Memorandum Opinion and Order
Mаrgo Phillips brings this proposed class-action suit against Double Down Interactive LLC, alleging that Double Down’s online casino games are not just games — they are unlawful gambling devices under Illinois state law.
I. Background
For purposes of this motion, the Court accepts as true the factual allegations in the First Amended Complaint and draws all reasonable inferences in the plaintiffs favor. McGowan v. Hulick,
To play the- Casino’s games, players must have virtual “chips.” Id. ¶ 2: Players use these chips to wager on the games. Id. First-time visitors to the site are offered a bundle of free chips (one million chips, to be exact) with which to play. Id. ¶¶ 2, 24. Returning players are offered additional virtual chips free of charge each day. R. 1, Exh. E ¶4 (John Clelland Deck); R. 51, Pl'.’s Resp. to Def.’s' Second Citation to Add’l Authority, at 2 n.2 (noting that players are awarded free chips on Double Down’s website and citing, without contesting, Double Down’s assertion that returning players are given additional free chips each day); see also Double Down Casino,. http://www.doubledowncasino.com (last visited March 25, 20Í6) (website states: “Return to the game daily and receive more free ’chips every day.”). To begin playing, players select the amount of chips they would like to wager on a particular game. Am. Compl. ¶ 28. For example, if playing a slot machine, a player would select how many chips he or she wishes to
Double Down Casino chips can only be used to play its online games. Double Down does not offer any cash for the virtual chips, meaning players are not able to “cash out” their chips with Double Down for ‘“real world’ money, goods, or other items of monetary value.” R. 27-1, Exh. A, Rebekah H. Parker Deck at 6 (Double Down’s “Terms of Use,” available at http://www.doubledowncasino.com); R. 36-1, Pl.’s Resp. Br. at 110 (noting that “[w]hen players win or buy ... Chips, they can either use the chips to make future wagers or ‘cash out’ by selling their Chips to other Double Down Casino players on an external ’black market.’ ”); Am. Compl'. ¶ 34' (alleging that players can cash out their accounts on the secondary market only); see also R. 51, PL’s Resр. to Def.’s Second Citation to Add’l Authority, at 3. .According to the site’s Terms of Use, Double Down specifically “prohibit^]” the “transfer of Virtual Currency [that is, virtual chips]” and requires players to agree that they will not, “[t]ransfer, sell, or resell” chips to- any other ■ party. R. 27-1, Exh. A, Rebekah H. Parker Deck at 6. But even so, according to Phillips (and accepted as true for deciding the dismissal motion), players- are still able to “cash out” their chips by listing their1 accounts on the secondary market. Am. Compl. ¶ 34.
As part of its recordkeeping, Double Down keeps track of each wager, outcome, and win made by each player. Id. ¶ 36. It also regularly analyzes how “chips are consumed”; that is, how lоng’ it takes for players to run out of chips. Id. ¶ 37. It is through the sale of chips that Double Down (and in .turn, its parent company IGT) earns revenue. Id. ¶ 21; R. 27-1, Exh. B, IGT Form 10-K at 7. In 2014, for example, Double Down (as reported in IGT’s annual SEC filings) reported over $240 million in revenue.
Around January 2013, Phillips began playing games at Double Down Casino through- her Facebook- account. Am. Compl. ¶38. After she used all of her initial free chips (that is, the one million chips given to first-time users), she began buying chips. Id. From January 2013 to April 2015, Phillips ■ played a variety of Double Down’s slots and roulette games, each time wagering her chips in an attempt to win additional chips. Id. ¶ 39. Phillips alleges that during that same time pеriod — from January 2013 to April 2015 — she wagered and lost over $1,000 worth of chips. Id. She further alleges that she lost at least fifty dollars’ worth of chips in the last six months, /¿’('alleging that on March 7, 2015, she paid $59.00 to Double Down for 35 million chips, all of which she later lost). As will be discussed later, the fífty-dollar allegation is a necessary threshold for the primary Illinois statute at issue.'
. In April 2015, Phillips filed a class-action complaint against Double Down in the Circuit Court of Cook County, Illinois, alleging that Double .Down operates unlawful gambling devices, and that “[b]y operating its virtual casino, [Double Down] has illegally profited from thousands of Illinois consumers.” R. 1, Exh. A, State Court Compl. ¶4. Phillips brought suit on her own behalf, as well as on behalf of “[a]ll individuals domicilеd in the State of Illinois who lost $50 or more to [Double Down] through Double Down Casino.” Id. ¶ 35. Double Down removed the case to federal court. See supra n.l.
