Legal Claims Against Online Gaming Websites
December 30, 2024
Our firm is often asked by potential clients in the United States to pursue lawsuits or other formal action against online gaming companies that:
- Fail to pay apparent player winnings.
- Impose difficult obligations to cash out.
- Close customer accounts after demands for payment.
Some players consider bringing legal action shortly after purportedly winning a big prize with little or no payment, while others have lost significant sums before being denied payment or simply quitting the site. Occasionally we are asked whether a particular gaming business is legal, in the hopes that the operator can be sued for offering unlawful gambling resulting in the recovery of losses.
While we do not represent players in such claims, given our representation of many online gaming operators, this post is intended to shed some light on the considerations involved in pursuing legal action against online gaming companies.
The vast majority of online gaming services operate in compliance with applicable regulations and industry best practices. Regrettably, however, there are some rogue operators that offer gaming, sweepstakes, or gambling services to the public in an unethical manner. These gaming sites are often (but not always) located in foreign jurisdictions with little or no regulatory oversight.
Any claimant should first review the applicable Terms of Service or User Agreement that forms the contractual relationship between the player and the gaming site. These agreements often include releases, waivers, or limitations on damages that can impose significant restrictions on pursuit of any breach of contract claims. The online terms may also require that any lawsuit be brought in a specific (often foreign) location or require arbitration instead of litigation.
While other claims may be available, such as fraud or deceptive trade practice violations, pursuit of such claims in the United States against a foreign gaming operator faces numerous hurdles.
First is the concept of personal jurisdiction. The claimant must show that some U.S. court is able to force the foreign company to defend a lawsuit in the chosen location by satisfying a complicated legal test that looks at the contacts the company has in the forum where the litigation will occur. Simply offering a website to users throughout the world will typically be insufficient to require a foreign company to defend a case in a specific state. Disputes over personal jurisdiction can be costly, and may result in appeals before the merits of any claim are actually addressed.
Assuming the court has personal jurisdiction to consider the claim, the claimant must prove their case at trial with admissible evidence. Bringing a case to trial can take years and require the outlay of substantial resources to pay court costs and attorney fees. Consumer litigation over gaming disputes is not typically handled on a contingency fee basis (although each firm can make its own decision in this regard). Instead, claimants will likely be required to pay hourly legal fees as the litigation progresses. Unless the amount of the loss is very substantial, claimants may end up paying far more for litigation expenses than can be recovered in damages.
Winning a judgment for damages does not always translate to payment of any compensation to the claimant. A gaming operator may simply not defend the case and accept a default judgment.
If the gaming company does not have sufficient money or property in the U.S., the claimant will be required to look for assets in another country. If foreign assets are found, the claimant must establish the validity of the U.S. judgment against the company in a different country in order to force any payment. Such efforts can again be costly and require engagement of foreign attorneys to pursue the enforcement procedures.
U.S. judgments are not automatically recognized in foreign countries. This stage of the proceedings may require additional hearings in the foreign jurisdiction to determine whether the judgment is valid and consistent with local law. Assuming the judgment is recognized where the company is located, the company may not have sufficient assets to pay the judgment. In such case, the claimant is left with a “paper judgment” but no actual recovery.
Claimants are understandably upset when they fail to receive winnings shown on gaming sites or are faced with account closures without payment of remaining balances. Often, the claimant has screenshots, emails, and other proof of their side of the story. However, in some instances, gaming sites impose contractual restrictions on prizes, payouts, or play-through requirements before any cash can be withdrawn.
In other cases, prize displays may be the result of computer errors or software defects. However, there are certainly instances where players are simply not paid due to fraud, greed, or breach of contract by a rogue gaming operator. Claimants should carefully consider whether any particular claim is worth the legal fees, time, and effort of formal legal proceedings in light of the applicable agreement, law, and practical considerations.
So what are the options?
First and foremost, research any gaming site where you invest time or money. Look at where the operator is located and whether it holds a gambling license. Companies that are based in the United States are more likely to respond to legal action in this country if a valid dispute arises. Licensed gambling sites are regulated by governmental gaming commissions and typically follow the law.
State or federal law enforcement may provide assistance in cases where an operator is violating criminal laws. Since partaking in online gambling activity is, itself, illegal in some jurisdictions, claimants should ensure that their own actions are not unlawful before involving the criminal justice system. Even if a company is offering gambling in violation of applicable law, this does not mean that players can automatically recover losses, as such rights vary from state to state.
Consumer protection agencies can also be consulted for assistance with deceptive or unfair trade practices. Alternatively, consumers can consider reporting unlawful or unethical conduct to the Better Business Bureau or online review sites to warn other individuals.
While small losses are typically not worth pursuing in court, large losses caused by obviously illegal behavior by a solvent U.S.-based operator may be pursued by some law firms on a contingency fee basis.
By considering the practical implications of pursuing formal legal action, claimants can make informed decisions in any individual case.
Lawrence G. Walters operates Walters Law Group and has decades of experience representing online gaming companies. If you are a player seeking legal assistance with a claim against an online gaming company, please contact your state bar association for a referral to a consumer protection attorney. Nothing in this article is intended as legal advice. Mr. Walters can be reached through www.firstamendment.com or on social media @walterslawgroup.