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A federal appeals court reinstated a class-action antitrust lawsuit alleging Atlantic City casino hotels used AI software to coordinate room rates, inflating prices for guests. The 3rd U.S. Circuit Court of Appeals ruled July 29, 2026, that plaintiffs provided sufficient evidence to proceed under federal antitrust law.
The decision allows plaintiffs to enter discovery and seek internal technical records from Cendyn Group, the developer behind the Rainmaker revenue management platform at the center of the dispute.
Appeals court overturns lower court dismissal
The Philadelphia-based panel reversed an October 2024 decision by US District Judge Karen Williams, who had dismissed the complaint for failing to show an explicit agreement among hotels or explain how the algorithm processed confidential data.
Writing for the panel, Circuit Judge Theodore McKee explained that plaintiffs were not required to detail the internal workings of proprietary software before discovery.
“AI software can facilitate collusion by enabling competitors to coordinate prices and share information without ever communicating with each other,” the court noted.
Suit targets major Atlantic City casino resort operators
Alongside Cendyn, the lawsuit targets Atlantic City casino operators connected to:
- Borgata Hotel Casino & Spa (operates Borgata Online Casino)
- Caesars Atlantic City
- Hard Rock Hotel & Casino Atlantic City (operates Hard Rock Bet Online Casino)
- Harrah’s Resort Atlantic City
- Tropicana Atlantic City
According to the complaint, participating casinos fed real-time, nonpublic rate and occupancy data into Rainmaker. The platform combined this information with competitor metrics to generate automated rate recommendations multiple times daily. Although hotels set their final rates, plaintiffs claim operators adopted the system’s recommendations roughly 90% of the time.
Case relies on hub-and-spoke theory
Plaintiffs allege a “hub-and-spoke” conspiracy under Section 1 of the Sherman Antitrust Act. In this model, Cendyn acted as the hub, coordinating price settings across competing hotel “spokes.”
While using shared software is legal, judges noted the allegations extended beyond simple parallel pricing. The complaint outlined the exchange of commercially sensitive data, consistent acceptance of algorithmic recommendations, and market behavior contrary to traditional competition, as noted in reporting by Reuters.
AC casinos’ hotel occupancy dropped as room rates surged
Market data in the complaint highlights unusual economic trends. Between 2017 and 2019, combined occupancy across the casino hotels dropped 8%, yet room revenue rose approximately 22%. By 2022, the hotels rented 5% fewer rooms than in 2019 while charging 25% more.
Casino business models typically rely on high occupancy to drive revenue across gaming, dining, and entertainment venues. Plaintiffs argue the shared algorithm reduced incentives to lower rates to attract guests.
Circuit split emerges over algorithmic collusion
The 3rd Circuit ruling contrasts with an August 2025 decision by the 9th US Circuit Court of Appeals, which dismissed a similar lawsuit filed by Nevada casino guests against Cendyn, an issue further analyzed by Law Commentary.
The divergence highlights a growing split among federal courts over how antitrust law applies to algorithmic pricing tools. Federal regulators, including the Department of Justice and Federal Trade Commission, maintain that companies cannot evade competition laws by delegating price setting to software algorithms.
