Mai v. Supercell Oy

Background

Peter Mai and Diego Niño alleged that Supercell Oy’s loot boxes in Clash Royale and Brawl Stars constituted illegal gambling under California and federal law. Loot boxes could be bought with real-world money or with in-game virtual currency called gems, but players did not know which item they would receive until opening a box. The plaintiffs alleged that the loot boxes were unfair and exploited gambling-related cognitive effects, particularly among adolescents and other vulnerable people.

The first amended complaint asserted claims under California’s Unfair Competition Law (UCL), California’s Consumers Legal Remedies Act (CLRA), and for unjust enrichment. The court had previously dismissed Mai’s original complaint with leave to amend. The amended complaint added allegations about the value of loot-box prizes, studies comparing loot boxes to gambling, and another California Penal Code provision.

UCL and CLRA standing

The court first considered standing, meaning whether the plaintiffs had the required injury to bring their claims. For the UCL claims, a private plaintiff must show an injury in fact and that the plaintiff lost money or property because of the challenged conduct. The court held that the plaintiffs had not plausibly alleged economic injury. They did not allege that the loot boxes or virtual currency were defective, that they received less than promised, or that they failed to receive what they purchased. Because they received what they paid for, the court found no qualifying economic injury.

The court rejected the plaintiffs’ arguments that they had standing because Supercell allegedly misrepresented the legality of the transactions or sold an illegal product. Those arguments depended on the premise that the loot boxes were illegal gambling, which the court found was not plausibly alleged.

The court also dismissed the CLRA claim for lack of standing. It held that virtual currency was not a good or service under the CLRA, that the plaintiffs had not plausibly alleged that the loot boxes or related services were legally prohibited, and that they had not alleged damages because they received what they paid for.

Failure to state a claim

The court separately held that all claims would fail even if the plaintiffs had standing. A motion under Federal Rule of Civil Procedure 12(b)(6) tests whether the complaint’s allegations are legally sufficient to support a plausible claim.

The amended claims continued to depend on the assertion that Supercell’s loot boxes were illegal slot machines or controlled games. Under the California gambling statutes cited by the plaintiffs, the relevant device or game must involve a chance to win or lose a “thing of value.” The court held that the virtual items did not meet that requirement. Their subjective value to players, including aesthetic, entertainment, competitive, or personalization value, was not enough. The court also held that alleged sales on secondary “gray markets” did not establish value because Supercell’s terms of service prohibited the sale or purchase of virtual currency and virtual in-game items.

Because the loot boxes were not “things of value” under the relevant California statutes, the court concluded that they were not illegal slot machines or controlled games. The court therefore found that the plaintiffs had not plausibly alleged violations of the state or federal gambling laws that served as the basis for their UCL, CLRA, and unjust-enrichment claims. The court did not decide Supercell’s additional arguments that the loot boxes were games of skill or were not machines or devices under the statutes.

The court also rejected the UCL unfairness theory. It found that the alleged unfair conduct overlapped completely with the alleged unlawful gambling conduct. Because the loot boxes were not unlawful gambling, and because the unfairness theory could not be based only on subjective views of fairness or alleged harmful effects, the unfairness claim failed. The unjust-enrichment claim failed to the extent it relied on the same alleged unfair conduct.

Disposition

The court granted Supercell’s motion to dismiss the first amended complaint without leave to amend. It concluded that amendment would be futile because the loot boxes were neither illegal slot machines nor controlled games and the plaintiffs could not state a claim based on their alleged unfair effects. The action was dismissed with prejudice, a separate judgment was ordered, and the Clerk was directed to close the file. Judge Edward J. Davila signed the order.