A federal court in California ruled that Apple, Google, and Meta must continue to face a class action lawsuit, which accuses these tech giants of profiting through illegal gambling apps. Judge Edward Davila of the San Jose district in California dismissed the companies' claims for exemption under Section 230 of the Communications Decency Act, allowing most charges based on consumer protection laws to proceed. This ruling could have profound implications for the tech industry, challenging the traditional protections platforms have had against liability for third-party content.
Lawsuit Background and Origin
The lawsuit began in 2021, targeting Apple's App Store, Google's Play Store, and Meta's Facebook platform. The plaintiffs accuse these platforms of offering casino-style gaming apps, replicating "Las Vegas-style slot machine gambling experiences."
Dozens of plaintiffs claim that these companies not only host these apps but also promote them as part of an "illegal extortion conspiracy." The lawsuit further accuses these platforms of handling payments for in-app purchases of virtual chips and charging up to a 30% commission.
Core Allegations and Claims for Damages
The plaintiffs accuse these tech companies of earning substantial profits through gambling apps, with estimated commission revenues exceeding $2 billion. The lawsuit claims that the defendants intentionally exploit users, leading to harmful consequences such as depression, suicidal thoughts, and addiction.
While the lawsuit demands compensation and triple damages, the total amount of claims has not been explicitly stated. The plaintiffs' lawyers argue that these platforms should be held responsible for the gambling behavior they facilitated.
Court Ruling and Legal Reasoning
In a 37-page ruling, Judge Davila dismissed some charges related to violations of state laws but allowed most charges based on consumer protection laws to proceed. The judge ruled that the defendants did not act as "publishers" in processing payments, weakening their defense under Section 230.
Judge Davila wrote in the ruling: "The core of the plaintiffs' theory is that the defendants improperly handled payments for social casino apps. Whether the defendants thereby become gambling companies or brokers is irrelevant." This interpretation provides a legal basis for the continuation of the case.
Controversy Over Section 230 Exemption
Section 230 of the Communications Decency Act has long provided tech companies with exemption protections, shielding them from liability for third-party content. The court's ruling that payment processing does not fall under this protection marks a potential shift in the legal interpretation of platform liability.
The judge emphasized that providing "neutral tools" to app developers does not absolve these companies of responsibility. He also ruled that whether the plaintiffs explicitly label these companies as "gamblers" does not affect the core legal issues of the case.
Appeal Process and Next Steps
The judge allowed Apple, Google, and Meta to immediately appeal to the United States Ninth Circuit Court of Appeals, citing the broader significance of the legal issues involved in Section 230. Previously, the appeals court rejected a similar appeal in May 2024, but the new ruling opens the door for reconsideration.
The case will now continue under formal case names in the Northern District of California: regarding Apple's App Store simulated casino-style games lawsuit (case number 21-md-02985), Google Play Store simulated casino-style games lawsuit (case number 21-md-03001), and Facebook simulated casino-style games lawsuit (case number 21-02777).
Industry Impact and Legal Significance
This ruling could have a significant impact on the tech industry, which has long relied on Section 230 protections to evade responsibility for third-party content. The court's determination that payment processing does not fall under exemption scopes suggests a possible shift in the legal interpretation of platform liability.
Analysts believe that if the final ruling supports the plaintiffs, it could set an important precedent, changing how app stores and social platforms monitor and assume responsibility for third-party content.
Responses from Parties and Case Progress
Following the announcement of the ruling, Apple and Meta did not respond to media inquiries, and Alphabet's Google also declined to comment immediately. The plaintiffs' representative lawyers also did not make any public statements about the ruling.
The case will continue to be heard in the California federal court, with both parties expected to engage in in-depth legal debates over the interpretation of Section 230 and related consumer protection law charges. The appeal process may extend the final resolution time of the case.