After the case was removed, Double Down filed a motion to dismiss all counts in Phillips’s original complaint. R. 12. In response, Phillips filed an Amended Complaint. R. 18, Am. Compl. In her Amended Complaint (which this Opinion will simply call her “Complaint” going forward, for convenience’s sake), Phillips asserts four causes of action. In Counts 1 and 2, Phillips argues that Double Down’s casino violates the Illinois Loss Recovery Act, 720 ILCS 5/28-8(a). Id. ¶¶ 48-59, 60-70. In Count 3, Phillips argues that Double Down’s casino violates the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS §§ 505/1 et seq. Id. ¶¶ 71-82. Finally, in Count 4, Phillips argues that Double Down has been unjustly enriched through its gambling devices. Id. ¶¶ 83-87. Double Down then filed its current motion to dismiss all counts in Phillips’s Complaint. R. 24.
II. Legal Standard
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). This short and plain statement must “give the defendant fair notice of what the claim is and the grounds upon which it rests.” Bell Atl. v. Twombly,
“A motion under Rule 12(b)(6) challenges, the sufficiency of the complaint to state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police Chicago Lodge No. 7,
III. Analysis
A. Counts 1 and 2: Illinois Loss Recovery Act
The first two counts of the Complaint rely on Section 28-8 of the Illinois Loss Recovery Act. 720 ILCS 5/28-8, That section creates a cause of action to recover gambling losses: “Any person who by gambling .. .lose[s] to any other person, any sum of money or thing of value, amounting to ...$50 or more ...may sue for and recover the money or other thing of value[] so lost.” 720 ILCS 5/28-8(a); Reuter v. MasterCard Int'l Inc.,
Double Down advances several аrguments in targeting Phillips’s Illinois Loss Recovery claims, Double Down argues that: (1) its online casino games are not “gambling devices” under the statute, (2) it is not a “winner” tinder the statute, and Phillips is not a “loser,” (3) the Complaint does not adequately plead that Phillips suffered a loss, and (4) Counts 1 and 2 are duplicative. R. 27, Defi’s Br. at 6-15.
i. Online Casino Games as “Gambling Devices”
Double Down first argues that its online games aré not “gambling device[s].” The Illinois Loss Recovery Act defines a “gambling device” as “any clock, tape machine, slot machine, or other machines or device for the reception of money or other thing of value” that on “chance or skill.., is staked, hazarded, bet, • won or lost.” 720 ILCS ,5/28-2(a). Double Down .asserts that its online games are not covered by the Act because (a) only tangible devices, not internet games, can be gambling devices; and (b) its virtual chips are not “things of value.” Def.’s Br. at 12-15.
In Double Down’s view, the definition of gambling device “clearly refers to a physical, tangible object — a device that can ‘receive’ money like a slot machine,” and not “internet games which consist of intangible software.” Id. at ,14-15. Double Down invokes a statutory-interpretation principle known as ejusdem generis, which is a Latin term that means “of the samé kind.” This principle advises that “[w]here, general-words follow specific words in a statuto
Double Down’s reliance on the similar-nature interpretive principle does not work for a variety of reasons. To start, Double Down does not explain why it chose tangibility as the common thread that ties together a clock, a tape machine, and a slot machine. In other words, for this list of gambling devices, why is the “nature”' in the “similar in nature” interpretive principle, Yates,
Another crucial point is that, although Illinois courts have yet to specifically address whether internet games are gambling devices, the Illinois Supreme Court has taken a broad view of what is a “gambling device.” E.g., People v. McDonald,
Double Down next argues that its online games are not “gambling devices” because its virtual chips are not “thing[s] of value.” Def.’s Br. at 12. Double Down contends that because players are only able to wager chips on the games, which are not “thing[s] of value,” its online games cannot be considered “gambling devices.” Id. (Remember, the Illinois- Loss Recovery Act defines a gambling device as: “any clock, tape machine, slot machine, or other machines or device for the reception of money or other thing of value” that on “chance or skill ... is staked, hazarded, bet, won or lost.” 720 ILCS 5/28-2(a) (emphasis added).) Phillips disagrees, arguing that Double Down’s chips are things of value. R. 36-1, Pl.’s Resp. Br. at 6-9. She points to the fact that the chips can be purchased by players for a discrete sum, that chips grant players the right to place additional wagers on casino games without spending any additional mоney, that Double Down makes - millions of dollars on chip sales each year, and that players can buy and sell their accounts (and with it their chips) on the secondary market. Id. at 7-9; Am. Compl. ¶¶ 52, 64.
