Lawsuit Against Google for Alleged Illegal Gambling Through Loot Boxes Dismissed with Leave to Amend

Coffee, et al. v. Google, LLC
Case No. 20-cv-03901
United States District Court for the Northern District of California
Filed June 12, 2020

The U.S. District Court for the Northern District of California dismissed a class action lawsuit against Google alleging that loot boxes in games available on the Google Play store are illegal “slot machines or devices” under California gambling laws. Loot boxes are digital “boxes” that can be purchased with virtual currency within a game that have a randomized prize inside, such as appearance modifications or “skins” for in-game player characters or weapons. In some games, loot boxes may also offer a chance to receive an improved item with better characteristics, such as a more powerful weapon or a faster car.

The Plaintiffs alleged that Google is operating a “predatory Loot Box scheme” because the payments for in-game purchases are made using Google Play’s payment system, of which Google takes a thirty percent cut. Specifically, the Plaintiffs asserted three state law claims against Google: (1) unlawful and unfair business practices under California law, (2) unfair and deceptive acts and practices under California law, and (3) unjust enrichment under unspecified state law.

In its evaluation of Claim 1, the Court deferred the issue of whether Loot Boxes constitute illegal gambling to a later stage of the proceeding. The Court also found that the Plaintiffs did not explain how they suffered an economic loss by purchasing virtual currency because they did not allege that they received less virtual currency than they paid for. The Plaintiffs also did not allege that Google engaged in false advertising related to purchases of virtual currency. Although Plaintiffs argued that “Google acts as an unlicensed “casino” that “facilitates” illegal gambling via Loot Boxes by converting real money to virtual game currency that is used like poker chips during game play,” they did not allege that theory in their complaint. The Court also noted that Plaintiffs did “not address the fact that virtual currency may be used to make in-app purchases other than Loot Boxes.”

Plaintiffs’ second claim of unfair and deceptive acts and practices is based California’s Consumers Legal Remedies Act (“CLRA”). However, California courts have held that virtual currency is not a good or service for the purposes of the CLRA. Because the Court found that the purchase of virtual currency through the Google Play store was the only transaction between Plaintiffs and Google, it held that Plaintiffs did not allege facts to support their theory of casino liability or misrepresentations made by Google about loot boxes.

In evaluating Claim 3, the Court held that Plaintiffs “cannot allege unjust enrichment without specifying which state’s law they seek to apply.”

The Court granted Google’s motion to dismiss with leave to amend. Plaintiffs may amend the claims already alleged in the complaint, and may not add new claims or parties without the Court’s permission.

Supreme Court Rules Google’s Copying of Oracle’s Java SE API is Fair Use
Default Judgment Entered Against Seller of Nintendo Switch Jailbreak