The Ninth Circuit Court of Appeals will soon consider the question of whether free slots and social casino games equate to illegal Internet gambling. The lawsuit also alleges that companies providing a platform for players to access such games are complicit.
Judge Edward J. Davila of the US District Court, Northern District of California issued his ruling on Sept. 2. He dismissed two out of the plaintiff’s three claims. On the third, however, he felt there was ambiguity in the Ninth Circuit’s precedent and that “reasonable minds could differ” on how it applies. Therefore, he invoked a provision allowing a trial court to refer a case directly to the court of appeals.
The case should appear in the Ninth Circuit’s docket within a week. It will have an obligation to review the case, though it could choose to dismiss it. Either way, we should know within a month whether the appeal will proceed.
Davila heard oral arguments in the class action on Aug. 4. The plaintiffs alleged Apple, Google, and Meta “violate various state consumer protection laws by distributing game applications (‘apps’) that operate as social casinos and thus permit illegal gambling.”
In the meantime, Davila has stayed the underlying case. If the appeals court dismisses the case, it will proceed with one of the original three arguments still in play.
Davila summarized the case as follows:
Players must buy virtual chips from the Platforms app stores and may only use these chips in the casino apps. It is this sale of virtual chips that is alleged to be illegal. Plaintiffs neither take issue with the Platforms’ universal 30% cut, nor the Platforms’ virtual currency sale. Plaintiffs only assert that the Platforms role as a ‘bookie’ is illegal. Plaintiffs therefore do not attempt to treat the Platforms as “the publisher or speaker” of third party content, but rather seek to hold the Platforms responsible for their own illegal conduct — the sale of gambling chips.
Sports betting in California is the subject of an upcoming referendum, though real-money online casino gaming looks to be a long way off.
Free Slots May Not Pay a Price
While this class action lawsuit alleges the free slots, bingo, card games, and craps are “illegal,” the complaint deals with actions by Apple, Google, and Meta.
That may mean that even if the app stores have to pay the price, the social casinos themselves won’t. However, losing their distribution platforms would be at least as damaging as any direct financial penalty.
For the public, though the fact that the app developers aren’t defendants may mean the issue comes up again. Players who claim to have been victimized by the social games have been taking developers to court for years. Each time, however, they’ve accepted settlements – often in the millions of dollars – rather than awaiting final court rulings. That means that the fundamental legal questions around this unregulated gray area have yet to be resolved.
In the meantime, these free slots and social casino apps reap the benefit of the billions Americans spend each year on such games. Before the court consolidated the case against Apple, Google, and Meta into one class action, the original complaint against Apple stated that US residents “purchased and gambled away” $6 billion in social casino virtual chips during 2020.
Davila’s Narrow Ruling
Judge Davila’s opinion focuses on Apple, Google, and Meta – not the free slots and social casino games in their app stores.
He says:
The requested relief is grounded in the Platforms’ own bad acts, not in the content of the social casino apps that the Platforms display on their websites.
To that end, he examined Section 230 of the Communications Decency Act (CDA).
Davila describes the act this way in his order to send In Re: Apple Inc. App Store Simulated Casino-Style Games Litigation to the appeals court:
Title V of the Telecommunications Act of 1996, Pub. L. No. 104-104, is known as the “Communications Decency Act of 1996” (the “CDA” or “the Act”). Its primary purpose was to “reduce regulation and encourage the rapid deployment of new telecommunications technologies.”
His 37-page order then summarizes precedents regarding how communications platforms handled everything from Nazi-looted art to rapists targeting would-be models.
What Social Casinos, Crowdsourcing and Terrorism Have in Common
The aspect of law Davila felt applied to this case involved two precedents. The first relates to Google, Meta, and Twitter’s handling of ISIS videos and posts. The second case was about an Airbnb-type home rental service, HomeAway.
Davila writes:
In Gonzalez, liability attached to Google’s action of funding terrorism in violation of the Anti-Terrorism Act. In HomeAway, liability attached to the website’s unlawful transactions for unregistered properties. Likewise, here, Plaintiffs seek to impose liability for the Platforms processing of unlawful transactions for unlawful gambling.
That’s where the judge notes that plaintiffs seek “relief” because of Apple, Google, and Meta’s “own bad acts,” not those of the free slots and social casino games.
Davila says:
Courts must look closely at the facts alleged and ask who is responsible for the charged, illegal conduct. Id. at 683 (“[T]he CDA does not provide internet companies with a one-size-fits-all body of law.”). Indeed, websites may not evade federal, state, and local regulation simply because they host third-party content. “Like their brick-and-mortar counterparts, internet companies must also comply with any number of local regulations concerning, for example, employment, tax, or zoning.”
At this point, Davila’s language becomes a lot more direct:
The data-driven targeting of consumers by big social-media platforms can hardly be compared to the Internet of 1996. Platforms like Facebook, Google, and Apple are more than mere message boards, they are creators of content themselves, and they should be treated as such.
To further emphasize his take on Apple, Google, and Meta’s data manipulations, he notes that the hundreds of free slots and social casino game apps don’t have access to the user data the platforms use for payment processing.
App developers only get that data from the platforms if they give it to them, he says.
So Apple, Google, and Meta are the companies using data in their algorithms to target free slots and social casino game players in their app stores.
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