Social Casino App Lawsuit Could Be Catalyst For Big Changes To Big Tech

Written By David Danzis on September 15, 2022 - Last Updated on September 21, 2022

A federal court judge in California delivered a partial win to social casino users who believe technology giants Google, Apple and Facebook-owner Meta should be doing more to prevent illegal gambling apps from appearing on their platforms.

While social casino apps and possible unlawful gambling practices are central to the case, the scope is much larger. The California court’s ruling could drastically alter Big Tech’s responsibility, or lack thereof, for content.

Clinton-era law provides cover for Big Tech

As part of a Sept. 2 consolidated decision on three class-action lawsuits, U.S. District Judge Edward Davila of San Jose ruled the digital platform providers could be held liable for their own conduct with potentially illegal third-party gambling apps.

Davila dismissed the other two complaints, agreeing with the defendants’ claims of immunity for third-party content under Section 230 of the Communications Decency Act of 1996.

However, the judge is asking a higher court to determine if his interpretation of the law and precedent is accurate. The 9th Circuit Court of Appeals must now decide whether to review Davila’s ruling.

Class-action suit could pave the way for legal action against tech titans

Ultimately, the legal decision may open the door for Big Tech companies to be held accountable for hosted content. In upholding the suit’s one complaint, Davila acknowledged that the origin of Section 230 “demonstrates a preference for immunity.”

He adds, though, that it “is not limitless.”

“This case involves controlling questions of law, namely whether the platforms are entitled to immunity for their hosting of the allegedly unlawful social casino apps,” Davila wrote as part of the 37-page ruling. “While the court believes it has followed the 9th Circuit’s precedent on this complicated question, the court finds that reasonable minds could differ as to the outcome.”

Social casino, DFS fall short of being labeled gambling

While legal gambling outlets are available to more Americans than ever, certain states do not permit online gambling.

California is one of them. That could change in November when voters will decide whether or not to legalize California sports betting.

In the meantime, gaming companies and app developers are filling the void by creating non-gambling products that resemble sports betting and online casino-type offerings.

Operators offering daily fantasy sports contests, peer-to-peer platforms and social casinos exist in a “grey area” outside of gambling laws. This is the case even though consumers are “betting” real money.

A federal court determined that DFS was a game of skill rather than a game of chance. Therefore, DFS did not constitute gambling.

Judge says social casinos function like real gambling parlors

After enticing users with free “chips,” social casinos prompt in-app purchases for additional chips. Wins cannot be cashed out, so the games do not meet the generally accepted definition of gambling.

In both design and play, social casino apps “function much like in-person gambling,” the judge wrote.

Davila noted social casinos are intended to replicate “an authentic Vegas-style” experience. As a result, they have the potential to be “extraordinarily profitable and highly addictive.”

“One important distinction, however, is that social casino developers have access to big data, which allows them to identify, target, and exploit consumers prone to addictive behaviors,” he wrote.

So, what does this have to do with Apple, Google and Facebook?

That is where “the Platforms,” as described in the suit, come into play, according to the court documents. The platforms in this instance are Apple, Google and Facebook.

Summarizing the class-action claims, Davila wrote:

“Plaintiffs allege that these social casino apps do not, and cannot, operate and profit at such a high level from these illegal games on their own…the Platforms ‘retain full control over allowing social casinos into their stores, and their distribution and promotion therein,’ and ‘share directly in a substantial portion of the gamblers’ losses, which are collected and controlled by the Platforms themselves.’”

He later concluded:

“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.”

An attorney for the plaintiffs told a Reuters columnist that should the 9th Circuit concur with Davila’s rulings, it will “provide a clear roadmap” for those seeking accountability from tech companies.

“This case puts at issue tens of billions of dollars lost by ordinary hard-working Americans, and Section 230 is one of the platforms’ primary defenses.”

Photo by Shutterstock / PlayCA
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David Danzis

David Danzis is a lead writer and analyst for CatenaMedia's network of Play sites, appearing on PlayNJ, PlayCA and PlayOH. He is a New Jersey native and an honors graduate of Rutgers University. As a newspaper reporter for the New Jersey Herald and Press of Atlantic City, David earned statewide awards for his coverage of politics, government, education, sports, and business. After years of reporting on Atlantic City casinos, NJ online gambling and sports betting, his focus is now on emerging gaming markets. David lives in NJ with his wife and two children. When not on the beach, golf course, or snowboarding, David enjoys watching his beloved New York sports teams — Yankees, Jets, Rangers, and Knicks.

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