Amazon settles class action lawsuit over social casino apps for over $200m

E-commerce giant Amazon has reached a settlement in a protracted class action lawsuit involving the sale of virtual casino chips. This agreement could result in claimants receiving over $200 million. The lawsuit accused Amazon of profiting from "free-to-play" social casino games by allowing the purchase of virtual chips, despite these games not offering real money prizes. A 2018 Washington ruling determined that virtual chips constituted a "thing of value," classifying the activity as gambling. This is a significant step that further fuels the debate surrounding the legal classification of social casinos.

The social casino apps at the center of the class action lawsuit were described by the plaintiffs as "highly addictive" and "extraordinarily profitable." Plaintiffs alleged that Amazon was aware of the controversial status of these games but permitted their download nonetheless. The lawsuit demanded that Amazon cease providing such games and return all "illegally" obtained proceeds to consumers.

Numbers and facts

The class action lawsuit named a total of 34 social casino brands, including well-known names such as Big Fish Casino, Jackpot Party, Monopoly Slots, Lotsa Slots, Black Diamond Casino, and Quick Hit Slots. According to research from Statista, an estimated $6 billion was "gambled" on social casinos in 2020. The lawsuit argued that Amazon took 30 percent of each wager, accounting for nearly $1.8 billion in 2020 alone. This contrasts with traditional casinos, which typically take between 1 and 15 percent from real-money slot games.

A Washington court had previously ruled in 2018 in a similar case against Churchill Downs. The social casino Big Fish Casino was deemed illegal gambling because virtual chips were considered a "thing of value." This precedent was crucial for the Amazon litigation. A comparable lawsuit against IGT and DoubleDown Interactive was settled in August 2022 for $415 million.

Todd Logan, a partner at Edelson PC, the law firm representing the plaintiffs, commented on the role of tech giants: > “Big tech isn’t just standing by—they’re cashing in. This verdict is a milestone, but it’s only the beginning.” - Todd Logan, Partner at Edelson PC

Background

Legal uncertainty regarding social casinos persists in the U.S. While they are largely considered legal, rulings like those in Washington are changing the landscape. The plaintiffs emphasized how social casinos combine the addictive aspects of traditional slot machines with the ability of companies like Amazon to leverage big data and social network pressures. This is used to identify, target, and exploit users prone to addictive behaviors. The lawsuit highlighted the inextricable link between social casino apps and Amazon, which maintained full control over the approval and promotion of these apps and directly profited from a significant portion of player losses.

Why it matters for German players

For German players, social casinos are legally distinct from regulated online gambling. These games do not offer the chance to win real money, meaning they do not fall under the German Interstate Treaty on Gambling 2021 (GlüStV 2021). Nevertheless, they can acclimatize players to the feeling of gambling and carry a high potential for addiction. German players should be aware that while buying virtual chips is not directly considered gambling in the regulated sense, it can still lead to significant expenses. Platforms like Amazon offer social casinos, clearly differentiating them from offerings that fall under the supervision of the Joint Gaming Authority of the Federal States (GGL).

GGL-licensed providers must adhere to strict rules, such as a deposit limit of 1,000 euros per month and a stake limit of 1 euro per spin. They must also be connected to the LUGAS self-exclusion system. Such protective mechanisms do not exist for social casinos.

What it means for GGL-licensed casinos

For GGL-licensed online casinos in Germany, this development has only indirect implications. The market for regulated online gambling is clearly separated from the social casino sector. While social casinos are often seen as a precursor to real gambling, GGL-licensed casinos operate under strict regulations for player protection and addiction prevention. However, the recent U.S. ruling could sharpen the focus on platforms' responsibility for the content they host and monetize. This may lead to a long-term debate about regulating in-app purchases and similar monetization models, even if they do not promise direct real-money winnings. The GGL closely monitors the German market to enforce the GlüStV 2021 and thus ensure player protection for German players.