A federal lawsuit alleging that Apple, Google, and Facebook are responsible for encouraging and making money off of illicit gambling apps will go forward.

Apple, Google parent Alphabet, and Facebook's Meta must continue their defense that they did not encourage illicit gambling by hosting casino-style apps and made money from their operations through commissions, according to a 37-page order issued on Tuesday in the San Jose courthouse by US District Judge Edward Davila.

On the grounds of Section 230 immunity, the tech companies, each of which has app stores with numerous social casino apps, requested that the lawsuit be dismissed. Online platforms are shielded from liability for user-posted content by Section 230 of the Communications Decency Act, a federal law. Instead of treating internet platforms as publishers, the statute views them as content distributors.

In California's Northern District Court, Davila acknowledged that Section 230 shields Apple, Google, and Facebook from lawsuits pertaining to the content of apps they distribute, but he objected to the businesses making money off of the content.

Continued Case

Twelve named plaintiffs filed a federal complaint against Apple, Google, and Facebook in 2021, claiming they had lost hundreds of thousands of dollars using illicit gambling apps that were marketed as social gaming. The plaintiffs want the court to stop the tech giants from offering social casino apps and to restore the money they gambled.

According to the proposed class-action lawsuit, the class suffered financial and psychological harm as a result of the three corporations' alleged racketeering with the illicit gaming businesses.

The plaintiffs "failed to plead a substantive violation," according to Davila, who rejected the RICO conspiracy claims. The plaintiffs did not describe how social casino apps are rigged, the judge clarified.

"Plaintiffs did not suffer such an injury when purchasing virtual chips because they received what they paid for — chips that could be exchanged for a chance to win a virtual slot spin. They did not suffer such an injury when they lost on a slot machine, because losing is injury to intangible expectations,” Davila wrote.

However, Davila was not persuaded by the defense's claims that Section 230 shields the businesses from the consumer protection claims made by the other plaintiffs.

“When analyzing Plaintiffs’ loss recovery claims, the Court concluded that the purchase of virtual chips is a gambling transaction. As the Court is also assuming that the underlying gambling in social casino apps is illegal, that purchase is also an illegal transaction. Because Defendants do not dispute that the benefit of the bargain defense is unavailable when it comes to illegal transactions, that defense is not grounds for dismissal,” Davila determined.

Appeal Probability

Davila's decision is anticipated to be appealed by Apple, Google, and Facebook to the Ninth US Circuit Court of Appeals in San Francisco. Due to its authority over Silicon Valley, the appellate court has rendered a number of significant tech-related rulings.

In a number of instances, such as the Federal Trade Commission's decision against Qualcomm, Oracle's case about intellectual property restrictions, and Microsoft's case over website tracking, the Ninth Circuit has ruled in favor of technology.