GME3: High-Stake’s Gambling, Kim’s SKIMS: Green Scheme, and Copyright ClAIms

In this week’s GME3 we’re covering the $41 billion Stake hack, more friction between Kim Kardashian and the FTC, and a new development in the world of copyright law and AI. Read on below for the full stories!

Gambling

High-Stake’s Gambling

Stake, an online cryptocurrency gambling site, has been hit by hackers – over $41 million was withdrawn in various cryptocurrencies, including the chains Ethereum, Polygon, and BNB Smart Chain (BSC). The platform has some serious sponsors, including Drake and the Alfa Romeo F1 Racing Team.

The hack took place over a few minutes on September 4, and funds were distributed to multiple accounts after being drained. Stake claims that no user funds were taken during the hack, and it only took 5 hours for the platform to resecure their wallets, and reopen deposit and withdrawal features to users.

This is not the first time that such a significant amount of money was stolen from a crypto site. On July 22, 2023, $31 million was stolen from Alphapo, a cryptocurrency payment processor that provides services to a number of gambling sites, including HypeDrop, Ignition, and Bovada. Only a few days later, an additional $37 million was taken. The Alphapo hack has since been attributed to a North Korean hacker group known as Lazarus. This group is notorious in the crypto world, allegedly having stolen over $2 billion in the past few years.

Hacking crypto services seems to have turned into a cottage industry, with over $3.7 billion being lost in 2022 to hacks or other exploits. Adding gambling to the mix makes things a little more interesting. Gaming regulators have strict standards, including adequately protecting player funds. While Stake managed to keep player funds out of the hackers hands this time around, the next target may not be so lucky.

While crypto hacks have been on the decline in 2023 (at least compared to last year), it’s unlikely that the issue will be wholly eliminated any time soon. Regulators have been quiet about the issue so far, but if security concerns continue to rise it seems only a matter of time until some kind of change will be necessary in the crypto-casino industry. 

Media

Kim’s SKIMS: Green Scheme

Kim Kardashian has once again been accused of being involved with deceptive marketing claims. This time, Kardashian’s “shapewear” brand, SKIMS, is facing backlash due to claims on the brand’s packaging which states “I AM NOT PLASTIC. I am compostable made from plants. I will biodegrade in your home compost and in an industrial compost facility”. The accusations were posted on greenwash.com, a website run by Changing Markets Foundation (the “Foundation”), a non-profit organization that advocates for sustainability and environmentally beneficial products.  

Despite the messaging on SKIMS’ packaging regarding its materials, the packaging shows that it is made from “Plastic 4”, which clearly contradicts the package’s claim that it is not plastic. Section 5 of the Federal Trade Commission Act (the “FTC Act”), the main statute governing misleading advertising in the US, prohibits making claims that are deceptive, so it will be interesting to see if the FTC pursues any action against the company. Of note, the FTC also has “Green Guides”, a guidance document designed to ensure claims being made about environmental attributes of products are truthful and not deceptive. If the FTC pursues SKIMS, the Green Guides may provide the FTC with additional support that SKIMs may be engaging in misleading practices regarding its environmental claims. 

Violations of Section 5 of the FTC Act can carry fines up to $50,120, but this may not concern Kardashian too much considering her net worth is estimated to be over $1 billion dollars. Kardashian has also been required to pay much heftier fines, for example, last year she was ordered to pay $1.2 million to the US Securities and Exchange Commission for her role in misleading cryptocurrency ads.    

Since Kardashian is one of the biggest influencers in the world and has hopes to become a practising lawyer, it will be interesting to see if any adjustments are made to SKIMS’ packaging in light of the Foundation’s claims. Of course, Kardashian’s legal team is free to reach out to GME Law for additional support with SKIMS’ marketing and advertising practices.

Entertainment

Copyright ClAIms

A D.C. District Judge ruled that the U.S. Copyright Office (the “Copyright Office”) was correct in its decision to deny a copyright registration for a work created entirely by artificial intelligence (“AI”). The Court’s decision was consistent with the Copyright Office’s Guidance on Works Containing Material Generated by AI (the “Guidance”), which states that in order to support a copyright claim, a work that contains AI must include “sufficient human authorship”.

The facts of the case are that the Plaintiff developed a computer program that generates original art pieces by using AI, and after “creating” an AI-generated piece of art (the “Work”), the Plaintiff attempted to register the Work with the Copyright Office. The Plaintiff listed in the application that “Creativity Machine” was the author of the Work and the Plaintiff himself was the copyright claimant due to having “ownership of the Creativity Machine”. The Copyright Office denied the application because the Work “lacked the human authorship necessary to support a copyright claim”, noting that copyright law only extends to works created by human beings. 

In its reasons, the Court stated that “copyright has never stretched so far, however, as to protect works generated by new forms of technology operating absent any guiding human hand” and “human authorship is a bedrock requirement of copyright”. The Court also responded to the Plaintiff’s claim that even though “Author” is not defined in the US Copyright Act, the “originator” of the work must be human in order to claim copyright protection. 

With the myriad of lawsuits that have been filed due to the use of AI, it is encouraging to see jurisprudence that establishes such works cannot be copyrighted in the US. However, it’s important to note that the Guidance also leaves open the possibility that if AI-generated work contains sufficient human authorship, certain aspects of a work can support a copyright claim. While the principles of copyright in the context of AI are still developing, this will no doubt be a fascinating area of law that evolves through case law and government guidance across the world.