High 5 Entertainment Lawsuit in California Runs into Trouble
Sweepstakes casino operator High 5 Entertainment has suffered a major legal defeat in California after a San Francisco Superior Court judge rejected its bid to compel arbitration in a consumer lawsuit.
The lawsuit, which plaintiff Thomas Portugal initiated, accuses the company of deceitful conduct that led the man to pay for its online poker platform.
High 5 wanted the conflict arbitrated, but the court deemed the company's arbitration provision unconscionable due to the inclusion of what it referred to as the "high degree of substantive unconscionability." The decision criticized conditions in the contract that imposed a one-year deadline for all claims regardless of the law.
The judge also dismissed arguments that the case should be thrown out for lack of personal jurisdiction, allowing the lawsuit to continue in California. The decision builds on an earlier ruling from August, in which Judge Van Aken determined that Portugal's allegations of financial loss tied to an allegedly unlawful gaming service were sufficient to establish standing.
This is not the first time High 5 has faced regulatory or legal scrutiny. In early 2024, the company agreed to settle with the state of Connecticut for $1.5 million, including paying $643,000 in restitution for players and $800,000 to the Department of Consumer Protection.
The operation initially had its license revoked in the state, but it was later reinstated. The ongoing legal challenges highlight the difficulties surrounding sweepstakes casino operators, who have thus far been met with increasing opposition by the nation's regulators.
California lawmakers weigh ban
The latest court ruling arrives as California lawmakers consider broader action to address the sweepstakes casino industry. Assembly Bill 831 (AB 831), introduced by Assemblymember Avelino Valencia, has advanced to the state Senate floor.
The bill recently passed the Senate Appropriations Committee with unanimous 7-0 support during a suspense file hearing. Legislators must decide by Sept. 12 whether to move the measure forward and send it back to the Assembly for concurrence.
AB 831 would prohibit online sweepstakes casinos from using dual-currency models, which regulators feel are equivalent to real-money online casinos. Violators would be guilty of misdemeanor offenses and are subject to fines between $1,000 and $25,000, as well as up to one year of jail time.
Earlier this summer, the amendments narrowed the bill down to specifically targeting sweepstakes gambling. This came after the concern expressed by the state officials and tribal casino owners over the rapid expansion of unregulated online sites.
Committee chair Senator Anna Caballero noted the procedural vote to pass the bill doesn't mean the full Senate will vote to pass the bill. Legislators often reserve the right to vote on the final decision during floor debate. With the legislative session ending in mid-September, the bill only has a limited window to pass.
California hearings are part of the bigger picture. Even New Jersey has banned sweepstakes casino enterprises this year.
