Video Game Companies Face Expanding Consumer Litigation Risks

The consumer litigation trends in the video game industry extend beyond traditional advertising or product defect theories. User interfaces, purchase flows, promotional offers, and even terminology such as “buy” can become the basis for allegations that consumers received a different product or experience than they reasonably expected, while game design features may be targeted under regulatory frameworks.

This Insight examines several emerging areas of consumer litigation affecting the video game industry, including dark patterns and in-game pricing, misrepresentations in advertising, privacy claims, representations about whether digital games are purchased or licensed, and claims that certain game mechanics or platforms constitute unlicensed gambling, and provides practical steps that companies can take to minimize their risk of litigation throughout a product’s design and production lifecycle.

DARK PATTERNS AND IN-GAME PRICING DRAW SCRUTINY

One developing theory focuses on so-called dark patterns, or user-interface and design practices that allegedly steer consumers toward decisions they might not otherwise make. These actions may be pursued by consumers under state consumer protection statutes that create private rights of action against misleading or deceptive business practices.

The Federal Trade Commission has identified practices such as misleading countdown timers, hidden fees, and interfaces that obscure material information as potential dark patterns. The agency previously pursued gaming-related allegations involving design features that allegedly resulted in unintended purchases.

Private plaintiffs’ lawyers are now pursuing similar theories in gaming, with particular attention to so-called “fake urgency” discounts, “pay to skip,” and confusing and frictionless in-game currency transactions. For example, a mass arbitration campaign involving the mobile game Last War: Survival alleges that certain in-game offers used discount percentages, limited-time messaging, or scarcity claims that did not reflect genuine savings or expiration periods. No court has determined the merits of those allegations.

The theory illustrates how common monetization features can become potential litigation targets. For games built around frequent microtransactions, questions may arise not only about the price charged but also the way in which the interface communicates discounts, urgency, scarcity, or the value of virtual goods, especially for games played by minors.

REPRESENTATIONS REGARDING GAMEPLAY MAY CREATE LIABILITY

Game publishers and developers seeking to promote their games may face false-advertising risk if the gameplay is not accurately described. The recent outcome in Skillz Platform Inc. v. Papaya Gaming Ltd. illustrates the potential consequences of allegedly misleading representations about the mechanics of a game, apart from any transaction screen.

Skillz and Papaya compete in the real-money skill-based mobile gaming market, in which players pay to enter tournaments for the opportunity to win cash or other rewards. Skillz alleged that Papaya falsely advertised its games as contests among human players while using undisclosed bots in tournaments.

Following an April trial, a jury found Papaya liable for false advertising under the Lanham Act and New York General Business Law and awarded Skillz $420 million in damages.

In July, the US District Court for the Southern District of New York rejected Papaya’s post-trial challenges and awarded Skillz $719 million in disgorgement, along with attorney fees and certain costs. The court concluded that there was substantial evidence of an advertising scheme that deceived consumers about the nature of Papaya’s product.

While Skillz involved claims by one gaming business against another rather than a consumer class action, the dispute offers a broader lesson for the industry, and the same factual allegations could potentially support consumer litigation. Statements about gameplay, opponents, odds, rewards, pricing, or other features can create litigation risk when plaintiffs contend that the underlying game experience does not match the representations used to attract or retain players.

DIGITAL PRIVACY CLAIMS CAN DRIVE CONSUMER LITIGATION

Plaintiff firms have established robust playbooks for pursuing privacy claims in the digital era. Statutes involving data collection and the use of biometrics often present consumers with the right to recover statutory damages, which can help aggregate claims to drive large demands without the need to individually adjudicate any actual harm or damages. These strategies have evolved in the contexts of digital advertising pixels and facial recognition, among others.

For example, while the Video Privacy Protection Act was originally written to protect consumer privacy at brick-and-mortar video rental stores, a 2024 decision, Aldana v. GameStop, Inc., No. 22-CV-7063-LTS (S.D.N.Y. Feb. 21, 2024), held that the statute may be applicable to video game sales. Dozens of lawsuits and mass arbitration campaigns followed, echoing this same theory of liability.

