Facebook Sued as Alleged Co-Conspirator to Social Casinos

Following suits against Apple and Google, three consumers filed a class-action complaint Friday in the Northern District of California against Facebook for its purported continued participation “in an illegal internet gambling enterprise.”

The plaintiffs claimed that over the past 10 years, slot machine makers “have teamed up with American technology companies to develop a new product line: social casinos.” According to the complaint, social casinos “are apps, playable from smartphones, tablets, and internet browsers, that make the ‘authentic Vegas-style’ experience of slot machine gambling available to consumers anywhere and anytime.” The plaintiffs alleged that by moving casino games directly onto players’ devices and by using “an innocuous-sounding ‘free-to-play’ model, social casino companies, along with Facebook, Google, and Apple (the ‘Platforms’), have found a way to smuggle slot machines into the homes of consumers nationwide, twenty-four hours a day and three-hundred-sixty-five days a year.”

In particular, social casinos, like in-person slot machines, allow consumers to “purchase virtual ‘chips’ in exchange for real money, and then to gamble those chips at slot machine games in hopes of winning still more chips to keep gambling.” For example, DoubleDown Casino purportedly has chip packages costing up to $499.99. However, according to the complaint, “unlike Las Vegas slots, social casinos do not allow players to cash out their chips. Instead purchased chips and won chips alike can be used only for more slot machine ‘spinning.’” The plaintiffs contended that social casinos combine the addictive qualities of slot machines “with the power of the Platforms … to leverage big data and social network pressures to identify, target, and exploit consumers prone to addictive behaviors.” Moreover, the plaintiffs proffered that social casinos could not “operate and profit at such a high level” without the help of the platforms. Specifically, “(t)heir business of targeting, retaining, and collecting losses from addicted gamblers is inextricably entwined with the Platforms” because “the Platforms retain full control over allowing social casinos into their stores, and their distribution and promotion therein,” as well as sharing in the portion of the gamblers’ losses, which the platforms collect and control.

According to the plaintiffs, nine out of the top 12 grossing apps on Facebook are social casinos. The plaintiffs contended that the social casinos use Facebook as a distribution and payment processing partner while providing player data and insight. In exchange, Facebook allegedly takes a 30% commission from every wager. Consequently, the plaintiffs claimed that consumers are harmed by this partnership, particularly those with gambling addictions. The plaintiffs also noted that social casinos are “illegal under many states’ gambling laws,” including in Washington and California. The plaintiffs averred that despite this illegality, Facebook continues to profit from “hosting the game, driving customers to it, and acting as the bank.” Therefore, Facebook and the other platforms are allegedly liable as co-conspirators to this illegal gambling enterprise.

For instance, one of the plaintiffs has played DoubleDown Casino through Facebook for about five years; she purportedly “first started playing DoubleDown Casino after seeing an advertisement on Facebook for the social casino app.” Reportedly, all the plaintiffs claim to be addicted and playing for multiple hours a day. The plaintiffs have allegedly lost more than $50,000; $240,000; and between $10,000-$20,000 on social casino games.

The proposed class includes “(a)ll persons in the United States who have lost money to any Illegal Slots through the Facebook Platform.”

The causes of action are violations of the Racketeer Influenced and Corrupt Organizations Act and California’s Unfair Competition Law.

The plaintiffs seek class certification and for the plaintiffs and their counsel to represent the class; declaratory judgment in their favor; to enjoin Facebook from further illicit conduct; restitution; disgorgement; an award for damages, costs, and fees; an injunction; and other relief.

The plaintiffs are represented by Edelson PC.