Fliff, Inc. Lawsuit Arbitration Decision Imminent in Significant Ruling

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Fliff, Inc., a prominent “social sportsbook” in California, is currently awaiting a pivotal decision from Judge Sunshine S. Sykes regarding the arbitration of an ongoing class-action lawsuit.

A clause embedded in Fliff’s terms and conditions could compel users to resolve disputes through individual arbitration, thereby bypassing collective litigation. The outcome of this decision could potentially change the legal landscape across U.S. online gambling, particularly for operators navigating the gray areas of gambling and sweepstakes regulations.

The main plaintiff in the lawsuit, Bishoy Nessim of California, is seeking $7 million in damages over $7,000 he lost using Fliff’s services. However, the suit hinges on challenging Fliff’s social sportsbook model. If the case is sent to independent arbitration, any such panel will not have the authority to apply its decision outside of this case. That makes it essentially legally toothless for others seeking class action lawsuits against Fliff or similar operators.

Interestingly, several online media outlets misunderstood court documents last week and reported that the case had been sent to arbitration, favoring Fliff. However, they were forced to delete the stories or post corrections, as the case has not yet been dismissed. Judge Sykes did say she intended to dismiss the case in August – but she is still considering the arguments around Fliff’s compelled arbitration clause, with a decision due soon.

Arbitration and User Agreements

The crux of the legal battle hinges on the enforceability of Fliff’s arbitration clause, which stipulates that disputes must be resolved through arbitration rather than litigation.

Nessim’s lawsuit, which seeks $7 million in damages, alleges that Fliff is essentially offering unregulated California online sports betting. It says that the platform does not adhere to the state’s definition of a sweepstakes because of the nonrandom nature of prize allocation.

Fliff, on the other hand, maintains that it operates legally under federal law, categorizing itself as a sweepstakes operation, thereby circumventing traditional gambling regulations.

The decision pending from Judge Sykes will be heavily watched by the online gambling sector and others, as it will determine whether users, by virtue of agreeing to Fliff’s terms and conditions, are committed to resolving disputes through arbitration.

This decision could potentially deter future lawsuits against Fliff and similar platforms, establishing a precedent that could ripple through the online gambling industry.

Despite Sykes previously expressing her intention to send the case to arbitration. California law had a similar lawsuit upheld because of a concept called public injunctive relief. In 2017’s McGill vs Citibank, the state Supreme Court ruled that Citibank’s compelled arbitration clause violated the public right to ask courts to stop the potentially infringing activities during litigation.

Nessim’s suit also argues that the compelled arbitration law is unconscionable, or extremely unreasonable. However, Fliff countered that the wide availability of offshore sportsbooks in California that do not have such terms means gamblers are free to choose an alternative to Fliff without such clauses.

“Plaintiff further asserts that the arbitration terms are procedurally unconscionable because he does not have other market alternatives, relying solely on the false assertion that Defendant is the only provider for illegal internet sports betting in California,” Fliff’s lawyers wrote in court documents.

“While Fliff disagrees with Plaintiff’s characterization that Fliff is an unlawful internet sports betting operator entirely, there are myriad actual illegal offshore sports betting websites which California residents may readily find via simple Google searches.”

Wider Shifts

Fliff, which allows players to engage in betting activities without making a real-money deposit, is one of several platforms that operate in a regulatory gray area. It is providing gambling-like activities without being subject to the stringent regulations that govern traditional gambling platforms.

The case also underscores the broader issue of how social or sweepstakes casinos are regulated, a matter that is being contested in various states across the country.

Recently, many such operators have faced huge lawsuits. That includes one in June 2023, which ended International Game Technology paying a $419 million settlement over its former social casino operation DoubleDown.

Several states have also recently cracked down on daily fantasy sports operators that offer pick ‘em proposition bets. Lawmakers in Florida, and regulators for Michigan and New York sports betting, have announced they want to close the contests down, as they see them as unregulated sports betting.

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