In October 2023, Steve Horn, a Nevada resident, filed a class-action complaint in Washington’s federal court (Western district – Seattle), against the world-renowned eCommerce giant Amazon, citing that the latter profited from social gambling that he thought should not be legally and readily available to the public. In this class action suit, the parties noted that according to a US appeals court ruling from 2018, applications supplying social casino entertainment are illegal under Washington State law, as they constitute illegal gambling per Section 230 of the Communication Decency Act (CDA) of 1996.
Hence, that means that Amazon has been accused of playing a part in an operation that facilitated people from various corners of the globe to partake in casino-style gambling when they should not have been able to do so while in the process, this corporate behemoth raking in billions of dollars.
The parties suing Amazon in the class-action suit demand that the eCommerce juggernaut stop participating in social casino gaming and return the proceeds it earned through allowing this entertainment pastime. In total, thirty-four brands were named in this lawsuit, and the most notable of these are Quick Hit Slots, Black Diamond Technology, Jackpot Master, Lotsa Slots, Monopoly Slots, and Jackpot Party.
Among the documents submitted is an estimate that suggests around $6 billion worldwide gets wagered on social casinos, with Amazon taking a 30% cut from every bet on the apps it advertises. Hence, using these statistics, the allegations are that Amazon raked in $1.8 billion as a liable co-conspirator in a conspiracy running an illegal gambling enterprise.
The Latest State of the Law Suit
At the start of 2024, Amazon attorneys released a statement rejecting any liability in this case, refusing any culpability in conspiring with social casino app developers to run an illegal operation. As likely everyone from this part of the US knows, online casino status in Washington remains illegal, with no bill planned shortly, as much of the country remains firm against online casino gambling. Only seven US states allow this hobby to their residents, and those territories are Delaware, New Jersey, Michigan, West Virginia, Rhode Island, and Pennsylvania.
Amazon’s legal team believes that under the landmark ruling in the Barnes v. Yahoo! 2009 case, online platforms cannot be held responsible for the objectionable content third parties post on them. Thus, Amazon’s attorneys think this social gaming lawsuit has no merit. Reuters claims that in April of May 2024, the Ninth US Circuit Court of Appeals should look at similar cases regarding Google, Apple, and Meta. Because of this, Amazon states that litigation concerning this one should at least get put on hold until the US Circuit Court gives its opinion on the mentioned similar lawsuits.
Experts think the Communication Decency Act supplies apt legal protections for online software marketplaces. Nonetheless, there are doubts that it can save Amazon from possibly knowingly violating criminal law.
As noted, Amazon is asking a Seattle district judge to freeze this case until mid-2024, when rulings for the noted Facebook, Apple, and Google cases come down. It quotes the CDA, the part where this act states that – no interactive services provider shall be treated as a publisher.
The Apple, Facebook, Google Lawsuit
Similar to the issue Amazon is facing, Apple, Google, and Facebook also got hit with similar complaints years prior, as in 2018, the US Ninth Circuit Court of Appeals ruled that virtual chips were something of value and offering social casinos was the same as supplying real money gambling. The suit alleged that these applications utilize stimulating graphics and facilitate gaming behavioral prompts that can build a compulsion loop toward real money gambling down the line.
These three cases got consolidated in 2021, and San Jose’s California Edward Davila, a US District Judge overseeing these class actions, dismissed some of their claims but allowed others, certifying his decision for immediate appeal to the 9th US Circuit Court of Appeals while highlighting the need for clarity on whether platforms could get held liable for their actions in facilitating alleged illegal transactions for simulated gaming fun. The move was made to save time and resources for all parties, regardless of the court’s decision.
It is interesting to cite that in 2018, one of the land-based sector’s most respected machine suppliers, International Game Technology, which also operates in the digital sphere, encountered charges comparable to those of these three tech giants and Amazon. In that suit, initially brought upon by plaintiffs Mary Simonson and Adrienne Benson, IGT and its online subsidiary, DoubleDown Interactive, got accused of illegal gambling for supplying social gaming products at their DoubleDown Technology brand, again, under Washington law. The case (Benson v DoubleDown Interactive LLC) settled for $415 million and never went to court. Under the agreement, which became public in 2022, DoubleDown was obligated to pay a $145.2 million slice into the settlement fund, and International Game Technology contributed $269 million to the pile.
How Do Social Casinos Function
Social Casinos are primarily mobile apps delivering a wide range of games in the vein of gaming products found at land-based and online gambling venues. These simulate chance-based gameplay like the one found in slots, poker, roulette, blackjack, baccarat, and other games where operators have an edge over players. However, here, organizers make profits by selling ads to advertisers. Those third parties supply marketing banners that cannot target individuals under eighteen and may not promote monetary rewards.
Social casino gambling is allowed in many US states under sweepstakes law. Yet, these are not permitted in Michigan, Idaho, and Washington. That is somewhat surprising because Michigan legalized virtually all forms of online gambling in 2021, including Internet poker and casino games, which can be played remotely by anyone in Michigan.
Apps that supply social gaming do not require licensing, as they do not constitute gambling, given that no money gets wagered on games. Users purchase credits provided as an in-game currency and then get wagered on the casino-like software featured in these applications. Prizes won in these apps can be redeemed as gift card vouchers or more app credits. Customarily, these pieces of mobile software give away a sizeable number of free-play chips to users upon registration. They also provide daily chip dosages. Note that these can get quickly depleted by active users. Consequently, if those individuals want a decent shot of claiming advertised prizes, they will likely need to purchase more in-app currencies using their funds. The conversion rate of real money for virtual chips gets decided by developers and differs by app.