Roblox asks judge to throw out illegal gambling claims

(CN) — Roblox, an online platform where mostly children create and play their own games, on Thursday asked a federal judge to throw out claims brought by parents that the site facilitated gambling by children using its Robux in-house currency in virtual casinos operated by third parties.

The hearing before U.S. District Judge Vince Chhabria in San Francisco revolved around the question whether the plaintiffs had a legally sufficient basis to proceed on their claim that Roblox violated California’s Unfair Competition Law by engaging in unlawful conduct.

The Barack Obama appointee didn’t rule from the bench on Roblox’s request to dismiss part of the proposed class action, but he expressed reservations that the parents’ claims fell under various provisions of California’s penal code regarding illegal gambling.

“The concern I have is that what we’re describing here is a situation where Roblox isn’t conducting a gambling operation,” Chhabria told Andre Mura, an attorney for the parents. “It seems like your arguments under the California penal code are a bit of a stretch.”

In addition, the judge said, courts needed to be careful not to interpret criminal law too broadly in the context of a private, civil lawsuit because that can effect criminal liability for people.

If he were to dismiss the plaintiffs’ claim based on purported unlawful conduct, they still might proceed on their claim that Roblox’s engaged in unfair business practices, Chhabria added. In this regard, he wondered how much it would matter to the plaintiffs if they were precluded from seeking to hold Roblox liable under both prongs of the Unfair Competition Law.

“You have your unfair business practices claim under the UCL,” Chhabria said. “If you’re violating the spirit but not the letter of the statute in a way that’s unfair under California law, you’re liable nonetheless.”

Mura responded that the plaintiffs still would want to pursue all options at this stage of the litigation.

“We’re at the pleading stage,” the parents’ attorney said. “There’s been no finding of criminal liability — it’s an assertion of civil liability where we’re just predicating the liability on the applicability of these laws.”

A decision whether Roblox can be on the hook for unlawful conduct, Mura said, might be best reserved for summary judgment, where the judge has more evidence about how the platforms operated to decide whether the claim has any merit.

In their complaint, the parents claim that Roblox knowingly allowed third-party gambling websites to accept wagers using Robux. And since the company charges a 30% fee to convert Robux used on gambling websites back into dollars, Roblox made millions of dollars in the process, they say.

“Plaintiffs do not allege that Roblox allowed the [Virtual Casino]s’ games on the Roblox platform, controlled or operated the [Virtual Casino]s, or had an agreement with the [Virtual Casino]s, making the statutes inapplicable to Roblox,” the company argued in its motion to dismiss.

“Even if Roblox allegedly received a 30% Robux fee when users purchased virtual content on the Roblox platform to facilitate their off-platform use of the [Virtual Casino]s, plaintiffs do not allege that Roblox owned or leased those games or was employed by any [Virtual Casino],” the company said.

Robby Saldaña, an attorney for Roblox, agreed at Thursday’s hearing that the judge’s reservations about allowing the claims based on violations of California’s penal code to proceed were on point.

“The court has really hit the issue on the head,” Saldaña said. “We’re talking about criminal statutes, and any decision by the court interpreting criminal statutes is going to have implications beyond this case.”

The plaintiffs have demanded a jury trial, accusing Roblox of violating federal anti-racketeering law and several state statutes. Chhabria last year tossed the RICO claims, but in a separate ruling allowed the parents to proceed with their negligence claims.

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