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James Gatto

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Jim Gatto is a partner in the Intellectual Property Practice Group in the firm’s Washington, D.C. office. He is Co-Leader of the Artificial Intelligence Team, the Blockchain & Fintech Team, and Leader of the Open Source Team.

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Social casino games remain incredibly popular and profitable. This success has drawn attacks from plaintiffs’ class action lawyers in the form of gambling loss recovery lawsuits and other consumer-based actions. Some have been successful, mostly in Washington state, netting plaintiffs hundreds of millions of dollars. This has created an incentive for more lawsuits. Some social casino game companies have evolved their business model to include a dual currency, sweepstakes model. This model has also drawn a substantial number of lawsuits and a call to action by the American Gaming Association (AGA). Last August, the AGA published a position paper imploring gaming regulators and state Attorneys General to investigate companies or platforms that offer games under the “sweepstakes” model to determine whether or not these operators are in compliance with their respective laws and regulations, and to take appropriate action if not. Some regulators have responded by initiating actions against both the game companies and payment processors. Numerous private lawsuits have also been filed against game companies, and some have even included payment processors and app stores. In response, some social casino game operators have ceased operations in certain states. As many legal misconceptions exist with this model, game companies, payment processors and app store operators need to understand the evolving legal risks associated with this social casino sweepstakes model, and the steps they can take to mitigate such risks. This post addresses those issues. Continue Reading Social Casino Sweepstakes Model is Under Fire – What Game Companies, Payment Processors and App Stores Need to Know

In the latest string of gambling cases involving social casino-style apps out of Washington state, a federal jury has awarded a class of players nearly $25 million for injuries arising from the use of two of High 5 Game’s mobile applications: High 5 Casino and High 5 Vegas.Continue Reading Operating Social Casino-Style Applications Continues to be Costly in Washington State

Introduced in response to certain digital media sellers (e.g., game publishers) revoking consumer access to purchases with little to no recourse, AB 2426 forces sellers of “digital goods,” such as movies, apps, games, books and music to clarify what a consumer is actually receiving in connection with their “purchase.” Often companies refer to the “purchase” or “sale” of digital goods, yet the associated terms of service make clear that the buyer only receives a revocable license to the such goods. In some cases, if a buyer violates the terms of service, the license is revoked and the user is denied further access to the digital goods. In other cases, a buyer may be denied access to digital goods it has “purchased” if the digital media platform shuts down.Continue Reading New California Law Targets Sellers of Digital Goods

On August 28, the CFPB issued a Consumer Advisory warning that it believes video game companies are targeting children for monetary gain. With 45.7 million U.S. children engaged in video gameplay, the agency is concerned about the financial risks that games and virtual worlds pose, especially to young consumers. This Advisory highlights a growing focus on the game industry’s practices, which allegedly mimic traditional banking systems but lack corresponding consumer protections. Continue Reading Regulators Ramp up Scrutiny of Games’ Business Models

The Consumer Financial Protection Bureau (“CFPB”) published a report on Banking in Video Games and Virtual Worlds (“Report”) that warns of greater scrutiny of and enforcements against the financial services offered in games and virtual worlds that increasingly resemble traditional financial products and services offered by regulated banking and payment systems. The Report is applicable to all types of games and virtual worlds, but creators and publishers of blockchain games and metaverses, in particular, should take note of this report.Continue Reading CFPB Report Targets Games and Virtual Worlds – What Blockchain Game and Metaverse Companies Need to Know

Roblox recently announced that it is working on generative artificial intelligence (AI) tools that will help developers who build experiences on Roblox, to more easily create games and assets. The first two test tools create generative AI content from a text prompt and enable generative AI to complete computer code. This is just the tip of the iceberg on how generative AI will be used in games and a variety of other creative industries. Music, film, art, comic books, and literary works are some other uses. AI tools are powerful and their use will no doubt be far reaching. In the near term, so too will the associated legal issues. Some of the legal issues include:Continue Reading How Generative AI Generates Legal Issues in the Games Industry

The rising prevalence of crypto and virtual currencies has invited the scrutiny of several regulatory bodies who continue to grapple with the unique challenges posed by blockchain technology, FinCEN being one prime example. The Financial Crimes Enforcement Network (“FinCEN”) is an arm of the United States Department of Treasury that seeks to impede financial crimes such as money laundering and terrorist financing, and was the first financial regulator in the U.S. to address virtual currency.Continue Reading Blockchain Game Developers and FinCEN: When are State Money Transmission Laws Applicable?

This was originally published by Esports Insider on June 4, 2021

Within the blockchain space, one of the fastest-growing areas is NFTs. Within the games space, esports is growing rapidly. So naturally the combination of NFTs and esports should have tremendous potential. This article will explore some opportunities at the intersection of these trends and some of the potential legal issues that might arise.
Continue Reading The Legal Considerations of Esports NFTs

The allegations of gambling issues with games continues. Last week, a class action lawsuit was filed against  Apple relating to games in its App Store that include loot boxes. The complaint alleges that sale of such games are predatory practices enticing consumers, including children, to engage in gambling and similar addictive conduct in violation of California law. The suit alleges that loot boxes are like Vegas-style slot machines and allegedly constitute illegal slot machines when played on an iPhone or similar device.
Continue Reading Players Sue Apple Over Loot Boxes