• by Wendy Davis  @wendyndavis, July 25, 2023

Google, Meta and Apple are asking a federal appellate court to throw out claims that they promoted illegal gambling by profiting from gaming apps.

The tech companies argued in papers filed Monday with the 9th Circuit Court of Appeals that Section 230 of the Communications Decency Act protects them from liability over apps developed by outside companies. That law broadly immunizes interactive companies from lawsuits stemming from material created by third parties.

“It is undisputed that Apple did not create the apps,” Apple wrote in its appellate brief. “Under Section 230, Apple therefore cannot be held liable for hosting them on the App Store -- full stop.”

Meta and Google make similar arguments in separate briefs.

The appeal comes in a battle dating to 2020, when people who said they lost money on virtual slot machines alleged that the platforms wrongly distributed the gaming apps, processed in-app payments for virtual currency, and took a commission on the sale of that currency. The users also alleged that the apps themselves were illegal in some states. 

U.S. District Court Judge Edward Davila in the Northern District of California rejected the tech companies' bid to dismiss the case at an early stage. He ruled that while Section 230 protects the companies from liability for hosting the apps, that law doesn't immunize the platforms from claims that they profited by processing payments for in-game currency.

Davila wrote that the allegations regarding payments and revenue sharing were “grounded in the platforms’ own bad acts, not in the content of the social casino apps that the platforms display on their websites.”

But Davila also said “reasonable minds could differ” about the interpretation of Section 230, and authorized an immediate appeal to the 9th Circuit.

The tech companies now argue that all of the users' allegations should have been covered by Section 230. The companies essentially contend that the users' claims all hinge on the apps' content -- meaning games that allowed people to gamble using virtual currency.

Liability for allegations relating to payment processing “would not exist if the content of the apps were different,” Apple argues, adding that it's therefore immune from suit.

Apple also says the virtual gaming chips are themselves third-party content.

"They are no more real than the virtual ghosts in a game of Pac-Man," the company writes. "Apple cannot be held liable merely for processing the payment for that in-app content.”

Google and Meta make similar arguments.

“The virtual chips at issue here are digital content created by third-party app developers at the behest of users who purchase them for use within the app environment,” Google argues. “Plaintiffs seek to hold Google liable solely based on what that digital content is and how users elect to use it.”

Google adds that the gaming currency wasn't always used for virtual slot machines.

“If users purchase a new outfit for their digital avatars ... or if they gift the virtual chips to another user (or simply hoard the chips, rather than play a virtual slot machine), nothing even allegedly unlawful has happened,” the company writes.

Meta says in its brief that allowing people to sue platforms for processing payments “could threaten the availability of online content well beyond casino-themed games.”

“Countless online services process payments for untold amounts of virtual content sold by third parties -- for example, ebooks, podcasts, and newsletters,” the company argues. “Because online services could be held liable if third-party content is unlawful anywhere it could be accessed, this end-run around Section 230 would allow fifty varying state regimes to dictate the availability of content everywhere.”

The 9th Circuit previously ruled that Section 230 didn't override a local California housing ordinance that prohibited Airbnb and HomeAway.com from processing some payments.

But the tech companies say that prior ruling doesn't apply to the claims in this lawsuit.

The ruling in HomeAway and Airbnb “involved online rental websites that merely needed to do the same things as offline rental agents: look at the address of the unit and perform the same cross-referencing to the city’s registry,” Apple writes.

“By contrast... Apple could only determine whether a particular app includes games that resemble gambling by reviewing the content of every single app on the platform.”

Even if the 9th Circuit ultimately rules that Section 230 doesn't protect the platforms in this case, they could still ultimately defeat the lawsuits, Santa Clara University law professor Eric Goldman tells MediaPost.

For instance, he says, it's not yet clear whether the games in the apps violate state gambling laws.

“The entire activity might be legal, so there wouldn't be liability for anybody,” he says.