A Federal court in Illinois dismissed a class action lawsuit against Machine Zone, Inc. Machine Zone is the maker of the popular “Game of War” mobile app. Although the app can be downloaded for free, a portion of the game, known as the “Casino” permits players to receive free spins on a virtual wheel. A player may click the “play” button to spin the wheel for a chance to win a prize as indicated on the wheel. Following a free spin, a player may exchange chips for additional spins. Chips can be obtained through a variety of manners, including purchasing them for money via in-app purchases. The plaintiff spent hundreds of dollars on in-app purchases to obtain chips to play in the casino. The plaintiff alleged that Machine Zone was operating a gambling device which resulted in a loss greater than $50 in violation of the Illinois Loss Recovery Act (“ILRA”) and the Illinois Consumer Fraud and Deceptive Business Practices Act (“IFCA”).
To prove a violation of these statutes, the plaintiff must show that the defendant was the winner of the plaintiff’s gambling losses. The court concluded that the plaintiff’s allegations do support a finding that Machine Zone violated state law because Machine Zone was not the “winner” of the plaintiff’s gambling losses. Rather, Machine Zone keeps the money a player pays to buy additional chips, regardless of the prize the player wins in the casino. The plaintiff therefore does not win or lose that money. Importantly, the court determined that Machine Zone is not putting any of its own money at risk in the game – simply a risk of potential future sales. Since the plaintiff did not propose additional pleadings, the case was dismissed with prejudice.
TAKEAWAY: Companies that offer in-app purchases to participate in casino-style games may not run afoul of state gambling laws because these games do not constitute gambling devices if the company does not risk their own money as part of the game. Put differently, if a player cannot use his or her winnings for cash, a company may not be offering a gambling device. A careful analysis of state gambling statutes, however, will be required to determine if the Illinois court’s holding would be instructive for other states’ gambling laws.