Fliff earns wins in court as judge sends lawsuit to arbitration 

A California federal judge has handed free-to-play sweepstake operator Fliff Inc a win in court, ruling that the firm’s arbitration agreement is binding in its ongoing lawsuit brought by a disgruntled user.

The class-action suit, first filed by California resident Bishoy Nessim in June 2023, was originally seeking damages up to $7m on the grounds Fliff was illegally operating sports betting in California, where sports betting is not yet legal, which contributed to the plaintiff allegedly losing thousands of dollars on the platform.

The original lawsuit was filed at Riverside Federal Court in the central judicial district of California.

Plaintiff Nessim accused Fliff of operating in California against the federal interstate Wire Act, the California Unfair Competition Law, and the state’s anti-bookmaking laws.

Fliff argues that its product falls under a sweepstakes model despite offering lines and odds as a sportsbook would.

Users can deposit money which is then exchanged for so-called Fliff Cash to place bets. Fliff also allows its users to collect free Fliff Coins to play with.

In a ruling by Judge Sunshine Suzanne Sykes, the court sided with Fliff’s contention that it was not governed by Californian law but instead Pennsylvania law, as this is where the company was headquartered at the commencement of the business relationship with Nessim.

The plaintiff had previously challenged this as Fliff had subsequently relocated to Texas, arguing the operator did not have a “substantial relationship” with Pennsylvania and applying Pennsylvanian law in this matter was “contrary to a fundamental California policy”.

However the court ruled that Fliff’s Pennsylvania base at the time of the start of the relationship with the plaintiff was sufficient to be classed as a substantial relationship. Nessim contested that the two states’ respective laws were contrary to each other, a point the court declined to comment on.

Further, the court granted the arbitration on the grounds that Nessim had agreed to Fliff’s terms and conditions which stipulate that players waive the rights to settle disputes in court and instead must be resolved under the rules of the American Arbitration Association.

Nessim did not challenge that he’d checked a box accepting the “Terms of Use and Sweepstakes Rules” but did argue that the creation of the arbitration agreement was “unconscionable”. However, the judge rejected his claim under California law and the court granted Fliff’s motion and stayed the action.

Judge Sykes did however acknowledge that the plaintiff had cause to feel discontent. Her judgment read: “Despite the seeming unfairness of the situation as it exists, with Fliff being able to claim a connection to Pennsylvania despite it having moved to Texas where it now runs its business from, the Court finds, because Fliff’s principal place of business ‘at the time of contracting’ was Pennsylvania, there is a substantial relationship between Pennsylvania and the Parties.

“Having found the Parties have a substantial relationship with Pennsylvania, the Court will apply Pennsylvania law unless Nessim can show Pennsylvania law is contrary to a fundamental California policy and that California has a materially greater interest in the issue,” it concluded.

The case will now move to third-party arbitration where both parties present their arguments and file a joint report every 120 days regarding the status of the process.

The case is now formally closed in the courts.