Another Gambling Case Over Online Virtual Coins Proceeds–Wilson v. Playtika
I blogged about Big Fish, who had a trip to the Ninth Circuit and was denied a bid to arbitrate claims against it based on its waiver of the right to arbitrate. As a follow up, I also blogged about the Huuuge case, where the same judge denied a bid to arbitrate claims against a gaming company on the basis of lack of affirmative assent to the terms. Today’s case involves gambling claims against Playtika, an Israeli company with services that look similar to Huuuge. It’s in front of the same judge. The ruling deals with a range of issues, including personal jurisdiction and enforceability of the terms of service, all of which the defendant Playtika loses.
The personal jurisdiction analysis is somewhat interesting, notwithstanding that it deals with personal jurisdiction. The court talks about the distinction between contract and tort cases, and characterizes this as a hybrid. The court concludes that Playtika has availed itself of the privilege of doing business in the State of Washington. The games rely on repeated coin purchases, so Playtika contemplated “future consequences” with Washington residents. The court says the result is the same if it applies a tort-based analysis. Playtika has constructive knowledge because it is aware that Washington residents purchase virtual coins.
Playtika argued that users had to litigate in Israel because they agreed to that forum via the terms of service. Playtika’s terms of service implementation is similar to Huuuge’s implementation in that users weren’t required to check the box indicating assent to the terms. Playtika’s terms suffer the same fate as Huuuge’s: they’re treated as legally useless. As to Playtika’s forum non conveniens arguments, the court says that Washington has an interest in enforcing its gambling statute to protect Washington residents, and there’s no guarantee that the alternate forum would respect these rights.
Substantively, Playtika challenged whether the virtual chips that players win are “things of value” under the Washington anti-gambling statute. Playtika noted that the complaint here alleged players can receive chips for free. (In the Big Fish case the Ninth Circuit noted it wasn’t considering the effect of players receiving virtual coins for free since this was outside the four corners of the complaint.) However, the court says the complaint against Playtika only alleges the “initial allotment” is free. Playtika also cited screenshots attached to the complaint showing the availability of free chips, but the court says at most the screenshots show players can receive “some additional coins.” The availability of additional coins in an uncertain frequency or quantity does not establish that the virtual coins aren’t “things of value.” The court adds that if free chips only allow for a “short” period of playing time, then “filling in the intervening time could be very expensive.” So even some amount of free chips may not be enough to take the virtual coins outside the definition of a “thing of value”. Playtika also claimed that the terms specify its players are not required to make any purchases and Playtika’s publicly filed financial documents indicate that only a small percentage of the players actually purchase additional coins anyway. The court says neither fact is germane to whether the virtual coins are a thing of value. Finally, Playtika also asks the court to disregard the Ninth Circuit’s Kater ruling as contrary to the position of the Washington Gambling Commission. The court declines, saying that it makes sense to follow the Ninth Circuit’s guidance in Kater, which already declined to consider a pamphlet put out by the commission.
The court also rejects Playtika’s argument that plaintiffs cannot recover because they are seeking to recover the value of “the thing . . . lost” which is precluded by the statute. The court also says that the games do not fall into the statutory exemption for a “bona fide business transaction”.
Is a settlement on the horizon as a result of the pronouncements of this court (and Kater)? As with the Ninth Circuit’s ruling in Kater, this ruling also rejects many of the game company’s arguments on the merits. The tenor of the court’s ruling is that the game mechanics fit squarely within the prohibitions of Washington’s gambling statute. The one ray of hope is a sentence from the ruling that if the virtual coins only serve to unlock higher levels of play, then they may fall outside the definition of “thing of value”.
The key unresolved question: how can an online game company can lawfully structure a game in a way to make money from selling virtual coins? Do the courts’ statements regarding the availability of free chips offer some glimmer of hope?
Citing to the position of the gambling commission is dicey. In Kater, Big Fish also sought the input of the gambling commission. The commission with one commissioner dissenting stated it took no official position, but nevertheless included a sentence in its ruling expressing overall concern with the effects of these types of games. (Here’s a link to the commission’s order re: Big Fish.)
I mentioned the Huuuge case (and its companion) above and in a prior post. Defendants in those cases have filed a notice of appeal. They will likely get a stay of the trial court proceedings since the rulings involved denial of a request to arbitrate.
Case citation: Wilson v. Playtika, 3:18-cv-05277-RBL (W.D. Wash. Nov. 20, 2018)