By Andrew Silver
Sports wagering operators—along with anyone interested in the status of mandatory consumer arbitration—have their eyes on a class-action lawsuit filed by three video game players in November against Electronic Arts in the United States District Court for the Northern District of California.
Electronic Arts’ EA Sports division is the developer of popular sports video game franchises including the Madden NFL football, FIFA soccer, and NHL hockey games. The gamers filed their class action against EA alleging that the games are programmed to adjust the difficulty of games based upon individual gamers’ skill levels. By adjusting the skill level in this way, the gamers allege, they are caused to purchase more “loot boxes” called “Player Packs.” Player Packs allow gamers the chance to access superstar athletes, such as soccer star Lionel Messi, for use in the games’ “Ultimate Team” mode to improve their team. Electronic Arts has not yet responded to the lawsuit, and while its initial response was scheduled to be filed on January 11, it requested another extension from the Court in early January.
We are just beyond the opening kickoff, so to speak, in the gamers’ lawsuit against Electronic Arts, but before even getting to the heart of the lawsuit, EA will likely ask the court to compel the gamers to have their claims decided in mandatory individual arbitration, as opposed to in court as a class action. EA’s user agreement, to which gamers subject themselves, contains a provision by which gamers agree to waive the rights to a trial by jury and to participate in a class action lawsuit, in favor of agreeing to having their claims decided via arbitration under a modified version of the American Arbitration Association’s Consumer Arbitration Rules. Like EA, most sports wagering operators’ account agreements contain similar arbitration clauses.
Although the Federal Arbitration Act generally allows for arbitration clauses to exist, consumers have occasionally been successful in getting around arbitration clauses, such as that in EA’s user agreement, in order to pursue a class action. However, in 2015, in another class action lawsuit brought by a gamer against Electronic Arts, the United States District Court for the Eastern District of New York rejected a gamer’s attempt to void EA’s arbitration clause, and required that the claims be decided in arbitration.
Much has changed as it relates to consumer arbitration since 2015. Indeed, in 2017, the Consumer Financial Protection Bureau (CFPB) issued a rulemaking that served to limit companies’ ability to require consumers to submit to mandatory arbitration rather than pursue class actions in court. However, that rule was short-lived, as later in 2017, the Senate invoked the Congressional Review Act to vote to repeal the rule, in a measure approved by President Trump. Now, many are speculating that the incoming Biden administration may attempt to issue a similar rulemaking (whether through the CFPB, the Federal Trade Commission, or some other agency) in an effort to once again scale back businesses’ ability to avoid class actions in favor of sending consumer lawsuits to mandatory arbitration.
The new Player Pack lawsuit against Electronic Arts could have implications for many businesses. Although it has not yet responded to the lawsuit, EA will almost certainly ask the court to enforce its arbitration agreement. The gamers will contend in response that the arbitration clause is unenforceable under California law—an argument which has occasionally succeeded in California courts. However, if the incoming Biden administration were to act quickly to limit arbitration, that might provide the gamers with added ammunition in their efforts to avoid arbitration.
Because of the potential arbitration impact, many businesses, including sports wagering operators, will have an eye on the gamers’ lawsuit against Electronic Arts. The case could be particularly relevant to sports wagering operators for multiple reasons. First, because sports wagering operators almost universally employ arbitration clauses in their customer agreements, any court rulings (or action by an incoming administration) that chip away at the legality of consumer arbitration would certainly impact how sports wagering operators do business.
Second, and less obviously, there is a potential gambling connection to the gamers’ lawsuit against Electronic Arts. This is because the plaintiffs refer to purchasing the Player Packs as “games of chance,” in that by purchasing a loot box like a Madden Player Pack, they are taking a gamble in the hopes of adding a superstar player such as Stephon Gilmore or Lamar Jackson to their Ultimate Team. And while others have discussed the question of whether loot boxes are, in fact, “gambling,” the more important issue for sports wagering operators is that if gamers are successful in avoiding arbitration against EA, consumers may consider filing class actions against other businesses offering “games of chance,” such as sports wagering operators.
The puck has just been dropped in the gamers’ Player Pack lawsuit against Electronic Arts. The outcome of the lawsuit along with the prerogatives of the Biden administration could have a significant impact on businesses’ ability to subject consumers to arbitration. Because of the potential impact on their businesses, sports wagering operators will be paying particularly close attention.
The preceding article was first published by Forbes.com.