The judge and venue for a class action lawsuit recently filed in California against social sportsbook Fliff could play a key role in the case.
Seven months after California Indian tribes spent more than $200 million to defeat online sports betting Prop 27, the case against Fliff is set in the heart of Indian Country in front of the first Native American to serve as a federal district judge in California.
The lawsuit alleges that Fliff operates an illegal online sportsbook under the guise of a free sweepstakes contest, violating the federal Wire Act, California’s Unfair Competition Law and anti-bookmaking laws.
PlayUSA spoke with gaming and sports law attorney Daniel Wallach, the founder of Wallach Legal LLC, about the Fliff case and its potential ramifications.
Prop 27 failure a focal point for lawsuit
The defeat of Prop 27 appears to influence the timing of the lawsuit against Fliff, which began operating in 2020.
The filing notes that California voters overwhelmingly voted against the legalization of online sports betting in the November 2022 General Election. It continues:
“Despite that public rebuke, Defendant Fliff facilitates the ability for California residents to make online sports wagers to win real money without any approvals, regulations, oversight, or taxing.”
Attorney Dennis Stewart filed the case and asked for a jury trial at the US Central District of California Court in Riverside on June 6. Riverside County is home to many Indian tribes, including Pechanga and Morongo. Pechanga was one of the leading opponents of Prop 27.
The Riverside court randomly assigned the case to Judge Sunshine Suzanne Sykes, one of its three judges. Sykes is a member of the Navajo Nation tribe in Arizona.
“By filing in Riverside and getting a seemingly favorable judicial draw (perhaps by design), plaintiff’s counsel has already secured an important advantage to his client — gaining the best possible venue to litigate his case, especially with emotions running so high after Proposition 27,” Wallach said.
Interestingly, Stewart filed the case against Fliff last month in the Northern District of California. Four days later, he filed for a refund, stating he filed the case in the incorrect district. He then refiled the case in Riverside with a different plaintiff, Bishoy Nessim, a resident of Riverside County.
Stewart declined to comment to PlayUSA about the case at this time. He said he preferred not to comment about pending cases as a courtesy to the courts.
Details of class action filing against Fliff
Fliff, which operates in 42 states, bills itself as sports betting reimagined as a social, free-to-play game.
But the lawsuit alleges that Fliff claims to be a free sweepstakes to avoid any regulatory or legal oversight.
“Alleged sports prediction games are nothing more than online sports gambling. Indeed, Fliff gives every user, regardless of local, state, or federal law, the option to bet with ‘Fliff Cash’ which has a dollar-for-dollar equivalence to actual money and that can be withdrawn and wired directly to users’ bank accounts. That’s the epitome of an online sportsbook.”
Nessim says he has lost more than $7,000 on Fliff, according to the lawsuit. But the plaintiff seeks more than $5 million in damages for himself and every Californian who has lost money on Fliff. The lawsuit also demands that Fliff cease offering the challenged conduct in the state.
Fliff co-founder Matt Ricci did not respond to a request for comment.
First lawsuit of its kind
Wallach said this might be the first class action lawsuit alleging that a sports prediction site has engaged in illegal bookmaking.
“While there have been class-action lawsuits brought against fantasy sports companies in the past, those suits were primarily grounded on claims of false advertising and did not involve bookmaking,” Wallach said.
He added that the closest comparison could be a lawsuit the Washington State Gaming Commission won against a short-lived peer-to-peer betting exchange Betcha.com. But that wasn’t a class action lawsuit.
“In that case, the Washington Supreme Court held that the peer-to-peer betting service was ‘unambiguously involved in bookmaking,’ even though it was not on the other side of any bet — as is often the case in house-banked sports wagering,” Wallach said.
Potential impact of Fliff class action lawsuit
Wallach said one of the key questions raised in the case from a gaming law perspective is whether sports betting predictions fit within the category of sweepstakes under state law.
“The dominant attribute of a ‘sweepstakes’ is that the prizes are distributed randomly or by lot or chance. By contrast, sports betting involves a significantly higher amount of skill. So, the crucial inquiry is whether, and to what extent, sports betting prediction sites can characterize their contests as ‘sweepstakes.’ The answer to that question could have far-reaching implications for Fliff and numerous other prediction-based sites that use a sweepstakes model.”
The complaint states that nothing about Fliff satisfies the definition of sweepstakes.
Double Down Casino, a social casino, recently reached a settlement of a class action lawsuit in Washington state.
Wallach indicated if the Fliff case goes the distance, an outcome likely is at least two to three years away. So it’s difficult to predict what impact the Fliff case could have on sweepstakes sites in the future.
What’s next in Fliff case
A recent court order directs that Fliff’s response is due on July 3, though the company could ask for more time.
Wallach said it’s likely Fliff will test the case with a motion to dismiss for failure to state a cause of action.
The next major battleground will be class certification if the plaintiff withstands a motion to dismiss. The plaintiff must demonstrate that the court should certify the lawsuit as a class action.
“This would naturally increase the potential recovery and, importantly, class counsel’s attorneys’ fees, which are awarded by the court based on a percentage of the overall recovery (usually in the 30% range),” Wallach said. “Conversely, if the class action is not certified, the value of the case plummets and would likely settle quietly and confidentially.”