Aristocrat agrees to $47m payout to settle smartphone game lawsuits

25 May 2020, 01:17 by Patrick Hatch

Australian poker machine manufacturer Aristocrat Leisure has agreed to pay $US31 million ($47 million) to US customers who lost money playing with "virtual chips" on its smartphone casino games.

The $16.5 billion ASX-listed group was hit with two class action lawsuits relating to its Big Fish digital gaming arm, which it bought for $1.3 billion two years ago and makes digital blackjack, poker and slot machines games.

https://static.ffx.io/images/$zoom_1.061%2C$multiply_1.5109%2C$ratio_1.776846%2C$width_1059%2C$x_0%2C$y_0/t_crop_custom/q_62%2Cf_auto/cd28c08a94bd37554e2e0fdf6aa196afaae64970 — Aristocrat said it would pay $US31 million to settle the cases.Credit: Glenn Hunt

Online gambling is illegal in many US states. Aristocrat's games are free to download but users can buy virtual gaming "chips" to play the games with.

Just five months after the Big Fish acquisition, the US Court of Appeals for the Ninth Circuit ruled that Big Fish's games constituted illegal gambling in Washington state, which was followed by the two class actions.

Aristocrat said on Monday morning that it had reached an in-principle agreement to settle the two cases for a combined $US155 million ($236 million), with it to pay $US31 million and Big Fish's previous owner Churchill Downs Incorporated (CDI) to pay $US124 million.

The lead plaintiff in one of the cases, Manasa Thimmegowda, said in court documents that she started playing Big Fish Casino on her iPhone in 2017 and within a month had lost more than $3000 after paying real money to buy virtual chips.

"By operating Big Fish Casino and other similar online gambling games, defendants have violated Washington law and illegally profited from tens of thousands of customers," the document says.

Another of the lead plaintiffs, Cheryl Kater, lost $US1000 in virtual chips.

The legal action sought to reclaim money players lost on the games Big Fish Casino, Jackpot Magic Slots and Epic Diamond Slots; lawyers' fees and punitive damages on behalf of the three individual plaintiffs and as part of a nationwide settlement class action.

Aristocrat said in a statement that the settlement came after mediation between Aristocrat, the Seattle-based Big Fish, CDI and the plaintiffs, and remains subject to approval by the US Federal District Court for the Western District of Washington.

https://static.ffx.io/images/$zoom_0.216%2C$multiply_1.5109%2C$ratio_1.776846%2C$width_1059%2C$x_0%2C$y_0/t_crop_custom/q_62%2Cf_auto/55bb009aa742bd6d68b2f552221651453f255018 — Aristocrat's digital products bring in almost as much revenue as its poker machine business.Credit: Peter Braig

The US Court of Appeals ruling that deemed the Big Fish games illegal in Washington hinged on the question of whether the virtual chips had any value. While the chips - bought for between $1.99 and $250 - could not be exchanged for cash, the court noted that users must buy more chips to continue playing Big Fish games if they ran out, meaning the chips could be considered a "thing of value".

Aristocrat's digital division - which also makes popular videos games such as War of Clans and RAID: Shadow League - brought in just over $1 billion in revenue in the six months to March 31, the company said last week, which is almost as much as its poker machine business.

The company made a $752 million full-year profit in 2019. Aristocrat said last week that its poker machine business had been hit hard by the coronavirus, as it forced casinos and clubs to shut their doors. However, lockdowns prompted people to spend more time playing its digital games.