Recently, courts have pushed back against the trend. For example, in Lakes v. Ubisoft, Inc., 2025 WL 1036639 (N.D. Cal. Apr. 2, 2025), a federal court held that an industry-standard privacy policy and consent flow could bar recovery.

Generally, the video game industry can expect plaintiff firms to continue asserting novel applications of privacy statutes to video games over the handling of consumer data collected from websites and through in-game mechanics.

WHEN “BUYING” A GAME MEANS LICENSING IT

Another emerging issue concerns what consumers actually acquire when they pay for digital games. A putative class action filed in June in the US District Court for the Northern District of California challenges the use of terms including “Buy Now” and “Confirm Purchase” for digital games that plaintiffs allege are provided under a revocable license rather than sold to consumers.

The complaint asserts false advertising and other California consumer protection claims. Those allegations remain unproven.

The case follows a change in California law specifically addressing digital goods. Effective January 1, 2025, California Business and Professions Code Section 17500.6 generally restricts sellers from using terms such as “buy” or “purchase” for digital goods when consumers receive a license unless the seller obtains specified affirmative acknowledgment or provides a clear and conspicuous pre-transaction disclosure explaining the license arrangement. Digital applications and games expressly fall within the statute.

For gaming companies, the issue reaches beyond terms of service. Disclosures presented only in contractual language may not resolve claims directed at the terminology consumers encounter during the transaction itself.

GAMBLING THEORIES PRESENT ANOTHER FRONT

Gaming companies also continue to face claims seeking to characterize certain products as unlawful gambling operations. These disputes can turn on state-specific definitions of gambling, including whether a game involves consideration, chance, and something of value.

Recent litigation involving online casino-style games illustrates the theory. Plaintiffs have alleged that virtual currencies used to play chance-based games constitute things of value and have sought recovery of player losses under state gambling-loss and consumer protection laws.

A 2025 complaint involving No Limit Coins, for example, alleges that players can use virtual currency in casino-style games and potentially redeem winnings for cash-value prizes. Those allegations have not been adjudicated.

Outside of casino-style games, mechanics such as loot boxes have also drawn scrutiny as gambling mechanics. Following litigation by the New York attorney general asserting that loot boxes were a form of unlicensed gambling,[1] multiple plaintiff firms launched class actions and mass arbitration campaigns echoing those theories.

Mechanics involving variable rewards may also be scrutinized as potentially creating addictive features, creating an additional level of alleged harm to users.

The legal analysis is highly dependent on the product and jurisdiction, but the broader risk is relevant to companies offering sweepstakes, casino-style mechanics, paid competitions, or other products in which virtual currency and real-world value intersect.

PRACTICAL CONSIDERATIONS FOR GAMING COMPANIES

These developments suggest that consumer litigation risk should be considered throughout product design and monetization rather than only when reviewing traditional advertising. Companies should:

• Review consumer-facing representations across advertising, app-store descriptions, purchase screens, promotional offers, gameplay instructions, and terms of service for consistency with actual game functionality.
• Assess how consumers encounter discounts, countdown timers, virtual currency, and limited-time offers, including whether qualifying information is sufficiently prominent.
• Evaluate whether purchase terminology and disclosures accurately describe the rights consumers receive, particularly in jurisdictions with specific requirements governing licensed digital goods.
• Review privacy policies and related disclosures, and the way consumers encounter and consent to those disclosures, to align with best practices and statutory requirements.
• Periodically assess whether arbitration agreements provide conspicuous notice and legally sufficient assent, and whether mass arbitration provisions remain appropriate in light of developing law, arbitral rules, and the company’s particular consumer base.

LOOKING AHEAD

The emerging litigation discussed above does not point to a single theory that is unique to video games. Instead, it reflects plaintiffs’ increasing willingness to apply familiar false advertising, consumer protection, gambling, and contract theories to the distinctive ways in which games are designed and monetized.

Consistency is increasingly important for publishers, developers, and gaming platforms. What a game says, what its interface communicates, what its terms provide, and what the player actually experiences may all be examined together.

As new monetization models and digital distribution practices develop, companies that incorporate litigation risk into product, marketing, and user-experience reviews will be better positioned to identify potential disconnects before they become disputes.