Lawyers asked a federal court in California to deny Fliff’s motion to compel arbitration in a lawsuit accusing the Sweepstakes app of offering illegal online sports betting.
Fliff had responded to the filing in US Central District of California Court in Riverside by asserting that the app’s terms of service and sweepstakes rules require parties to arbitrate disputes on an individual basis.
Attorneys looking to form a class action against Fliff countered that the terms are invalid and unenforceable under California law.
A hearing on the motion to compel arbitration is scheduled for Sept. 29 in front of Judge Sunshine Suzanne Sykes.
Arguments for rejecting motion for arbitration
Plaintiff’s counsel argued that the case is brought by a California plaintiff on behalf of a proposed class of California residents challenging an illegal sports betting operation under California law. Yet Fliff wants the court to force the plaintiff to arbitrate claims under Pennsylvania law.
In the response, the plaintiff attempted to establish that California law should govern the contractual analysis. The plaintiff then argued that Fliff’s arbitration terms are not valid or enforceable under California law.
The response cites two reasons the arbitration terms are not valid.
Firstly, the plaintiff argued that Fliff’s arbitration rules deny public injunctive relief as a remedy. Attorneys cite a California Supreme Court case, McGill v. Citibank (2017), as determining that an arbitration agreement to waive the right to seek public injunctive relief available under the Unfair Competition Law (UCL) violates California civil code.
“In sum, because Plaintiff alleges a cause of action under the UCL, and seeks highly important public injunctive relief vindicating the state’s fundamental policy against gambling, Fliff’s arbitration terms violate the McGill Rule.”
Secondly, the plaintiff argued that using the service required checking the box to accept Fliff’s terms.
Contractual terms ‘tainted with illegality’
This case could set an important precedent for the legality of online sweepstakes games based on making sports predictions.
While sweepstakes operate in a legal gray area, there’s no doubt that Fliff seeks to capitalize on the void created by California not having legalized online sports betting.
Last year, California voters rejected two ballot measures to join the 37 states with some form of legal sports betting.
And stakeholders have filed no sports betting initiatives in California this year. Any initiative filed at this point would have a shortened period to collect signatures to qualify for the 2024 election.
But before the Court considers if sweepstakes are a legal alternative for Californians wanting to bet on sports or a form of illegal online sports betting, the case needs to survive the motion to compel arbitration. If the Court grants the motion, it will stifle what the lawyers call “hundreds, if not thousands, of putative class members.”
The plaintiff concludes:
“Because, at their core, Fliff’s Sweepstakes Rules establish a framework for illegal sports betting, as applied to Plaintiff and Class Members, the contractual terms are ‘tainted with illegality’ and should not be enforced by this Court.”