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But Your Honor, He Said a Bad Thing About Me on Facebook: Business Defamation Claims in the Age of Social Media

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It is 2024 and every business has an online presence – whether through a website, on Google, or on social media. It is more important than ever for business owners to know what can and cannot be said (i.e. posted) regarding their business online. In other words, can you sue to get that negative review off of Google? Or what about that irate ex-employee that keeps posting false information to your Glassdoor page? Can an overzealous freight broker’s post against a trucker on Carrier411.com lead to a lawsuit?

In a recent Michigan case that involved Carrier411, Penguin Trucking Inc. and E.L. Hollingsworth & Co., faced off in a business defamation case. The two companies were contracted for the same job at different rates by an outside third party. However, by the time the two companies found out about the scam, Penguin Trucking had already had the freight in its possession and was unable to make a deal with E.L. Hollingsworth for them to reconcile and both deliver the freight.

Since Penguin Trucking already held the freight, they decided to enter into a deal directly with the end customer for the delivery. Shortly thereafter, an E.L Hollingsworth employee posted a scathing report on Carrier411.com, a trucking monitoring service website. The employee wrote that Penguin Trucking “held [the] load hostage,” attempted “in-transit agreement modification,” and accused them of “unethical or deceptive business practices.” In any industry, potential customers are reluctant to do business with companies that have negative reports written about them, like those written on Carrier411.com. In the trucking business, Carrier411 reviews are especially crippling and can even destroy a smaller or startup business. Penguin Trucking experienced these adverse effects first-hand when it lost out on a contract with a shipper based on the FreightGuard. In litigation, Penguin Trucking proved not only that the online statements were false, but that the loss of the shipper contract was directly linked to the Carrier411.com review. Penguin Trucking was awarded $612,400 in damages for this lawsuit.

Michigan’s laws are clear about what constitutes defamation and what does not. Most other states have similar laws that protect against false statements that damage a business’s reputation. There are four elements to a defamation claim in Michigan:

  1. A false and defamatory statement concerning the plaintiff;
  2. An unprivileged publication to a third party;
  3. Fault amounting at least to negligence on the part of the publisher; and
  4. Either special per se harm or actual damages proximately caused by the statement.

For a more in-depth look at what each element means and requires, check out my latest article about protecting your online reputation.

If someone is posting intentionally false information about your company on the Internet (including a false FreightGuard report on Carrier411) you have a right to defend your company. An experienced attorney can help with various options short of litigation, such as sending a cease-and-desist letter and negotiating a resolution on your behalf. If litigation does become necessary, we can also provide the necessary support and consultation to take your case before the proper court.

Have more questions? Contact our firm by email or call us today to set up your free initial consultation.

© 2024 Artaev at Law PLLC. All rights reserved.

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Are Skill-Based Real-Money Games Legal in the United States?

The skill-based real-money game sector continues to grow in 2024, and yes, skill games are generally legal under the laws of most states. Risking money on games of skill has always been popular – from Mesopotamia, to Ancient Egypt and the Roman Empire, to your local pool hall. Now, with the ubiquity of the smartphone and internet access, skill-based real-money gaming is a widely available form of entertainment. The setup is familiar – pay an entry fee for a chance to compete for a prize. Top score takes the prize. There is also no shortage to game variety, although skill-based solitaire, bingo, and a blackjack-solitaire hybrid called 21 Blitz account for the vast majority of players.

Designing, distributing, and marketing real-money skill gaming apps continues to be a lucrative business model. But what are the legal and regulatory hurdles to distributing and marketing your product in the United States? There are many nuances, and given that each of the 50 states has its own set of laws related to gaming and gambling, hiring experienced counsel is a must.

IMPORTANT – Real-money games of skill are still illegal in some U.S. states, even though they are not games of chance (such as traditional gambling like blackjack, roulette, or slots). A lot depends on the particulars of your app or game, but it is a mistake to assume that all skill games are automatically legal.

There are three main obstacles to distributing a real-money skill game in the U.S.:

  • Second, the app must comply with state and federal law. Geolocation technology can be used to meet specific location requirements or restrictions. Additionally, Apple requires that any real-money gaming app comply with local laws where the app is offered, have the required licenses (or the aforementioned legal opinion), and be geographically restricted to those locations. Also, offering an app in a jurisdiction where it is illegal risks attention of local authorities or private litigation, which can result in fines, penalties, and closure of your particular game.
  • Third, as skill-based real-money gaming is unlicensed and unregulated, it is important to have robust terms and conditions and a privacy policy in place. These terms function as a contract between the gaming company and its customers, offering important rules and regulations, as well as disclaimers and liability limitations. Further, dispute resolution provisions like an arbitration clause and a class action waiver are important, but must be carefully tailored to be enforceable.

Real-money games of skill vs. gambling

You may have heard that real-money games of skill – like darts, pool, puzzles – are not prohibited or regulated in the United States because they are not “gambling.” The reasoning goes that if the outcome depends on skill rather than chance, then it is not regulated under state gambling laws. This is false. Each of the 50 states have their own statutory definitions, laws, and regulations applicable to gambling. The states also differ on how much skill is required to exclude a particular game from the “gambling” category. Most states rely on the “predominance” test, where skill must predominate over the chance element. Other states use the “material element” test, where a game is considered gambling if chance is a “material” element in the outcome. A few states use the “any chance” test – where if there is any chance element present, the game is considered “gambling” and may not be offered without a license.