Phillips’s argument has surface appeal. When the players buy the chips, obviously the chips have a monetary value, and obviously Double Down has made money (indeed, millions of dollars) on chip sales over the past several years. At the end of the day, however, the Court need not decide whether the chips are'“things of value,” because the real problem for Phillips is that.Double Down’s online casino games do not have a “loser” or a “winner,” as those terms are used in the Illinois Loss Recovery Act. That is the next issue up for discussion.
ii. No “Winner” or “Loser”
The statutory language of Section 5/28-8 of the Illinois Loss Recovery Act, as well as the case law, make clear that in order for a plaintiff to recover under the Act, there must be a “winner.” It is against the winner that a plaintiff is entitled to recover his or her gambling losses. 720 ILCS 5/28-8 (“Any person who by gambling shall lose to any other person, any sum of money or thing of value, ... may sue for and recover the money or other thing of value, so lost .. .in a civil action against the winner (emphasis added)); Pearce v. Foote,
Here, Double Down is not a “winner.” Double Down .never directly participated in the games, Reuter,
To resist this conclusion, Phillips also argues that Double Down directly participates in the wagers because of “the way Double Down realizes its revenuе.” PL’s Resp. Br. at 13. Phillips contends that because Double Down “refuses to assign revenue generated from the sale of the •Chips [in its annual public filings] until a user actually wagers and loses them in the Casino games,” Double Down directly participates in each game — and thus, wins when Phillips loses. Id. at 13-14. Phillips, however, misunderstands what it means to defer revenue. IGT (Double Down’s parent company) notes in its 10-K that its “revenues” from Double Down “include deferral adjustments based on the estimated period of service or chip consumption.” IGT Form 10-K at 7. All this means, however, is that Double Down does not recognize its chip revenue immediately upon sale; rather, it recognizes revenue once the chips are “estimаted” to have been consumed. Id. at 64 (“Revenues from player purchases are recognized ratably over the estimated average service period in which the chips are consumed based on historical data analysis.”). The fact that for ;accounting purposes Double Down does not immediately recognize the sale of its chips in the fiscal period in which a player paid for those chips does not change the fact that Double Down still never faces the possibility of losing that
Finally, Phillips is likewise not a “loser” under the statute. When Phillips bought more chips, she was in essence buying the right to continue playing the games. And Phillips got to do just that: she got to use those chips to continúe playing Double Down’s online casino games. In other words, she did not “lose” the value of those chips. See, e.g., Humphrey v. Viacom, Inc.,
iii. Pleading of Amount of Loss
Double Down separately contends that Phillips failed to adequately plead the amount of loss. For the sake of completeness, the Court will address this argument. Assuming (contrary to what the Court just held above) for the moment that using the chips should be considered a “loss” under the Illinois Loss Recovery Act, Phillips would have adequately pled the amount of loss. To plead the amount of loss under Section 5/28-8(a), a plaintiff must “identify the winner, the amount lost to that winner, and the date of the loss.” Langone,
Hеre, if using the chips were considered a loss under the Act, Phillips adequately pled the details of the loss. In her Complaint, Phillips alleges that she lost at least $1,000 between January 2013 and April 2015 to Double Down.
iv. Duplicative Counts
Lastly, Double Down argues that Counts 1 and 2 of the Complaint are dupli-cative. Def.’s Br. at 17. But this argument, like the prior one, misses the mark. It is Phillips’s contention that Double Down’s Casino offers “continuous gambling sessions,” and that unlike “previous gambling devices where[] consumers gamble and exit after some time to conclude one gambling transaction,” a , session at Double Down Casino lasts until a player cashes out their account (presumably, on the secondary market). Am.. Compl. ¶¶ 33, 55;
In Count 2, by contrast, Phillips bases her claim on the theory she is instead entitled to recover only those losses that occurred in the six months immediately preceding the filing of this action, and nothing more. Am. Compl. ¶¶ 60-70; PL’s Resp. Br. at 19. Phillips raises this claim in the alternative, something she clearly states in her complaint. Am. Compl. ¶¶ 60-70 (Second Cause of Action labeled as being '“In .the Alternative to the First Cause of Action”). Phillips had every right to raise this claim in the alternative. Carlson v. Nielsen,
B. Count 3: Illinois Consumer Fraud and Deceptive Practices Act
In Count 3, Phillips contends that Double Down’s gambling devices violate the Illinois Consumer Fraud and Deceptive Practices Act (“ICFA”), 815 ILCS 505/1 et seq. Phillips alleges that Double Down treated her “unfair[ly]” and that Double Down’s games “offend[] Illinois’[s] public policy against unlawful gambling and [are] ... unethical, oppressive, [and] unscrupulous.” Am. Compl. ¶ 78.
