Nine-Figure Settlement Reached in Online Casino Suit
Nine-Figure Settlement Reached in Online Casino Suit
THE BIG PICTURE
One of the first cases addressing gambling in online games that have no monetary payout will likely end in a nine-figure settlement.
THE SETUP
Big Fish Casino, published by Churchill Downs, is a virtual casino where users can play games such as blackjack and poker using virtual chips. Players earn chips through gameplay or purchase more using real world money. In 2015, Kater, a player who lost over $1,000 worth of the chips, brought a class action lawsuit against Churchill Downs in the Western District of Washington, in part under Washington’s Recovery of Money Lost at Gambling Act (“WRMLGA”). The WRMLGA states:
All persons losing money or anything of value at or on any illegal gambling games shall have a cause of action to recover from the dealer or player winning, or from the proprietor for whose benefit such game was played or dealt, or such money or things of value won, the amount of the money or the value of the thing so lost.
Washington state defines a thing of value as:
[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.
The district court dismissed the case finding that the chips were not “things of value” because even though they allowed a player to extend play, overall the game could never result in any pecuniary gain to the player. In a 2018 ruling, the Ninth Circuit reversed the district court and found that all that was necessary to qualify as a “thing of value” under Washington law was the extension of gameplay. Therefore, the chips satisfied that element. The Ninth Circuit remanded the case to the district court where Churchill Downs attempted, unsuccessfully, to compel arbitration (presumably to avoid having to defend a class action). Aristocrat Leisure Limited ("Aristocrat”) purchased Big Fish Games from Churchill Downs in 2018 and a second class action was filed to include the new owners.
SETTLEMENT
On May 24, 2020, Churchill Downs and Aristocrat announced that they had reached a $155 million settlement with plaintiffs, subject to the district court’s approval.
WASHINGTON GAMBLING GAMES
The Kater decision could have implications beyond free-to-play online casinos and in particular on video game monetization strategies. It spurred a number of copycat suits against other online casino-type operators. In one of those copycat suits before the same district court judge, the court stated that it’s unclear whether Kater would affect non-online casino games, because the gambling statutes relate to games “not under the person’s control or influence.” What is unclear is how, for example, a loot box system where one of the rewards was additional lootboxes would be treated. Additionally, in the aftermath of the Kater decision, a couple of bills have been introduced in Washington to exempt from gambling:
online games of chance when played solely for entertainment purposes with virtual items if such virtual items may be used only for gameplay and may not be, per the terms of service of the game, transferred, exchanged or redeemed for money or property
It seems to me the easier fix would be to remove the extension of play element from the definition of “thing of value.” Washington’s definition of “thing of value” is so broad that it was necessary to write an exception for pinball machines into the definition of “gambling device.”