A federal judge in Washington state has ruled that two social casino apps operated by High 5 Games, High 5 Casino and High 5 Vegas, violate the state’s gambling laws. This decision marks a significant moment in the ongoing debate over whether virtual coins in social casino games constitute illegal gambling.
Violation of State Gambling Laws
The ruling, handed down by a federal judge, found that High 5 Games violated Washington’s Recovery of Money Lost at Gambling Act (RMLGA), which allows individuals to seek damages for losses sustained from illegal gambling activities. The court determined that the virtual coins used in the High 5 apps qualify as a “thing of value” under Washington law, making the company liable under gambling regulations.
The lawsuit was initiated by Rick Larsen, a former player who filed a class-action suit against High 5 Games. Larsen argued that despite the free-to-play nature of the apps, users were encouraged to spend real money to purchase additional virtual coins after their initial free coins ran out. Larsen himself spent $7,470.50 in the apps, arguing that the model essentially amounted to illegal gambling. The judge agreed, pointing to Washington’s stringent laws that govern both physical and digital gambling activities.
Consumer Protection Act Violations
In addition to violating the RMLGA, the court found that High 5 Games breached Washington’s Consumer Protection Act (CPA). The CPA is designed to protect consumers from unfair or deceptive practices. The judge ruled that High 5’s practice of enticing players to purchase virtual coins through real money, despite promoting itself as a free-to-play social casino, constituted deceptive conduct. High 5’s defense that players are not required to spend money did not hold up in court, with the judge ruling that regular play does require financial investment for continued participation.
High 5 Games had argued that their apps fall under the category of “social casinos,” where no real money is won or lost, as users are merely playing for entertainment. However, the court rejected this defense, stating that because players must use real money to purchase virtual coins to continue playing, the system mirrors that of traditional gambling.
Lawsuit Details and Class-Action Scope
The class-action lawsuit covers all Washington residents who purchased virtual coins in the High 5 Casino or High 5 Vegas apps after April 9, 2014. The case could potentially affect thousands of players, as Washington residents reportedly spent over $21.6 million on these apps between 2014 and 2023. Larsen’s lawsuit has opened the door for those players to claim compensation for their losses.
The total amount of damages owed by High 5 Games is yet to be determined and will be decided by a jury. The potential payouts to affected players could be substantial, given the significant amount spent by Washington residents on virtual coins during the relevant period.
Washington’s Virtual Currency Law
A key aspect of this case revolves around Washington’s unique stance on virtual currency. Under state law, virtual currency, including the virtual coins used in High 5’s games, is considered a “thing of value.” This designation brings virtual currency under the umbrella of gambling regulations, subjecting companies like High 5 Games to the same legal standards as traditional gambling establishments.
The court ruling serves as a reminder of how virtual economies in games can intersect with real-world gambling laws. Washington has some of the strictest laws regarding online gambling in the U.S., and this case underscores the risks companies face when operating in a state with such regulations.
High 5’s Response and Future Actions
High 5 Games has responded by attempting to geoblock its apps from being accessed by players in Washington state, a measure designed to prevent further legal liability. However, the company has maintained its position that its games do not constitute gambling, emphasizing that users are not required to spend money to play. Despite this, the court has ruled against them, casting doubt on the viability of this defense in future legal challenges.
The case has broader implications for the social casino gaming industry, especially as more states tighten their regulations on digital gambling. Companies that offer virtual currency as part of their gaming model will likely be watching this case closely as it may influence legal strategies in other jurisdictions.
Final Verdict
The judge’s ruling marks a significant legal victory for those advocating for tighter regulations on social casinos. By classifying the use of virtual currency as a form of gambling, the court has paved the way for similar lawsuits in the future. As the case moves toward the jury trial phase, Washington residents who spent money on virtual coins in High 5’s apps may soon be eligible for compensation.
The broader question of how virtual economies in games will be regulated remains to be seen, but this case suggests that, at least in Washington, virtual currency in social casinos will be treated much like real-world gambling.