Double Down Interactive: Legal + Business Model Analysis
Double Down Interactive’s digital social casino apps have historically not been considered online gambling because games are played with virtual chips that can never be cashed out. Money is lost at the point of purchasing chips, not during the games. However, I would be remiss if I did not do a deep dive into the risks around the business model. A major case in Washington, Benson vs DoubleDown Interactive, was successfully settled by the plaintiff class for a substantial amount of money. The cased hinged on the legal definition of ‘a thing of value’ in order to classify DoubleDown’s social casinos games as gambling under Washington law.
Washington state has proven to be a troubling jurisdiction for DoubleDown and social casinos generally. In the case of Benson vs. DoubleDown Interactive, a class action was certified and settled; DoubleDown was responsible for $145 million USD out of a total of $415 million USD. The remaining balance was paid by DoubleDown’s previous owner, IGT.
Washington State has a broad definition of “thing of value,” which includes the virtual chips that paying Double Down customers purchase:
“Thing of value,” as used in this chapter, means any money or property, any token, object or article exchangeable for money or property, or any form of credit or promise, directly or indirectly, contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge. — Wash. Rev. Code § 9.46.0285 – CRIMES AND PUNISHMENTS – GAMBLING – 1973 ACT – “Thing of value.”
Furthermore, Washington State has broad loss recoupment laws which make the proprietor or dealer liable, as opposed to just winning players:
“All persons losing money or anything of value at or on any illegal gambling games shall have a cause of action to recover from the dealer or player winning, or from the proprietor for whose benefit such game was played or dealt, or such money or things of value won, the amount of the money or the value of the thing so lost.” — RCW 4.24.070.
The premise of the valuational thesis for Double Down hinges on the idea that the Benson vs. Double Down Interactive payout was due to the peculiarities of Washington State law, and that social casino as a category is on solid ground in other jurisdictions. Should courts in other states rule that social casino games are defined as gambling under their respective local statutes, this opens the company up to liability.
As per the Double Down Form 6-K:
“As of September 30, 2025, the Company is a defendant in four lawsuits seeking damages, filed in the states of Alabama, Kentucky, and Tennessee. These lawsuits allege that the Company’s social casino-themed games constitute unlawful gambling under state laws. The Company denies the allegations, contends its games are not gambling under the applicable law, and contends that the case suffers from various procedural defects. At this time, the Company is unable to reasonably predict the outcome of these legal proceedings and cannot estimate what impact, if any, the litigation may have on the Company’s condensed consolidated interim financial statements.”
Over the years plaintiffs have tried to recover money from DoubleDown Interactive and other social casino firms in many jurisdictions and failed for various reasons.
In cases like Phillips vs DoubleDown (Illinois 2016) or Mason vs Machine Zone, Inc (Maryland 2017), and several others, a pattern emerges of hurdles to classifying social casino games as gambling. These include:
Loss-at-purchase theory
The real-world “loss” happens when the user buys virtual currency (a license to play), not when they spin the wheel or slot.
Because statutes like gambling-loss laws focus on money lost at gaming, this doesn’t fit.
No “thing of value” / no prize
Virtual chips or items can’t be redeemed for cash or legally transferred.
They create enjoyment and in-game utility, but not a legally cognizable economic prize.
Defendant isn’t a “winner”
The operator gets a fixed fee from selling currency or taking platform commissions, regardless of whether the player “wins” or “loses.”
Many loss-recovery statutes target the “winner” of the bet, not a fixed-fee intermediary.
Public-policy bars (especially California)
Even if activity is arguably “gambling,” state policy can bar civil actions to recover gambling losses.
Most states do not have strong loss recovery statutes to begin with, and those that do will face similar challenges of applicability to DoubleDown. Furthermore, other states do not define “a thing of value” explicitly, as Washington does.
Regarding the size of potential payouts, one reason that the Benson vs DoubleDown case resulted in such a large + 400 million USD settlement is that the case was certified as a national class action, which allowed players from all over the country to join the class and receive a payout based on Washington’s illegal gambling recovery laws.
DoubleDown was founded in Washington, and based in Washington, which made it particularly easy to certify a national class under Washington state legal code. The recent lawsuits in Alabama, Kentucky, and Tennessee will likely have a harder time doing so, making it likelier that hypothetical loss recovery would be more modest. In addition, payers throughout the country who have already received loss recovery from the Benson vs DoubleDown case are not eligible for further payouts against the same losses.
Conclusion
My layman’s due diligence on the legal basis of social casino apps in the U.S is that Benson vs DoubleDown was a very novel case, particularly due to Washington’s unusually explicit and broad definition of a “thing of value” to include “entertainment or a privilege of playing at a game or scheme without charge”, in addition to robust loss recovery statutes. DoubleDown’s ties to Washington also made it easier to certify a national class action under Washington law, which opened the door to applying Washington’s loss recovery laws to players around the country.
As copycat litigants try to argue similar cases in other jurisdictions, they face generic gambling statutes and a history of lost or dismissed cases. Even so, there remains a possibility that courts could follow Washington’s example, although this does not seem to be the probable outcome. There remains tail risk which can only be managed through portfolio diversification. However, I believe that weighed against DoubleDown’s +400 million USD balance sheet, the risk-reward remains favorable for DoubleDown.
I remain bullish on DoubleDown Interactive.
Disclaimer
This material reflects personal opinions only and is for informational purposes. It does not constitute investment advice, legal advice, tax advice, or a recommendation to buy or sell any security. The information contained herein may include forward-looking statements, estimates, or assumptions that may not prove accurate. You should conduct your own research and consult appropriate professionals before making any investment or legal decisions. I may hold positions in the securities discussed and may change such positions at any time without notice.