Amazon, one of the world’s largest tech companies, is being sued for taking a cut from alleged gambling-related proceeds from the social casino applications hosted in its Appstore. The lawsuit claims that Amazon has raked in billions from illegal gambling. Here’s a look into the case.
Multinational tech giant Amazon is facing a lawsuit challenging the platform’s allowance of free-to-play social casino apps in its application store. The class action alleges that the online retailer has brought in millions of dollars in what the suit refers to as an ‘illegal gambling enterprise.’
The class action was filed earlier this month on behalf of plaintiff Steve Horn, a Nevada resident. He alleges that the platform has teamed up with social gaming apps to rip off users who have become addicted to the interactive slots. The plaintiff also asserts that by running an app store, Amazon aggressively markets these social casino apps that are downloaded on its consumers’ devices. The plaintiff’s statement read in part:
“By moving their casino games directly onto the phones and computers of players, and by leveraging an innocuous-sounding ‘free-to-play’ model, social casino companies, along with Defendant Amazon, have found a way to smuggle slot machines into the homes of consumers throughout the United States, 24 hours a day, 7 days a week, and 365 days a year.”
The bone of contention in this case is the free-to-play gambling model, which the plaintiff argues is not entirely free as is perceived and may be an insincere way to rip off the masses. While the games are free to download and access, they usually require the players to purchase virtual chips to proceed with their gaming exploits.
In this case, Amazon has been accused of maintaining a 30% financial interest while affecting its role as both a bank and an intermediary. It is this aspect of the deal that the lawyers on the plaintiff’s side argue amounts to traditional gambling and that operators and platforms like Amazon have contributed heavily to skirting the law.
The lawsuit further used Statista research as a reference, pointing out that an estimated $6 billion was wagered on social casinos in 2020. To that end, the plaintiff argues that this is where Amazon makes the bulk of its money. The 30% quoted in the lawsuit is a mammoth sum compared to what traditional casinos take on every wager, which is estimated to be between 1% and 15%.
From the data described above, the lawsuit estimates that Amazon raked in $1.8 billion in 2020 alone from its gambling exploits as the social casinos entered a mutually beneficial contract with Amazon. How the complainant sees it, the terms of this agreement are such that Amazon would distribute the casino games and accumulate valuable data and insights about the players. In return, the tech giant is generating billions worth of revenue for themselves from ‘illegal gambling activity.’
The filed case also argues that the results of this agreement could be detrimental. It points out that:
“The result (and intent) of this dangerous partnership is that consumers become addicted to social casino apps, maxing out their credit cards with purchases amounting to tens or even hundreds of thousands of dollars. Consumers addicted to social casinos suffer a variety of non-financial damages ranging from depression to divorce to attempted suicide.”
According to the case files, Steve Horn, the plaintiff, is one of the persons who have been adversely affected by this arrangement. It is stated that Horn became addicted to several social gaming apps like Take Vegas 5 Slots, Quick Hit Slots, and Lightning Link Casino. The lawsuit details that he spent over 320 digital transactions, spending several hours each day, and lots of money on these social gaming apps.
Chicago-based law firm Edelson is steering the case, acting on behalf of the plaintiff, and claims that Amazon’s actions have affected ‘tens of thousands of consumers.’ Thus, Edelson expects its client to emerge victorious in this class action. Todd Logan, a Partner from Edelson, recently had a correspondence with Reuters on the matter, expressing confidence in victory. He said,
“We look forward to trying this case to a jury of Amazon’s peers.”
Edelson isn’t new to such cases, with the firm having previously collected millions of dollars in similar lawsuits. This is the firm’s eighth lawsuit involving social gaming apps.
The lawsuit filed against Amazon faults Amazon for continuing to receive a 30% financial interest despite knowing that social casinos are illegal. But is that really the case? Are social casinos illegal across the US? Well, our research has revealed that social casinos are majorly legal across many jurisdictions in the US.
That said, Edelson’s argument was perhaps referring to a 2018 ruling from Washington that deemed casino apps illegal. The case involved Churchill Downs and the Big Fish Games social casino enterprise. In the ruling, virtual chips were considered a ‘thing of value’; hence, using them to play could be deemed an act of gambling.
Additionally, in the recent past, the courts around the country have shown a tendency to lean to the direction of the plaintiffs in many cases involving social gaming apps. In the Big Fish Games 2018 lawsuit, the judge went on to rule in favor of the class action, with a whopping $155 million as a settlement to the former players. The decision sent shockwaves throughout the industry and is still being felt to date. Consequently, the social casino developer Big Fish Games had to restructure, and 250 staff members ended up being laid off.
The lawsuit against Amazon comes at a time when Apple, Meta, and Google are facing similar lawsuits with pending legal challenges in the 9th US Circuit Court of Appeals in San Francisco. The three tech giants are arguing against a 2022 ruling by a California federal judge saying that they could be held liable for processing virtual chip payments that are a fundamental part of social gaming apps. According to the tech triad, this could set a horrible precedent for the internet economy.
Amazon has yet to issue a response to the lawsuit, but there is an argument being fronted by many operators with regard to online gaming and social casinos. The defense is that in social casinos, players cannot bet or win any real money. As such, the operators argue that these games are more similar to video games rather than online gambling games. On top of that, virtual currencies do not hold any monetary value.
Blackjack
Slots
Roulette
Baccarat
Craps
Poker
