• by Wendy Davis  @wendyndavis, April 17, 2024

A federal appeals court has sided with mobile gaming platform Skillz in a dispute over whether it misled investors by allegedly failing to disclose information about potential weaknesses in its business.

In an opinion issued Tuesday, a panel of the 9th Circuit Court of Appeals upheld a ruling by U.S. District Court Judge Richard Seeborg, who dismissed the claims against Skillz last year.

The ruling grew out of a 2021 lawsuit by four Skillz shareholders who alleged in a class-action complaint that the company misled investors by failing to report information that could be perceived as negative. For instance, Skillz allegedly failing to report that download rates of top games declined in the second half of 2020 and first quarter of 2021, according to the complaint.

Skillz also allegedly touted that it could host synchronous game play, but “could only handle synchronous game playing on the most basic level and lacked the technological capabilities to handle high-quality synchronous games and genres,” according to the complaint.

Seeborg ruled that the allegations in the complaint, even if true, wouldn't support a claim that Skillz made false or misleading statements.

The 9th Circuit agreed.

“The federal securities laws do not create an obligation to disclose all potential kinks in a software program and the failure to disclose such kinks does not render general positive statements about the program false,” the appellate judges wrote.

They added that the complaint's allegations, even if true, wouldn't prove that Skillz misled investors by failing to reveal declining downloads for top games.

“The download rate for any particular game would be naturally subject to fluctuation over time,” the judges wrote, adding that even if download rates dropped, aggregate downloads and revenue could still grow.