Fliff Inc, the operator of sports prediction games for entertainment, is facing a class action lawsuit in California for masquerading as a sportsbook.
California sports betting is not legal, but Fliff is a social sportsbook. It allows players to make picks on their favorite sports and redeem winnings for cash prizes without making a deposit.
The plaintiff in the lawsuit, Bishoy Neshim, claims he lost over $7,000 while using the Fliff app.
It may be a while before online sports betting in California is legalized, so what does this lawsuit mean for Fliff and other sweepstakes-model products in California? Let’s take a closer look:
Details of Fliff’s class action lawsuit
Neshim filed a complaint with the US District Court for the Central District of California on June 6, seeking $5 million in damages for himself and others similarly affected.
According to the plaintiff’s charge, Fliff’s social sportsbook does not meet the state’s definition of “sweepstakes” because the prizes it distributes are not dispensed by lot or chance. Rather, the company uses the sweepstakes model to entice customers with free Fliff Coins. Players are then lured into depositing US dollars before converting them into Fliff Cash.
“Fliff gives every user, regardless of local state, or federal law, the option to bet with ‘Fliff Cash’ which has a dollar-for-dollar equivalence to actual money and that can be withdrawn and wired directly to the users’ bank account. That’s the epitome of an online sports book,” the 18-page complaint says.
The lawsuit also calls for a cease and desist order to prevent Fliff from violating the federal Wire Act by offering its contests across state lines.
In California, sportsbooks are outlawed, following a vote in November 2022 in which Californians overwhelmingly voted against two propositions that called for the legalization of sports wagering. Had the propositions been accepted, they would have sanctioned retail sports betting at tribal casinos and horse racing tracks. In addition, online sports wagering would have also launched for the first time in the Golden State.
Neshim’s class action lawsuit claims that “Fliff facilitates the ability for California residents to make online sports wagers to win real money without any approvals, regulations, oversight, or taxing.”
Fliff is also accused of posing “to be a free-to-play operator of sweepstakes with the chance to play ‘sports prediction games’ for entertainment, while in the real world, alleged sports prediction games are nothing more than online sports gambling.”
Potential ramifications on sweepstakes-model products
The lawsuit could have potential wider ramifications for Fliff and other sweepstakes products in California.
Over the past few years, social casinos using the sweepstakes model have increased in popularity across the country. In states where residents don’t have access to legal real money online casinos, sweepstake casinos present the next best alternative. These platforms offer casino games with the potential to redeem winnings for cash prizes.
If it is determined that Fliff is in violation of California state law, social sportsbooks and sweepstake casinos could be in trouble. But for now, that remains to be seen.
The plaintiff is demanding a jury trial but that’s unlikely to happen. Most companies would rather settle out of court as opposed to having their business model legally challenged.
Fliff is required to respond to the complaint by June 28 or face court action. Representing Bishoy Nessim will be Dennis Stewart, the former trial attorney with the US Department of Justice Antitrust Division.
It’s also worth noting that Fliff’s legal woes aren’t limited to California. The company also faces potential legal action in Ohio where regulators are cracking down on unregistered sports betting and daily fantasy sports websites. Last month, the Ohio Casino Control Commission placed a number of free-to-play apps under investigation including Lucra Sports, Prediction Strike, TeamStake and Dynasty.
As of June 1, Ohio joined a string of other states where users can only earn Fliff Cash if their account balance hits zero or through a “no-cost giveaway” on social media. Players in these states may not earn Fliff Cash through real money purchases.