There is also a distinction between fantasy sports-type games and pure contest games on both the state and federal levels.

Payment Processors and Due Diligence

Payment processors – companies responsible for money-in and money-out of your app – also have their own set of due diligence requirement. Most reputable providers will require the legal opinion, copies of the terms and privacy policy, and even may require an internal anti-money laundering (“AML”) policy. Under federal law, financial institutions and certain high-risk businesses (such as casinos) must have AML policies in place. However, experienced counsel can also help with craft a policy that balances the payment processor’s standards with practical considerations and costs facing any starting-stage business.

Disclaimer: This guide is not intended to be and does not constitute legal advice. It is for informative and promotional purposes only. Do not take any action or refrain from taking any action based on this guide, and always consult with a qualified professional about the circumstances of your particular case. Each set of facts is unique and different circumstances apply to each individual business.

This article was originally published in 2020, but has since been updated to reflect current legal and regulatory developments in the skill-based gaming area.

© 2020 Artaev at Law PLLC. All rights reserved.

How to Advertise Real-Money Gaming on Meta in 2023: A Legal Opinion is Still Required.

Meta (formerly known as Facebook) remains an attractive forum for real-money gaming companies looking to advertise their skill-based gaming apps, esports, and fantasy sports offerings. However, Meta has a strict policy that requires an application and approval before any “online gaming” ads can run. The application form is convoluted and complex, and unless you have a gambling license from a state regulator, you will need to obtain a legal opinion from an experienced gaming attorney.

Artaev at Law PLLC has provided consulting, review, and legal opinions to gaming companies since 2020. We also have experience with the Meta/Facebook onboarding and application process. Before Meta’s overhaul of the process in August 2022, the application was much simpler than it is today. The advertiser disclosed their geographic target, acknowledged the requirement for geofencing and age compliance, and submitted a legal opinion that qualified their offering as a game of skill or other type of competition that does not require a gambling license. Now, the application process requires not only a selection of the proper jurisdictions from a drop down menu, it also requires the advertiser to choose which “category” is most appropriate for their game.

For example, when choosing the United States, Meta prompts the applicant to choose the states where the game will be offered. Clicking on a state gives a choice of the types of games that Meta considers available or “allows” in that state. This sublist is inconsistent and does not provide any context as to what types of games fall into each category. For example, selecting Texas gives the advertiser a single option to choose “sweepstakes.” But Texas courts have applied the “predominant factor test” to permit real-money games where skill predominates over chance in deciding the winner. The Texas legislature’s definition of “gambling” also contains an express exemption for “bona fide contest[s] for the determination of skill.” TX Penal Code 47.01. So, while Texas state law permits skill-based games that pass the predominant factor test, Meta’s drop down menu only allows “sweepstakes.”

Gaming companies must also select the protective measures that they implement to ensure compliance with their territorial restrictions and 18+ age policies. KYC checks may also be appropriate depending on the jurisdiction, but again, this is a requirement that varies by country and region. Smaller or startup companies often struggle with navigating the various requirements, but there are qualified third party administrator solutions that offer the necessary services for gaming industry participants.

Finally, unless your company has a gambling license from a state regulator, Meta requires a legal opinion from an experienced and qualified attorney regarding the legality of the game under a particular jurisdiction’s laws. For example, if a company is offering a mobile app game of skill in the United States, the legal opinion will need to address not only the application of federal anti-gambling laws (such as the Unlawful Internet Gambling Enforcement Act and the Wire Act), but also the individual states. Each state has its own definition of “gambling,” various exceptions, and judicially-crafted test (such as the predominance or the material element test) that must be applied to the game in question. Also, the laws can change from time to time and must be addressed, such as when Virginia adopted specific legislation regarding certain physical games of skill in 2022.

Once the application and the opinion are submitted, Meta’s initial process is to check the submission for completeness (do not forget screenshots of your landing page!) and send it off for outside counsel review. The review can take as little as 2 weeks or as long as 3 months, depending on the game and the volume of submissions. Before the August 2022 reforms, if the application was rejected, there would be a specific reason and explanation. This allowed advertisers to go back to fix and resubmit their application. Currently, Meta does not give a reason for rejecting a submission. The default message is that advertising of the particular game or app is “not supported.” This is particularly frustrating when an advertiser has waited for weeks or months, just to find out their game is “not supported.” There is no clear appeal process either, and the advertiser is left to guess at how to best resubmit their application – or whether to simply try running ads without prior authorization (which risks Meta disabling the ad account and page).

Advertising on Meta can be a powerful boost to your game’s audience, but it is also a complex process that requires a legal opinion from an experienced attorney. There are many aspects to navigating the various laws in play, as well as KYC, age-gating, and geolocation requirements that are more and more prevalent across the industry. Contact Artaev at Law PLLC today to set up your initial consultation.

The qualified and specialized attorneys at Artaev at Law PLLC know gaming law – email or call us to set up your initial consultation.

Disclaimer: This guide is for general informational and promotional purposes only. Nothing herein constitutes legal, tax, or investment advice. Every situation is different and has its own unique set of challenges. Do not take any action or sign any contract until you have obtained specific guidance from a qualified professional.

© 2023 Artaev at Law PLLC. All rights reserved.

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