California Fliff Sports Betting Case Will be Settled

 

In a significant decision for the sports betting industry, a California district court judge has ruled that a class action lawsuit against the social sportsbook Fliff will be settled through arbitration. This ruling, delivered by Judge Sunshine S. Sykes on January 5, marks a decisive victory not only for Fliff but potentially for other gambling companies facing similar legal challenges.

The lawsuit was initiated by Bishoy Nessim, who is seeking $7 million in a class action suit against Fliff, accusing the company of operating an illegal online sportsbook. Nessim's legal action, which began in June 2023, alleges that Fliff violated California’s Unfair Competition Law and engaged in unjust enrichment by providing a platform for online sports betting, which is illegal under California law.

Central to the court's ruling is the arbitration clause included in Fliff's Terms of Use and Sweepstakes Rules. When Nessim created his account in December 2022, he agreed to these terms by clicking a checkbox, effectively waiving his right to pursue legal action in court. Fliff's legal team argued that this agreement should compel arbitration, a motion that Judge Sykes upheld.

 

Key Points

• Judge Sunshine S. Sykes: “Fliff provided sufficient evidence that Pennsylvania is its ‘principal place of business,' at least ‘at the time of contracting.'”
• Bishoy Nessim: “Pennsylvania law is contrary to a fundamental California policy because Pennsylvania law permits mobile and online sports betting, while California statutes and the California Constitution forbid such activities.”
• Fliff’s Legal Team: “There is no ‘material policy difference' between California and Pennsylvania as both states ban ‘unlicensed online sportsbook operations.'”

 

Legal Arguments and Implications

Nessim's argument hinged on the application of California law, given that Fliff’s sweepstakes app is available to California residents. He contended that Pennsylvania law, which permits mobile and online sports betting, is fundamentally at odds with California's stringent prohibitions on such activities. However, Fliff maintained that its sweepstakes rules complied with Pennsylvania gambling laws, as Pennsylvania was the company's principal place of business when the contract was formed.

Judge Sykes found Fliff’s evidence sufficient to establish Pennsylvania as the principal place of business at the relevant time, thus supporting the company's argument for arbitration. Fliff emphasized that both California and Pennsylvania laws prohibit unlicensed online sportsbook operations, negating any significant policy differences that could impact the case.

The case will now proceed to third-party arbitration, where a neutral arbitrator will review the evidence presented by both parties in a private process. This method of dispute resolution is often faster and more cost-effective than traditional court litigation, which can benefit companies like Fliff by reducing legal expenses and public exposure.

The ruling could set a precedent for other gambling companies operating in states with stringent betting laws. By upholding the arbitration agreement, the court has reinforced the importance of clearly stated terms and conditions in user agreements, potentially shielding companies from protracted and public legal battles.

Fliff operates differently from traditional real-money sportsbooks. Instead of direct monetary betting, players use “Fliff Cash” and “Fliff Coins” to participate in social gameplay. While Fliff Coins can be used for in-game activities and to earn loyalty points without any cash value, Fliff Cash can be redeemed for cash prizes or gift cards once players accumulate at least $50 in their accounts. This model allows Fliff to navigate legal restrictions in states where real-money sports betting is prohibited.

“Fliff provided sufficient evidence that Pennsylvania is its ‘principal place of business,' at least ‘at the time of contracting.'”

 

Conclusion

The decision to settle the Fliff class action lawsuit through arbitration marks a notable moment in the ongoing evolution of online sports betting regulations. It highlights the complexities of operating in a legally fragmented landscape and underscores the critical role of user agreements in protecting companies from litigation. As the industry continues to grow and adapt, this case may serve as a reference point for future legal challenges in the sports betting and gaming sectors.