Sixth Circuit Sends Social Casino Lawsuits Back to Tennessee State Court

The US Court of Appeals for the Sixth Circuit has upheld a lower court’s decision to return four lawsuits against online social casino operators to Tennessee state court. The ruling, delivered on March 16, focused on whether lead plaintiff Gina Burt had the legal standing required to pursue the cases in federal court. The appellate court determined that she did not, effectively removing federal jurisdiction over the matter.

The lawsuits, initially filed in Tennessee state court, targeted Playtika, VGW Holdings, Aristocrat Leisure, Ltd, and Product Madness, Inc. The plaintiffs accused these companies of running illegal online gambling platforms that caused financial harm to Tennessee residents. The cases were consolidated under appeal case number 25-5038.

The plaintiffs aimed to recover gambling losses under Tennessee Code Ann. § 29-19-105, a state law that allows third parties, including family , to reclaim losses on behalf of affected individuals. The defendants, however, moved the cases to federal court, citing jurisdiction under the Class Action Fairness Act (CAFA) and traditional diversity jurisdiction principles.

The US District Court for the Eastern District of Tennessee sided with the plaintiffs, granting their motion to remand the cases back to state court. The district court ruled that the lawsuits did not qualify as a “class action” under CAFA, making CAFA jurisdiction inapplicable. Additionally, the court found that aggregating gambling losses to meet the amount-in-controversy threshold for diversity jurisdiction was improper.

The defendants appealed the remand order, arguing that federal jurisdiction was appropriate under both CAFA and traditional diversity jurisdiction.

However, the Sixth Circuit determined that it did not need to address these jurisdictional arguments because the lead plaintiff, Gina Burt, lacked Article III standing—a constitutional requirement for pursuing claims in federal court.

Sixth Circuit’s Reasoning for Affirming the Remand

The Sixth Circuit , composed of Judges Gilman, Gibbons, and Thapar, concluded that Burt lacked standing because she did not personally suffer a gambling loss. The court emphasized that under federal constitutional law, a plaintiff must demonstrate three elements to establish standing:

1. An injury in fact—a concrete and particularized harm.
2. A causal connection between the harm and the defendant’s conduct.
3. The likelihood that a favorable ruling would redress the harm.

The court noted that Burt failed to meet the first requirement. While Tennessee law permits third parties to recover gambling losses on behalf of others, federal courts are not bound by state standing statutes when determining their jurisdiction. The court cited two key Supreme Court cases, TransUnion LLC v. Ramirez (2021) and Spokeo, Inc. v. Robins (2016), to underscore that merely having a state-created right to sue does not automatically satisfy Article III standing.

Rejection of Qui Tam Standing Argument

Burt argued that Tennessee Code Ann. § 29-19-105 functioned as a qui tam statute, which would grant her standing. Qui tam statutes allow private individuals to sue on behalf of the government to enforce the law. However, the Sixth Circuit rejected this argument for several reasons:

• Lack of government interest: True qui tam statutes address injuries to the government, not private individuals. Tennessee’s gambling loss statute, however, allows recovery by family , not the state.
• No assignment of rights: Qui tam statutes typically involve an explicit assignment of claims, which was absent in this case.
• No governmental control mechanism: Traditional qui tam statutes include procedural safeguards allowing government intervention, which this statute lacks.

As a result, the court determined that Burt’s claims did not meet the standards for qui tam standing.

Implications of the Ruling

By affirming the district court’s remand order, the Sixth Circuit reinforced the principle that federal jurisdiction is unavailable in cases where plaintiffs lack constitutional standing. The ruling sends the lawsuits back to Tennessee state court, where plaintiffs will argue their claims under state gambling laws.

This decision represents a setback for the defendants, who had hoped to keep the litigation in federal court. It also signals the potential for increased scrutiny of social casinos under state laws prohibiting gambling.