Federal Court Sends Tennessee Social Casino Case Back to State Court

The U.S. Court of Appeals for the Sixth Circuit confirmed that four lawsuits involving social casinos will return to the Tennessee state court system. 

The Sunday, March 16 decision upheld a lower court’s decision to rule against the lead plaintiff, Gina Burt, who claimed she had Article III standing to have her case heard in federal court. Plaintiffs hoping to invoke this position must show concrete proof they suffered an “injury in fact” or are at immediate risk of an injury, which they said she did not.

The four lawsuits will be heard and settled at the state level upon the granting of a motion filed by the plaintiffs. 

Upholding a previous decision

The lawsuits were filed in Tennessee. They identified Playtika, VGW Holdings, Aristocrat Leisure, Ltd., and Product Madness, Inc. as the defendants. 

The plaintiffs accused the online gambling platforms of acting in the face of Tennessee law, leading to financial losses for residents and guests of the state. They sought to recover the amount lost by all Tennessee gamblers under Tennessee Code Ann. § 29-19-105, which allows third parties to recover the gambling losses of affected individuals. 

“[A suit may recover losses] for the use of the spouse; or, if no spouse, the child or children; and, if no child or children, the next of kin of the loser,” reads Section 29-19-105.

The similar nature of the cases led to them being consolidated for appeal, or combined to be heard and decided at one time.

The defendants had the case reassigned to the federal court, citing the Class Action Fairness Act (CAFA), which expanded the federal court systems’ authority over class-action suits in cases with more than $5 million at stake and if the parties involved are similar.

Tennessee will handle social casinos case

While the defendants hoped the case would be settled in federal court, the U.S. The District Court for the Eastern District of Tennessee approved the plaintiffs’ request to have the case settled locally. 

The court decided that the lawsuit was not a typical class-action suit defined by CAFA, and the defendants could not combine the losses accrued by gamblers at their respective platforms to reach the $5 million amount. 

The Sixth District Court also ruled that Burt did not have the right to present Section 29-19-105 as a qui tam statute, which means that citizens can sue anyone participating in illegal activities on behalf of the government.

They settled on this for several reasons, ultimately affirming that federal courts cannot get involved in cases in which plaintiffs do not prove Constitutional injustices.

With the case headed back to the state level, eyes will be fixed on the possible implications for social casinos that result from a decision.

Social casinos and sweepstakes casinos are legal in Tennessee at the time of writing. 

Their ability to let customers play casino games without using real money circumvents traditional gaming laws, although many states are amending their regulatory standards as a result.