Meta Asks Ninth Circuit to Dismiss MDL, Says Virtual Chip Sales Are Just ‘Information’

Meta is asking the Ninth Circuit Court of Appeals to dismiss a case about whether platform providers can be liable for in-app purchases they facilitate between their users and third-party content providers such as play money casinos. The multidistrict litigation names Meta, Apple, and Google as defendants for their involvement with products like Double Down Casino, which recently settled a suit of its own. The question now is what sort of role these platforms played by allowing users to purchase chips for the games.

Whether or not the social casinos themselves are legal is an open question. The companies say their products are not gambling because the chips can’t be redeemed for cash. Plaintiffs in these cases have generally argued that the chips have value because the user needs them to keep playing and that the ability to play the game is a “thing of value,” legally speaking.

By settling such suits and adjusting the specifics of their product, Double Down and similar companies have avoided letting a court answer the question.

If Meta gets its way, this case might not even reach that point. Its legal team is challenging whether Meta and the other companies are valid defendants in such a case.

District Court Judge Edward J. Davila agreed with the defendants on two of three points. He dismissed the plaintiffs’ arguments regarding data sharing and advertising. However, he was less sure of the third issue: facilitating the purchase of chips. That issue is sufficiently complex that he took the rare step of referring it directly to the court of appeals rather than entering his own ruling.

Meta Claims Section 230 Protections

Meta and its co-defendants have argued that they benefit from protection under Section 230 of the Communications Decency Act. This bit of legislation stipulates that interactive service providers and their users are not liable for third-party content like a traditional publisher would be.

For instance, a newspaper could be responsible for defamatory letters that a human editor selects for publication. Conversely, it could not be sued for similar comments posted by visitors to its website.

A court can dismiss a case under Section 230 provided it meets three conditions:

  1. The defendant must be an interactive computer service or one of its users,
  2. The complaint must treat the defendant as the “speaker or publisher” of the content at issue, and
  3. The original creator of the content must be a third party, not the defendant.

Here, there is no dispute on the first and third conditions. On the second point, Judge Davila found that the data sharing and advertising roles were publisher-type tasks and ineligible for a lawsuit.

The only remaining question is whether facilitating the sale of virtual chips for a commission is a publisher’s role. That, in turn, may come down to whether the chips are just “information,” as Meta claims them to be, or another kind of product.

Parallels With HomeAway.com Case

Part of Judge Davila’s rationale for referring the case to the Ninth Circuit had to do with the precedent set by HomeAway.com, Inc. v. City of Santa MonicaIn that case, HomeAway and co-plaintiff Airbnb were challenging a city ordinance relating to the sort of short-term property rentals that form the basis of their businesses.

The district court and Ninth Circuit both upheld Santa Monica’s ordinance. Both courts did agree that HomeAway and Airbnb were not liable for listings posted on their sites. However, they found that the city was not treating the sites as publishers in imposing restrictions on their facilitation of the actual real estate transactions.

In other words, even if such a rental were illegal under municipal laws, there would be no problem with hosting the listing. However, the company would be liable if it acted as the middleman in such a deal.

To Judge Davila, facilitating these rentals seemed analogous to platforms acting as payment providers for virtual chip purchases. However, seeing that “reasonable minds could differ,” he sent the case straight to the Ninth Circuit in the name of efficiency.

Are In-Game Items ‘Information’ or ‘Product’?

Meta asserts that Davila erred in this interpretation. It claims that the chips, being purely digital, are nothing more than information and that selling them is more like publishing content than facilitating a real-world transaction.

The company’s lawyers go on to create a “slippery slope” style argument about the potential impact of ruling otherwise:

The district court’s reasoning has no logical stopping point and, if accepted, could threaten the availability of online content well beyond casino-themed games. Countless online services process payments for untold amounts of virtual content sold by third parties—for example, ebooks, podcasts, and newsletters. Because online services could be held liable if third-party content is unlawful anywhere it could be accessed, this end-run around Section 230 would allow fifty varying state regimes to dictate the availability of content everywhere given the “obvious chilling effect” of the “specter of tort liability.”

This means that there are potentially two interesting legal questions in play.

First, the Ninth Circuit must decide whether to dismiss the case. That decision could set an important precedent for other sorts of game publishers and their distributors. For instance, it appears directly relevant to the controversial issue of loot boxes when third-party platforms are involved.

If it does not dismiss the case, then the Ninth Circuit will need to examine the legality of the games in question. The defendants could end up settling, in which case the issue would remain unresolved. If not, however, the case could lead to an answer to the perennial question of whether virtual chips are a “thing of value.”

Philosophically, both questions are similar: They boil down to how “real” a thing can be if it exists only in the digital world, an important topic for this century.

About the Author

Alex Weldon

Alex Weldon

Alex Weldon is an online gambling industry analyst with nearly ten years of experience. He currently serves as Casino News Managing Editor for Bonus.com, part of the Catena Media Network. Other gambling news sites he has contributed to include PlayUSA and Online Poker Report, and his writing has been cited in The Atlantic.
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