Gambling Apps Possibly Under Higher Scrutiny As App Store Lawsuit Advances

Written By Derek Helling on September 20, 2022
california district court us online gambling

In the absence of law enforcement taking action to sift between illegal and legal gambling apps and websites, it’s mostly been up to consumers in the United States to try to determine whether the gaming platform they are accessing is actually legal. That could change somewhat if a lawsuit against some of the biggest technology companies in the US has the expected impact on the US online gambling industry.

A federal judge recently gave the plaintiffs in the lawsuit a small victory, although the major issues in the dispute remain undecided overall. If the momentum holds, companies like Alphabet, Apple, and Meta could find themselves somewhat liable for the availability of illegal gambling channels within their products.

Lawsuit that could affect US online gambling industry progresses

On Sept. 2, US District Judge Edward Davila sided with plaintiffs on one of three allegations against Alphabet (parent company of Google), Apple, and Meta (parent company of Facebook). The case is actually a consolidation of three formerly separate class action claims against the companies.

While Davila dismissed two charges, the claim Davila allowed to survive, at least for the time being, centers around the interpretation of Section 230 of Title 47 of the United States code. The defendants have argued that language protects them from liability for the potentially illegal activity taking place on their platforms. Davila isn’t yet buying that.

It’s a small victory for the plaintiffs, however, as Davila didn’t outright dismiss the defendants’ argument. Rather, he petitioned the US 9th Circuit Court of Appeals for guidance on Section 230. That would be the destination for an appeal of this case, so Davila is essentially trying to save some time by seeking more clarity.

Thus, the fate of this lawsuit now actually rests with the 9th, with a full appeal to the same court possible later. If the 9th disagrees with Davila on this point and determines Section 230 does grant the defendants immunity, the case is over at the district level.

What could a victory for the plaintiffs mean?

The plaintiffs in this lawsuit originally filed their complaint in October 2020, with the two subsequent and now consolidated cases being filed since then. The consolidated case argues that because Alphabet, Apple, and Meta take a cut of the purchases of digital currency used to play the potentially illegal games, they are profiting off unlawful activity.

It is worth noting that Alphabet has already successfully dismissed similar challenges on the state level using Section 230 immunity. If this litigation proceeds differently, though, the final ruling will determine actions that the companies will have to take to avoid similar lawsuits in the future.

On its most basic level, a win for the plaintiffs would mean the defendants are responsible for ensuring the legality of the content on their platforms. The ruling would define the scope of that liability. There are several potential ways for companies to comply with such a ruling.

Alphabet, Apple, Meta don’t want to get into regulatory business

In theory, the defendants could perhaps avoid culpability by no longer taking a percentage of the in-game transactions and merely acting as an uninterested publisher. However, that would run contrary to the purpose of the platforms for these companies. Such microtransactions are a significant source of income for them.

A CNBC analysis suggested Apple made over $85 billion off sales in App Store in 2021, for example. Naturally, not all of that money came from microtransactions in gambling apps. That does shed light on what the platforms are worth to the companies, though.

Another potential route to compliance would be restricting access to gambling on platforms like the iOS App Store to only apps regulated in the appropriate jurisdictions. That would require a lot more active oversight and filtering on the companies’ parts, though.

Because gambling is largely regulated on a state-by-state basis in the US, precise user location would become an important consideration when accessing marketplaces like Google Play.

Technically, it isn’t illegal to download an unlicensed gambling app onto a device in the US. The activity that is perhaps illegal is actually wagering real money while playing games on such apps. Alphabet, Apple, and Meta understandably don’t want to get into the business of having to determine whether every such attempted transaction is legal in users’ jurisdictions.

Should this lawsuit prove successful, that might become a consideration for the companies to some extent regardless of their wishes. How they proceed could affect user experiences when it comes to gambling on computers, smartphones, and tablets in the future. For now, everyone awaits a forthcoming dissertation on Section 230 from judges at the 9th.

Photo by PlayUSA/Shutterstock
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Derek Helling

Derek Helling is a lead writer for PlayUSA. Helling focuses on breaking news, including legislation and litigation in the gaming industry. He enjoys reading hundreds of pages of a gambling bill or lawsuit for his audience. Helling completed his journalism degree at the University of Iowa.

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