Apple Sued in California Over ‘Illegal Gambling’ Social Casino Apps

Posted on: January 26, 2021, 04:24h. 

Last updated on: January 26, 2021, 10:29h.

Philip Conneller @casinoorgphilc Read More

Expertise: Gaming Business, Regulation, Tribal Gaming.

A lawsuit in California accuses tech giant Apple of facilitating illegal gambling and of violating state law, which bans slot machines.

The complaint claims that the company’s distribution of free-play social casino games via its app store is akin to the house taking a cut from gaming in a Las Vegas casino — except that Apple’s cut is higher. The distributor will make up to 30 percent on in-app purchases, the lawsuit claims.

“The result (and intent) of this dangerous partnership is that consumers become addicted to social casino apps, maxing out their credit cards with purchases amounting to tens or even hundreds of thousands of dollars,” claims the lawsuit, filed last Friday in the US District Court for the Northern District of California.

Apple says it operates a robust compliance policy with the jurisdictions in which it does business.

‘Ill-Gotten Gains’

Plaintiffs Donald Nelson and Cheree Bibbs say they have spent “at least $15,000 each” on social casino games, which ape Vegas-style slot machines using virtual chips. While chips are initially free, players are encouraged to make in-app purchases to acquire more when they run out.

They are incentivized to do this by the promise of hitting new achievements, such as leveling up and unlocking new games, for example.

Plaintiffs are seeking an order declaring Apple’s behavior unlawful, as well as damages in the amount of the losses suffered and “disgorgement of all of Apple’s ill-gotten gains.”

The use of virtual chips and the absence of a payout means there is much debate about whether social casino games can be said to constitute gambling in a legal sense. A near-universal definition of gambling is that it involves risking something of value on the outcome of a game of chance or a future contingent event not under the gambler’s control. That comes with the expectation of winning something of value.

Threat to California Games Industry

Over the years, social games companies have faced various lawsuits claiming illegal gambling, which were usually quickly shot down. That is, until March 2018, when a federal appeals court ruled that the virtual chips used in Big Fish Casino’s games constituted something of value. The court claimed the company had broken gambling laws in its home state of Washington.

Big Fish owner Churchill Downs and former owner Aristocrat were ordered to pay $124 million and $31 million, respectively, to settle the suit.

The ruling emboldened aggrieved former players to file lawsuits in various states where casino gaming is illegal, naming social game operators, as well as distributors like Apple and Google.

Like Washington, California is home to much of the world’s video games industry. An unfavorable verdict in this lawsuit  could have troubling repercussions, not just for the social games sector, but for any creator of mobile games that employ microtransactions and elements of chance.

Last year, the Washington state legislature introduced a bill designed to protect its video gaming industry from the wave of litigation that followed the Big Fish verdict.