State AGs Roll the Cube on Gaming | Kelley Drye & Warren LLP

State AGs have lengthy had an curiosity in implementing client safety legal guidelines within the realm of gambling and gaming. Almost 10 years in the past, many state AGs (together with in Massachusetts, Alabama, New York, and Texas for instance) obtained settlements with sports activities betting websites, generally enjoining them from operation (though authorized tides have turned in lots of states since then as a result of Supreme Court choice in Murphy v. NCAA declaring a federal ban on sports activities playing unconstitutional). As playing has continued to evolve and (allegedly) combine with gaming, State AGs have remained on the reducing fringe of enforcement. 

AGs Question Predictive Markets

In June 2025, a bunch of 36 AGs filed an amicus brief regarding on-line predictive market firm Kalshi’s use of a “loophole” to keep away from state regulation. The National Association of Attorneys General hosted a panel dialogue at its Capital Forum in December 2025 known as “Predictive Markets: Legal Challenges and Regulatory Risks Ahead,” discussing the interaction between state playing regulation and federal preemption on commodity futures buying and selling. Last week, Utah’s AG (and different authorities officers) was sued by Kalshi after writing an op-ed on the dangers of betting on prediction markets. When the AG’s workplace didn’t reply to requests to obtain “assurances of non-enforcement,” Kalshi filed the motion towards the workplaces alleging irreparable harm and requesting an injunction from implementing anti-gambling legal guidelines towards its predictive market product.

Washington AG Sues Casino Apps

In early February, Washington Attorney General Nicholas Brown sued Playtika and Aristocrat, firms that personal “casino apps,” for violations of the state playing legislation and Consumer Protection Act. The AG alleged that customers had spent $225 million “gambling” within the apps since 2020, with some spending over $500 per day. The petition alleged that as a result of the cash that customers buy within the apps have worth, and the video games are video games of likelihood, the apps violate playing legal guidelines. 

The petition described slot machine, poker, and bingo apps that perform like “traditional, land-based” video games. Defendants allegedly marketed primarily based on this genuine expertise and have been conscious the players are on-line gamblers. Players buy cash, chips, or credit with actual cash, the place a thousand or extra could also be value one penny. While the apps didn’t convert these into authorized tender, the steadiness stays within the person’s app. One firm additionally despatched actual life items to “high spenders” and provided extra sweepstakes. After a Ninth Circuit ruling declaring on line casino apps playing and a 2020 class motion settlement for $155 million, defendants added a sure kind of free reward to their video games. Since then, it has not been determined whether or not that resolved the playing query (although Washington argues it doesn’t). 

Washington’s Consumer Protection Act claims embrace:

• The apps don’t forestall youngsters from taking part in, and sure apps allegedly market video games to youngsters.
• Terms and promoting misrepresent that their video games usually are not playing, or fail to reveal that the video games are playing.
• The apps use “buy now” ways equivalent to countdown timers and probably deceptive reductions to make gross sales.

New York Sues Valve for Loot Boxes

New York final week sued Valve, the maker of fashionable free-to-play video games Counter-Strike, Team Fortress, and Dota, underneath its Executive Law § 63(12) for promoting loot containers. New York described loot containers as a digital container the place customers purchase a key that opens a sort of “box” (treasure chest, and many others. exterior of the primary gameplay). The field accommodates a digital merchandise that usually enhances customers’ in-game look — often called “skins” for ornamental armor or weapons. The state alleged objects had a real-world financial worth since Valve permits customers to promote the objects by way of a digital market. Some objects have been a lot more durable to win than others, and Valve disclosed the objects’ rarity. But most objects customers win have been value solely pennies. New York alleged that as a result of Valve charged the participant for an opportunity to win one thing of worth primarily based on luck, this was playing pursuant to New York legislation. Further, among the video games had the looks of a slot machine. Generally, the digital objects elevated in worth over time, and a few objects have been valued at lots of and even 1000’s of {dollars}. While Valve claimed to ban third get together buying and selling websites from permitting gross sales for objects to be transformed into actual cash, in response to the criticism, they didn’t act towards these websites and at instances restored market accounts. Rare objects had such worth that Valve made modifications to its platform to aim to handle theft by hacking. New York alleges Valve’s conduct is especially troubling as a result of youngsters are a big portion of the video games’ person bases and are particularly prone to changing into hooked on playing.

New York alleges that underneath its Executive Law prohibiting repeated unlawful acts, Valve has violated the New York playing legislation underneath its structure and a number of penal legal guidelines. Note the FTC in 2025 settled with Genshin Impact over promoting loot containers to teenagers, alleging COPPA violations and deception relating to prices and odds of in-game transactions. Notably, New York didn’t use its basic authority prohibiting misleading acts or practices, probably as a result of its allegations notice that the corporate disclosed the percentages of its video games. 

Conclusion

In many contexts some State AGs take a broad view of their state’s authorized authority and will not have the identical interpretation of federal authority or preemption. In states the place playing legal guidelines might apply, firms providing on-line video games that embrace a possible factor of likelihood (versus video games of ability exempted by most playing legal guidelines) ought to study whether or not:

• the phrases (or “odds”) are absolutely disclosed;
• they’re treating the players like gamblers;
• they’re promoting video games as being just like conventional playing;
• the winnings have worth underneath state playing legal guidelines; and/or
• the video games might be thought of directed to youngsters.

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