrat Technologies will pay a total of $155 million to be distributed to players in proportion to their losses. Playtika, meanwhile, will cough up $38 million under similar terms. More importantly, however, the companies involved have all agreed to make changes to their products.
The changes to the products are twofold, and similar for both Playtika and BFG.
What’s interesting here is that there’s a subtle contradiction between the two changes. The latter is clearly an attempt to make sure the games do not meet the definition of gambling. If the user can continue playing without chips, the argument that they are a thing of value no longer holds.
On the other hand, the addition of a self-exclusion option is effectively an acknowledgment that the games are effectively like gambling on a psychological level, regardless of whether the stakes are real or imaginary.
It’s not surprising that these cases ended in a settlement. The products in question rely on fuzziness surrounding the definition of gambling, and the companies that produce them wish to preserve that ambiguity. As a result, such suits really only end in one of two ways. First, the defending company seeks to have the case thrown out of court. Failing that, it will settle, in order to avoid the possibility of a judgment that would undermine its business model in a larger way.
In the absence of a firm resolution, however, more such cases will keep popping up. The BFG suit played out over the course of several years, but a victory by the plaintiffs in the Court of Appeals for the 9th Circuit opened the floodgates for copycat suits against other companies. The Playtika case was one of these. Additional suits were filed around the same time in Seattle and Tacoma against three other companies: Double Down, High 5 Game LLC and HUUUGE Inc. These have not yet reached their resolutions.
US lawmakers have mostly stayed out of the fray so far. However, there were a couple of bills considered by the Washington legislature earlier this year which would have clarified the issues. These sought to create a carve-out for video games and would have put an end to such suits in the state. They didn’t receive much support, however, and COVID-19 soon derailed all but the highest priority legislative efforts, leaving the issue ambiguous for the time being.
All the suits mentioned above focus on social slots. However, these aren’t the only products that flirt with the boundaries of what constitutes gambling. The gray area is extensive and very lucrative.
Skillz Inc. is a company which facilitates esports competitions for mobile games, including ones with real money entry fees. It expects to have handled $1.6 billion in such fees by the end of the year. Skillz is facing a lawsuit in California and Nevada, alleging that its products constitute illegal gambling.
At the same time, however, it is in the process of going public via a special purpose acquisition company, Flying Eagle. That deal gives the company an implied value of $3.5 billion.
Meanwhile, Electronic Arts is fighting the latest in a series of battles over its use of loot boxes. These in-game purchases offer randomized rewards for players, such as new players for a sports team, or new weapons in a shooting game. Here too, the question hinges on whether these virtual goods constitute a thing of value, and thus whether their randomization equates to gambling.
These cases will likely end in either dismissal or settlement as well. Clarity on this issue is unlikely to come from the judicial system. Eventually, legislators will have to craft more detailed laws to cover these edge cases one way or the other. In the meantime, companies will continue to flourish in the gray area, treating legal settlements as simply part of the cost of doing business.