A California mother and her son have filed a class action lawsuit against Apple in the U.S. District Court for the Northern District of California, in San Jose. The June 12, 2020 complaint claims that Apple is complicit in promoting illegal gambling by permitting app developers to offer games with loot boxes in the App Store. Plaintiffs argue that Apple promotes addictive behavior and claims that loot boxes, when played on an iPhone or iPad or similar devices, constitute illegal slot machines or devices as defined by California Penal Code § 330b (d).

Game developers offer loot boxes to generate more revenue. These loot boxes are available as in-app purchases that randomly award players with virtual prizes for use within the game. Typically, a user will use real money to purchase virtual currency and use virtual currency to purchase loot boxes. Users attempt to win rare items that are difficult to obtain with loot boxes as most awarded items tend to be common.

The complaint claims that Apple profits from games with loot boxes by marketing the games to children, acting as an agent for the game developers, and managing the monetary transactions. Apple does not explicitly provide notice that a loot box game feature exists and instead provides disclosures of “Offers In-App Purchases.” The complaint also alleges that Apple has engaged in unlawful and unfair business practices in violation of California’s Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, et seq.). In particular, the complaint states:

Apple has violated the UCL’s proscription against engaging in “unlawful” business practices by virtue of its conduct in violation of California Penal Code §§ 330, et seq., the Illegal Gambling Business Act (18 U.S.C. § 1955), and the Unlawful Internet Gambling Enforcement Act of 2006 (31 U.S.C. §§ 5361-5367).

This lawsuit presents interesting challenges and will be closely monitored by many. If you have any questions pertaining to this case or loot boxes, please contact authors Karl Rutledge at krutledge@lrrc.com, Glenn Light at glight@lrrc.com, or Mary Tran at mtran@lrrc.com.

Authors

Karl F. Rutledge
Karl F. Rutledge
Partner, Chair - Commercial Gaming Group
krutledge@​lrrc.com
702.949.8317
Mary Tran
Mary Tran
Associate
mtran@​lrrc.com
702.474.2666

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