In this week’s edition of the GME3, we’re taking a look at a class action lawsuit targeting Apple and Google over alleged violations of the RICO Act in relation to sweepstakes casino apps hosted on their platforms, the new Ontario Bill 194 which creates new obligations for public sector entities regarding privacy, cybersecurity, and AI regulation, and five prominent Canadian news outlets that have filed a copyright infringement lawsuit against OpenAI. Read the full stories below!
Gambling
Tech Giants RICO-gnize a Problem
Tech giants Apple and Google are facing a class action lawsuit in New Jersey that accuses them of facilitating illegal gambling operations through sweepstakes casino apps hosted on their platforms. The lawsuit, filed on November 27, alleges violations of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act. Lead plaintiff Julian Bargo claims to have lost “well over” $1,000 on these platforms, with the suit arguing that Apple and Google profited by processing illegal payments and taking a significant cut of the proceeds.
Sweepstakes casinos operate under a unique model that blends social gaming with gambling features. Generally, users can purchase virtual “Game Coins” to play casino-style games and acquire “Sweeps Coins,” redeemable for cash and prizes. The lawsuit alleges that payouts are rare and often denied arbitrarily, painting these platforms as unregulated gambling operations. The suit continues to allege, that unlike licensed casinos, sweepstakes operators avoid oversight and gaming taxes by exploiting legal loopholes, such as arbitration agreements in offshore jurisdictions.
The Sweepstakes and Promotional Gaming Association (“SPGA”) defends the practice, emphasizing two key legal pillars:
Bona Fide Consumer Goods: Sweepstakes promote a legitimate product, like social casino coins, which the SPGA argues are widely recognized by consumers, demonstrated by over $40 billion spent on them in the past decade.
Exclusion of the Gambling Definition: Under U.S. law, gambling requires three elements: chance, consideration, and prize. Sweepstakes avoid the “consideration” element by offering free entry, making them a long-standing (legal) promotion tool.
The legal case comes as lawmakers and regulators intensify their scrutiny around sweepstakes casinos. The “Model Internet Gaming Act,” proposed by the National Council of Legislators from Gaming States (“NCLGS”), seeks to ban sweepstakes casinos outright, with significant penalties for violations. The proposed law aims to provide a framework for states considering the legalization and regulation of iGaming. The legislation included language which would ban sweepstakes casinos, with penalties of $10,000 to $100,000 per offence and up to two years in prison for repeat offenders.
Media
Securing Data, Building Trust
Bill 194, the Strengthening Cyber Security and Building Trust in the Public Sector Act, 2024, has received Royal Assent in Ontario, creating significant new obligations for public sector entities regarding privacy, cybersecurity, and AI regulation.
The Act enacts the Enhancing Digital Security and Trust Act (“EDSTA”) and amends the Freedom of Information and Protection of Privacy Act (“FIPPA”), introducing the following key changes.
EDSTA:
Public sector entities must develop cybersecurity programs and submit reports.
New regulations regarding the use of AI in public entities.
Rules for children’s aid societies and school boards on managing digital information about minors will be established.
FIPPA Amendments:
Privacy impact assessments are required before collecting personal information.
Institutions must report privacy breaches to the Information and Privacy Commissioner and notify affected individuals.
Expanded powers for the Commissioner to investigate public institutions’ practices.
A whistleblowing framework for reporting FIPPA violations confidentially.
Broader offences for improper handling of personal information.
The Legislative Assembly of Ontario is excluded from these rules, and implementation dates and specific requirements will be announced later.
Public institutions should prepare for these new regulations, including Canada’s first AI-specific public sector regulations. Private sector entities should keep an eye on these developments, as similar rules may emerge for broader applications.
Entertainment
Scraped Content, Scrapped Rights?
Five prominent Canadian news outlets have filed a copyright infringement lawsuit against OpenAI, seeking potentially billions in damages. This follows similar lawsuits in the U.S. by The New York Times and others. The core allegation is that OpenAI used unauthorized content from media sites to train its chatbot, profiting without compensating creators.
OpenAI claims its actions fall under “fair dealing,” a copyright law exception allowing certain unauthorized uses, and denies unlawful copying. Legal experts supporting OpenAI argue that AI training involves abstracting metadata and creating new outputs that are not substantially similar to the original works. Organizations like Creative Commons compare this use to Google’s book digitization, describing it as “transformative” and non-competitive with the original creators.
The Canadian lawsuit also alleges OpenAI breached site terms of service by bypassing protections like paywalls and anti-scraping tools. The plaintiffs assert that their content is for personal, non-commercial use only, and claim OpenAI’s actions violate these restrictions.
In response to legal challenges, OpenAI has started licensing agreements with some media organizations and allows publishers to opt out of training datasets. However, the lawsuits persist. Courts in Canada and the U.S. will soon decide whether scraping constitutes copyright infringement and whether it qualifies as fair dealing.
GME Law is Jack Tadman, Zack Pearlstein, Lindsay Anderson, Daniel Trujillo, and Will Sarwer-Foner Androsoff. Jack’s practice has focused exclusively on gaming law since he was an articling student in 2010, acting for the usual players in the gaming and quasi-gaming space. Zack joined Jack in September 2022. In addition to collaborating with Jack, and with a keen interest in privacy law, Zack brings a practice focused on issues unique to social media, influencer marketing, and video gaming. Lindsay is the most recent addition to the team, bringing her experience as a negotiator and contracts attorney, specializing in commercial technology, SaaS services, and data privacy.
At our firm, we are enthusiastic about aiding players in the gaming space, including sports leagues, media companies, advertisers, and more. Our specialized knowledge in these industries allows us to provide tailored solutions to our clients’ unique legal needs. Reach out to us HERE or contact Jack directly at jack@gmelawyers.com if you want to learn more!
Check out some of our previous editions of the GME3 HERE and HERE, and be sure to follow us on LinkedIn to be notified of new posts, keep up to date with industry news, and more!
One Response
It’s about time the government became pro-active – or at least interested – in the potential effect the tsunami of gaming advertising has on young and not-so-young-but-impressionable viewers of television sports. For those of us who spent most of our adulthood in a sports gambling prohibited environment (horseracing excepted), the distinction between sports games and gaming may be relatively easy to make. For those just now coming of age – 9, 10, 11, – who love watching hockey or football on tv, the distinction between enjoying hockey and betting on the outcome of games may be blurred to their emotional and financial detriment. So… it’s about time!