VIDEO GAMBLING
chips were not “things of value” and that no illegal gambling occurred. The trial court relied heavily on Big Fish Casino’s Terms of Use, which users must accept before playing any games, stating that virtual chips have no monetary value and cannot be exchanged “for cash or any other tangible value.” However, the Ninth Circuit noted that the existence of the transfer mechanism and an associated secondary market for such chip allowed players to effectively “cash out” their chips into fiat currency. Further, the court noted that Churchill Downs profits from such transactions because it charges a transfer fee on all transfers of virtual chips. The Ninth Circuit, in reversing the trial court, held that the virtual chips were indeed “things of value.” The appellate court found that because the chips are necessary for the privilege of playing the games within the Big Fish Casino, such that winning chips enables a user to play for free and running out of chips requires a user to purchase more, they are “things of value” because “they extend[ed] the privilege of playing the game without charge,” even though they “lack[ed] pecuniary value on their own.” 6 It is important to note that the Ninth Circuit’s opinion did not rely on the player’s ability to redeem points for money or merchandise. Quite the opposite in fact, as the court rejected this argument by finding that Big Fish Casino’s Terms of Use expressly prohibited the sale or transfer of the virtual chips. Value in an unauthorized secondary market did not matter to the court; instead, it was the value within the gaming environment through extended game play which was the crux of the illegal gambling analysis by the court. As a result of its determination that the virtual chips were “things of value”, the Ninth Circuit found that the Big Fish Casino constituted illegal gambling under Washington law, and therefore the value of the virtual chips lost was recoverable under the Washington Recovery of Money Lost at
Gambling Act. The court also distinguished this ruling from Mason, Double Down, and Soto v. Sky Union, LLC 7 , based on the differing statutes and definitions across states. 8 More recently, class action plaintiffs and attorneys have taken aim at the distributors of either virtual currency or gaming applications. In Taylor v. Apple, Inc., 2022 WL 35601 (N.D. Cal. 2022), appeal dismissed in part, WL 18635795 (9th Cir. 2022), and appeal dismissed, No. 22-15237, 2022 WL 18777162 (9th Cir. 2022), named plaintiff Taylor sued Apple on the premise that her son was induced to spend money on loot boxes 9 in the game Brawl Stars, which her son downloaded from the Apple Store. Specifically, Taylor alleged that her son bought virtual currency sold by Apple, which he then spent on loot boxes, which Taylor alleged were legally equivalent to slot machines under California law. It is worth noting that virtual currency could be spent on other virtual items within the game as well. Ultimately, the court determined that the loot boxes themselves were not per se illegal, and that all Taylor’s son purchased from Apple was virtual currency, which he received. In Coffee v. Google LLC, 2022 WL 94986 (N.D. Cal. 2022), Plaintiffs downloaded the games Final Fantasy Brave Exvius and Dragon Ball Z Dokkan Battle from the Google Play Store onto their mobile devices. Plaintiffs alleged that they “purchased virtual coins with [real] money to buy chances on loot boxes and lost property in the form of the virtual coins they used to buy chances on loot boxes,” asserting various claims under California law based on their contention that loot boxes are illegal slot machines. Id. The Coffee court, similar to that in Taylor, found that the plaintiffs got exactly what they paid for. 10 Furthermore, the court determined that loot boxes are not slot machines because they do not award a “thing of value” under California law, quoting Taylor. 11 The court also took judicial notice of the Google Play Terms of Service prohibiting the sale or transfer of any in-app content
6 Kater, citing Bullseye Distrib. LLC v. State Gambling Comm’n, 127 Wash. App. 231, 110 P.3d 1162 (2005). 7 159 F.Supp.3d 871 (N.D. Ill. 2016) (applying California law), discussed in the prior article.
8 Similar cases have been settled on the same arguments and holdings applying Washington law, e.g., Wilson v. Huuuge 944 F.3d 1212 (9th Cir. 2019); Wilson v. Playtika, 349 F. Supp. 3d 1028 (W.D. Wash. 2018); Reed v. Light and Wonder, 2021 WL 2473930 (W.D. Wash. 2021) and 18-cv- 0565-RSL, (W.D. Wash. 2022). 9 Loot boxes are generally randomized chances within the game to obtain important or better weapons, costumes, or player appearance or other in-game items designed to enhance gameplay. 10 The court also reiterated that virtual currency is not a good or service under the California Consumers Legal Remedies Act, a common holding. 11 “Finally, the allegations of the complaint further fail to show that the games violate the Penal Code because the loot boxes do not offer players a chance to win “a thing of value.” Plaintiffs insist that the loot boxes contain items that are of significant subjective value to those who play the games and purchase them. While that undoubtedly is true, the lack of any real-world transferable value to the items takes them outside the mean- ing of the statute.”
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IMGL MAGAZINE | APRIL 2023
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