A California sports betting lawsuit against Fliff, the “social sportsbook” operating in states without legal sports betting, will be settled by arbitration, a district court judge ruled on January 5.
Fliff player Bishoy Nessim is seeking $7 million in a class action lawsuit accusing the company of illegally operating California sports betting.
Judge Sunshine S. Sykes of the Central District of California agreed with Fliff that players waive the right to settle disputes in court when they agree to the company’s terms and conditions.
Fliff avoids California sports betting lawsuit
The case now moves to third-party arbitration. This alternative dispute resolution relies on a neutral arbitrator to preside over a private process where both parties present their arguments and evidence.
This prevents “hundreds if not thousands” from joining in on a class action, according to Nessim’s lawyers.
Fliff declined to comment on this story.
Court rejects arbitration argument
Sykes rejected Nessim’s argument that a prior California ruling established a precedent for relief.
Nessim presented a quote from a California Supreme Court decision in Armendariz v. Found. Health Psychcare Servs., that stated an arbitration agreement may not limit statutorily imposed remedies such as punitive damages or attorney fees.
“After careful review of Armendariz, the Court finds Nessim and his counsel mischaracterize the above quote,” Sykes said. “The quote is not made in relation to a discussion of substantive unconscionability. Rather, it is made in analyzing whether an arbitration agreement’s limitation of remedies in Fair Employment and Housing Act actions specifically renders the arbitration agreement contrary to public policy and thus unlawful.”
Operating in California sports betting market
Californians have rejected attempts to legalize sports betting via multiple ballot referendums. Home to the largest population in the US, the Golden State would quickly become one of the most important betting markets in the country.
Another attempt to legalize California sports betting is pending, though it faces staunch opposition from the state’s gaming tribes.
How Fliff caters to California sports betting
Fliff contends it legally offers an alternative option via a sweepstakes model. It offers lines and odds like a traditional sports betting app. Users can deposit money, which is exchanged for “Fliff Cash” to place bets, though they can also do so via free “Fliff Coins.”
Users may only earn Fliff Cash if their account balance hits zero or through a “no-cost giveaway” on social media, according to Fliff’s website. They can also earn Fliff Cash by sending a hand-addressed envelope to a P.O. box in Austin, Texas, asking for credits.
Sweepstakes model called into question
Because users can always make bets without depositing cash, the company operates a sweepstakes, not a sportsbook or casino, Fliff argues.
Nessim argues that Fliff does not meet California’s sweepstakes definition because neither random selection nor luck dictates who wins prizes.
Multi-state jurisdiction issue
Fliff argues that its sweepstakes rules adhere to law in Pennsylvania, where the company’s headquarters is listed. Nessim has contended that the company is actually based in Texas, and because it caters to Californians, Golden State law should apply.
Fliff provided sufficient evidence that Pennsylvania is its principal place of business, at least at the time of contract information, Sykes said.
“Despite the seeming unfairness of the situation as it exists, with Fliff being able to claim a connection to Pennsylvania despite it having moved to Texas where it now runs its business from, the Court finds, because Fliff’s principal place of business ‘at the time of contracting’ was Pennsylvania, there is a substantial relationship between Pennsylvania and the Parties,” Sykes said.
