• by Wendy Davis , Yesterday

Google, Meta Platforms and Apple can't shake a lawsuit by gamblers who say they lost money on casino apps, a federal judge ruled Tuesday.

In a 37-page decision, U.S. District Court Judge Edward Davila in the Northern District of California rejected the companies' argument that they were protected from liability by Section 230 of the Communications Decency Act. That law broadly immunizes interactive companies that publish material posted by third parties.

Davila essentially ruled that Section 230 immunizes companies for "publishing" activity -- such as hosting or distributing the gaming apps -- but doesn't protect the tech platforms for processing payments for in-app gambling currency.

"Payment processing is not an act of publishing," Davila continued. "Instead, it is better viewed as a generic business activity common to virtually all companies, publishers or not, just like hiring workers or paying taxes."

Davila narrowed the case by dismissing some of the claims in the lawsuit, but his decision means the litigation will continue.

His conclusion that Section 230 doesn't protect companies that take commissions on in-app payments "dances around really complicated questions" between the act of publishing and its business model, Santa Clara University law professor Eric Goldman tells MediaPost.

"The court is trying to draw a line that may not exist in practice," he says.

In a rare move, Davila authorized the platforms to seek immediate review of the ruling by the 9th Circuit Court of Appeals. It's not yet clear whether the platforms will do so, or if the appellate court will agree to hear the case.

Davila's new decision comes in a battle dating to 2020, when people who said they lost money on virtual slot machines alleged in class-action complaints that Google, Meta and Apple wrongly distributed gaming apps, processed in-app payments for virtual currency, and took a commission on the sale of that currency.

Google, Apple and Meta urged Davila to throw out the complaint, arguing that Section 230 protected them from all claims.

Davila initially ruled in 2022 that Section 230 covered some of the “theories” in the complaint, but not to claims based on the theory that tech platforms profited by processing payments for in-game currency.

The platforms appealed that ruling to the 9th Circuit Court of Appeals, where the dispute drew the attention of the digital rights group Electronic Frontier Foundation. That organization argued in a friend-of-the-court brief that a ruling against the tech platforms could have “drastic consequences” for app users.

The advocacy group wrote that stripping platforms of immunity because they processed in-app payments would “harm users’ ability to access the breadth of apps and content currently available ... as platforms would be forced to curtail users’ ability to purchase and access virtual content that has not been vetted for lawfulness to mitigate the companies’ legal risk.”

The 9th Circuit heard arguments in the case, but declined to rule on whether the platforms were protected by Section 230. Instead, the appellate court returned the matter to Davila with instructions to issue a more precise decision. The appellate judges noted in the ruling that the complaints against the three companies included more than 120 total claims, and said Davila should decide whether each particular claim could move forward.

Last year, the tech platforms reiterated their position that Section 230 precluded all claims in the case. Among other arguments, they said their payment processing systems didn't distinguish between apps based on content.

“Google’s conduct is the same whether an app sells 'chips' for purported gambling or some other form of in-app content related to, for example, cookie-baking, and is unconnected to any subsequent decision a user makes about how to use the third-party content she purchased," Google wrote in its bid for dismissal.

Meta and Apple filed similar papers.

Counsel for the plaintiffs contended that the tech platforms "directly participate" in illegal gambling because they allegedly broker the virtual chip sales and retain a 30% commission.

"Their billion-dollar revenue stream exists only because players purchase new chips after losing spins,” counsel argued.

Meta declined to comment. Google and Apple have not yet responded to MediaPost's request for comment on the ruling.