© Peter BraigAristocrat Leisure has upped its bet on the booming social gaming market.
Gaming giant Aristocrat could be on the hook for damages after the Big Fish digital gaming arm it bought for $1.3 billion was targeted in an American class action over its issuing of "virtual chips".
Aristocrat, a $15 billion gaming giant listed on the Australian stock market, on Tuesday confirmed the lawsuit had been filed in the US District Court for the Western District of Washington against Big Fish Games, a Seattle-based online casino games developer recently acquired by Aristocrat for $1.3 billion.
The case comes after another court, the US Court of Appeals for the Ninth Circuit ruled, several months after the acquisition, that Big Fish's "free-to-play online games - including virtual blackjack, poker and slot machines - constituted illegal gambling in the state of Washington".
Online gaming is outlawed in many US states, and a key question has been whether Big Fish's virtual "chips" have any monetary value.
Big Fish's games used the virtual chips, which could not be exchanged for cash, but if users ran out of virtual chips, they needed to buy more to continue playing the game.
Prices for the chips ranged from $1.99 to nearly $250, which led the court to determine that the chips fell within the definition of a "thing of value".
"The proliferation of internet connected mobile devices has led ot the growth of what are known in the industry as 'free to play' video games," the class action claim says.
"This terms is a misnomer. It refers to a model by which the initial download of the game is free but companies reap huge profits by selling thousands of in-app items."
The claim says the model had become particularly attractive to developers of games of chance such as poker and slot machines.
Aristocrat and Big Fish's former parent company, Churchill Downs, dispute the ruling and are continuing to work together to "vigorously defend the action".
The new class action lawsuit, filed last week, is being led by Manasa Thimmegowda, a former player of Big Fish Casino who began playing on her iPhone in 2017 and, within a month, had lost more than $3000 after "regularly paying real money to purchase virtual chips", court documents claim.
"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. "Accordingly, [the] plaintiff, on behalf of herself and a class of similarly situated individuals, brings this lawsuit to recover her losses and to obtain the appropriate relief". © Big FishGummy Drop! is one of Big Fish's most popular games.
In a statement on Tuesday, Aristocrat said neither the company nor Big Fish had yet been served with the lawsuit.
"However, Aristocrat understands that the Plaintiff alleges that certain games Big Fish Games offers for play are games of chance that are prohibited by Washington law"," the company said. "Aristocrat intends to vigorously defend the action."
The class action is being led by Seattle-based legal firm Tousley Brain Stephens, which has previously led similar lawsuits against providers of "free-to-play" online games.
Aristocrat's core business has traditionally been manufacturing poker machines for casinos, pubs and clubs.
But the company has notably upped its bet on the booming online social gaming market in recent years and acquired a number of online developers, including Big Fish Games with its catalogue of several hugely popular mobile and desktop games, played by more than 12.4 million active users every month.
Among its gaming titles are Big Fish Casino, Gummy Drop! and Fairway Solitaire.
Big Fish Games acquisition doubled the size of Aristocrat's fast-growing digital arm, which now accounts for 38 per cent of its revenue.
Aristocrat's share price was up 0.24 per cent to $2.47. The company is due to hold its annual shareholder meeting on Thursday.