Washington lawmakers are debating legislation that would shield many of the state’s smartphone game companies from class-action gambling lawsuits.
Several Washington companies that develop so-called social games are fielding lawsuits from plaintiffs who claim they have lost tens of thousands of dollars to the apps. A pair of companion bills in the state House and Senate would indemnify the companies from financial responsibility in those types of lawsuits, unless the games allow players to cash out.
Many of the games support in-app purchases but don’t allow players to actually make money, raising questions about whether gambling laws should apply.
One of the bills had a hearing Tuesday. Representatives from the gaming industry testified, claiming the legislation would provide legal clarity to the issue. Opponents of the bill said it would shield companies from liability for engaging in illegal behavior.
For years, the Washington State Gambling Commission did not enforce gambling laws on virtual casinos that do not allow players to cash out. But a 2018 federal court decision broke with that tradition, casting uncertainty on the smartphone gaming industry in Washington state. A federal judge from the Ninth Circuit Court of Appeals ruled that games developed by Seattle-based Big Fish Games constitute illegal online gambling under Washington state law.
Previously: Gaming industry launches lobbying effort to shield smartphone games from Washington gambling laws
Big Fish Casino is a series of games like slots, blackjack, and roulette that use virtual chips. The chips have no monetary value themselves, but players can only play as long as they have chips. If they run out, they have to wait until the game offers more free chips or they can buy more chips and jump back in.
Several other lawsuits have been filed in the wake of the Big Fish decision, challenging the legality of social games in Washington.
During the hearing Tuesday, Doug Pearson, chief technology officer at Seattle-based Flowplay, said the appellate court decision “created a haze of uncertainty for a company like ours.”
“If the plaintiffs prevail, Washington state will be the only state in the country to consider these games illegal gambling,” he said.
Alex Tievsky, an attorney representing plaintiffs suing the social games companies, testified on their behalf during the hearing. He said one of his clients lost $400,000 playing games in Big Fish Casino.
“It ruined her life,” Tievsky said. “This is not the only story like that.”
Tievsky accused the game companies of facilitating illegal gambling and said that the bill is an attempt to shield the industry of legal liability.
“All this changes is the ability of the victims to recover,” he said. “The legislature should not be in the business of bailing out lawless industries.”
Late last year, a coalition of gaming industry representatives and economic development professionals launched Game On WA to lobby the legislature to take up the issue. Game on WA co-chair Kristina Hudson testified during the hearing in support of the bill.
“Unfortunately our business environment for this industry is now clouded with uncertainty,” she said. “For years the Washington State Gambling Commission has provided guidance to all of our companies of what constitutes gambling and what does not … some of our companies are now at risk of having their free-to-play games constitute as gambling.”
Venkat Balasubramani, a technology and internet attorney who is not involved in the social games dispute, said he was surprised that the legislation would fully indemnify the companies.
“That seems pretty extreme,” he said.
The representatives who held the hearing appeared circumspect as well, with several questioning the underlying purpose of the bill.