Last week, a district court in the Northern District of California ended a suit alleging unlawful and unfair conduct by videogame developer Supercell Oy. Plaintiffs alleged that Supercell's use of loot boxes in its popular games Clash Royale and Brawl Stars constituted violations of California's Unfair Competition Law (Business & Professions Code § 17200) and Consumers Legal Remedies Act (Civil Code § 1750). At the crux of Plaintiffs' complaint were claims that loot boxes are illegal gambling games under California law and that loot boxes are inherently unfair because they exploit the same cognitive traps as gambling.
Ruling that Plaintiffs did not have standing to sue under section 17200 or section 1750, the court found that Plaintiffs suffered no economic injury because they received the in-game currency and loot boxes they paid for, and because loot boxes are not prohibited by law. The district court explicitly noted that its section 17200 analysis conforms with last year's dismissed loot box suits against Apple and Google.
The district court then rejected Plaintiffs' claims on the merits. First, it found that Supercell's loot boxes did not constitute unlawful gambling under the California Penal Code—a machine or game in which a "thing of value" may be won or lost by chance. While loot boxes have subjective, non-monetary value to gamers, the court held that this alone does not render a loot box a "thing of value" under California law. The Ninth Circuit has also held that a virtual item that can be sold for real currency is not a "thing of value" if its terms of service prohibit such sales.
Second, the district court found Supercell's conduct fair and not a violation of California's Unfair Competition Law or otherwise unjust enrichment. Plaintiffs alleged that Supercell engaged in unfair and immoral conduct contrary to public policy by promoting gambling as entertainment to vulnerable populations such as families and children. But because there was complete overlap between Supercell's allegedly unlawful and allegedly unfair conduct, the court ruled that Plaintiffs' unfairness claim must fail because Supercell's conduct was lawful.
Ruling that Supercell's loot boxes were neither illegal games nor caused unfair effects, the court concluded that amendment would be futile and dismissed Plaintiffs' action with prejudice.
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