Social casino platform High 5 will have to pay $25 million to settle a class-action lawsuit, although an appeal is likely first.
A jury has ruled that High 5 Games must pay $25m in a class action lawsuit related to its social casino operations.
The case, filed under case number 3:18-cv-05275-TMC, was brought against the company on allegations that its online casino-style games constituted illegal gambling under state laws.
The lawsuit specifically targeted the business model of social casinos, which allow players to purchase virtual chips to continue playing, even though they cannot cash out real money winnings.
The central argument of the lawsuit was that High 5 Games’ monetisation system effectively constituted gambling.
Plaintiffs contended that even though players could not directly win money, they were required to spend real money to purchase additional virtual currency to keep playing.
Under Washington state law and other state regulations, a key component of gambling is wagering something of value on a game of chance.
The plaintiffs argued that virtual chips, even though they could not be converted into cash, still held value because they allowed players to extend their playtime. The court agreed with this interpretation, leading to the ruling against High 5 Games.
This case is part of a broader legal trend in which courts are scrutinising social casinos and other digital gaming platforms that utilise virtual currencies.
The lawsuit alleged that High 5 Games knowingly profited from addictive gambling behaviours while skirting traditional gambling regulations.
The company, like many other social casino operators, argued that its games were purely for entertainment and that players were not engaging in actual gambling since there was no way to cash out winnings.
However, the jury rejected this argument and found High 5 Games liable for its business practices.
Putting the social casino space in check
The ruling in this case has potential implications for the social casino industry. Over the past decade, social casinos have generated billions of dollars in revenue, primarily by selling virtual currency to players.
These games are popular because they mimic the experience of real gambling without technically offering cash prizes. However, several legal challenges have emerged as more plaintiffs argue that these games are essentially gambling under the law.
Some states, such as Washington, have already established legal precedents, finding that virtual casino games with in-app purchases can be classified as gambling.
Similar lawsuits have been filed against other gaming companies, and this verdict may encourage more legal actions from players who feel they have been misled or exploited by these platforms.
The decision could prompt social casino operators to change their business models, although that would most likely occur only through regulatory orders.
Beyond this specific case, the ruling could impact the broader gaming industry, including mobile game developers and other platforms that use in-game currency or micro-transactions.
If more courts begin to classify virtual currency transactions as gambling, companies may be forced to adjust their monetisation strategies to avoid legal consequences.
Additionally, regulators and lawmakers may take further action to clarify laws surrounding digital gambling, potentially introducing new restrictions or oversight for social casino operators.
High 5 Games now faces a decision on whether to appeal the ruling or comply with the jury’s decision.