Illinois’s Consumer Fraud Act is designed “to protect consumers from unfair methods of competition and other unfair and deceptive business practices.” Batson v. Live Entm’t, Inc.,
In determining whether particular conduct is unfair, the Court considers whether the cоnduct: “(1) offends public policy; (2) is immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to consumers.” Batson,
Phillips first argues that Double Down’s games offend Illinois’s public policy against unlawful and unregulated gam
Phillips next argues that Double Down’s games are “immoral” and “otherwise unethical, oppressive, [and] unscrupulous,” because they are designed to encourage illegal gambling and to exploit the psychological triggers associated with gambling and addiction. Am. Compl. ¶ 78. To satisfy this criterion, a plaintiff must establish that the defendant’s conduct is “so oppressive [that it] lеave[s] the consumer with little alternative except to submit to it.” Robinson,
Phillips' also contends that Double Down’s conduct of inducing consumers to buy chips caused substantial injury. She argues that she personally suffered a substantial economic injury of more than $1,000 as a result of Double Down’s conduct. Am. Compl. ¶¶ 39, 79; PL’s Resp. Br. at 21. She further alleges that when her injuries are combined with the losses suffered by the “public as a whole,” “they are undeniably substantial.” PL’s Resp. Br. at 21. A practice causes substantial injury “if the injury is (1) substantial; (2) not outweighed by any countervailing benefits to consumers or competition that the practice produces; and (3) one that consumers themselves could not reasonably have avoided.” Batson, 746 F.3d at 834. Here, Phillips has failed to show that she could not have reasonably avoided buying additional virtual chips. She could have avoided the cost of buying more chips by either opting for alternative entertainment when she ran out of chips, or by stopping play and waiting a day for an additional allotment of free chips. E.g., Kremers v. Coca-Cola Co.,
C. Count 4: Unjust Enrichment
Finally, in Count 4, Phillips raises an unjust enrichment claim. In Illinois, to state a claim based on a theory of unjust enrichment, “a plaintiff must allege that the defendant has unjustly retained a benefit to the plaintiffs detriment, and that defendant’s retention of the benefit violates the fundamental principles of justice, equity, and good conscience.” HPI Health
Here,: Phillips’s unjust enrichment claim is based on. the same allegedly improper conduct that her Illinois Loss Recovery Act claims (Counts 1 and 2) and Illinois Consumer Fraud and Deceptive Practices Act claim (Count 3) are based on, namely, that Double Down Casino аllegedly operates unlawful gambling devices. But those claims have been rejected. Because Phillips’s unjust enrichment claim rests on the same conduct alleged in Phillips’s first three counts — all of which have already been found invalid — Phillips’s unjust enrichment claim must also be dismissed. Cleary,
IY. Conclusion
For the reasons discussed above, Double Down’s motion to dismiss [R. 24] is granted. Phillips has already amended her complaint once; and does not propose any other potential amendments, so the dismissal is with prejudice.
Notes
. Double Down removed the case from state court to federal court, R.. 1, Notice of Removal. This Court has jurisdiction under 28 U.S.C. § 1332(d) (Class Action Fairness Act), because the case meets the class-size, citizenship, and amount-in-controversy requirements, The proposed class has more than 100 members: Double Down represents that from January 1, 2013 to March 31, 2015 (the time period that Phillips accessed the site), nearly 18,000 people either accessed Double Down from Illinois or bought at least $50 worth of chips from an Illinois IP address. Id. ¶ 19. The
. Citations to thé record áre noted as "R.” followed by the docket number ánd the page or paragraph number.
. Although Federal Rule of Civil Procedure 23(c)(1) requires that certification be decided as soon as practicable, a defendant may ask for a merits decision early on, even before a Rule 23 decision, if the defendant is willing to forgo preclusive effect and prefers defending against the members of the class one-by-one. Wiesmueller v. Kosobucki,
. In her complaint, Phillips repeatedly relies on IGT’s 10-K and states that Double Down "saw revenues of over $240 million from the sales of online chips” in 2014. Am. Compl. ¶ 23 (emphasis omitted). A review of IGT’s 10-K for that same year, however, suggests that Double Down actually had revenue of over $280 million from social 'gaming, which appears to consist only of chip sales from Double Down. R. 27-1, IGT Form 10-K at 6-7, 36, 40.
. Double Down also does not explain what a “clock” or "tape machine” is in the context of gambling devices. The Court did not find an answer on "tape machine.” But the reference to "clock” is likely a "stock clock.” See State v. Grimes,
. Phillips filed her initial complaint- in state court on-April 10, 2015, See R. 1, Notice of Removal, Exh. 1 at 2. She filed her First Amended Complaint on July 2, 2015. R. 18.