Skillz Platform Inc. v. Papaya Gaming, Ltd., 2026 WL 2151126,
No. 24cv1646 (DLC) (S.D.N.Y. Jul. 27, 2026)
Some
previous opinions
(more linked there). At a jury trial, Skillz won a substantial damage award for
false advertising about Papaya’s use of bots in the real money skill-based
mobile gaming (RMSB) market. The court here rejected Papaya’s post-trial
motions and Skillz was awarded $719 million plus its attorney’s fees for the
years 2024 and 2025 and certain costs.
“Skillz created the first RMSB platform in 2012. Papaya
entered this market in 2019 and quickly took a significant market share.” In the
light most favorable to Skillz, the evidence at trial showed significant
barriers to entry in this market, because a successful platform “needs a
customer base large enough to match players of similar or comparable skill in
tournaments within a reasonable amount of time,” aka liquidity. Skillz
maintains that its tournaments are games of skill, not chance, and thus not gambling;
it was required to and did represent to app stores, payment processors, and
advertising hosts that it was not engaged in gambling and that the outcome of
its tournaments was determined by the skill of the players.
Then, Papaya
decided to enter the RMSB market in
2019 by deceiving the public and others about the nature of its product.
Instead of running tournaments in which the players who had paid entry fees
competed against each other, Papaya decided to solve the problem of building
liquidity by running tournaments in which multiple participants were not other
human players but were instead “bots.” Papaya’s bots were essentially scores
designated by Papaya’s algorithms; they were not artificially intelligent
players. In these tournaments, a player’s score was compared to the scores
Papaya assigned to its bots. In this way, Papaya was always able to run a
tournament, including tournaments with what appeared to be a dozen or more
participants, at any time of night or day. Papaya gave its bots usernames and
profiles to make them appear to be individual customers.
Papaya used liquidity bots to create immediately accessible
tournaments of up to 20 or more “players,” permitting a player in a Papaya game
to learn quickly whether he had won or lost a tournament, “thereby increasing
the odds that he would pay to enter another Papaya tournament.” It also used “tailored”
win/loss bots so that a player who had a losing streak could be given a “win”
to motivate them to keep playing in more tournaments. Tailored bots operated in
over 630 million Papaya tournaments, or in roughly one-quarter of the 2.6
billion tournaments that Papaya hosted 2021-2024. During that period, “bots
accounted for over 13 million of the participants on Papaya’s platform,
compared to about 11 million human players.” Over half of humans played in at
least one tournament where tailored bots were designed to give them a loss, and
more than 7.3 million played in tournaments with tailored bots designed to give
them a win.
Unsurprisingly, Papaya’s bots were used most heavily in the
initial phases, when it needed to build liquidity, about 90% of the time in
2021. “Because of its use of bots, Papaya only paid customers roughly $2
billion of the $6.7 billion that it advertised had been awarded in prizes. And
just before Papaya stopped using bots near the end of 2023, Papaya was still
using bots in roughly 50% of its cash tournaments.” Papaya “achieved a
substantial presence in the RMSB market while investing only a fraction of the
money expended by Skillz to do so. When seeking investors, it bragged about its
strategy” of multiple-player tournaments, “unique” platform capabilities, and revenue
growth “8 times more than the industry leaders.”
Papaya never disclosed its use of bots, but purposely
advertised falsely that its games were “fair” and “skill-based,” that it has
“no vested interest” in who wins or loses a tournament, and “described the
participants in its tournaments with pictures and in terms that apply to human
players.” When players complained, Papaya denied using bots, at the direction of
executives.
Papaya made similar misrepresentations to app stores, its
payment processers, and its advertising channels.
Papaya did not stop using bots until late 2023, at which
point Skillz’s revenue had fallen by 60% in just two years: from $384 million to
$152 million, “while Papaya’s revenue skyrocketed from $163 million to $461
million over the same period.”
Given the “overwhelming” evidence of intentional false
advertising, the parties principally litigated damages before the jury, and
also the court sought an advisory verdict on disgorgement. The jury was
instructed that “Skillz is not entitled to duplicative monetary recoveries and
the Court will ensure that Skillz only recovers once for any injury it has
shown it suffered.”
The jury awarded Skillz $420 million in damages, or
two-thirds of the requested amount, and an advisory disgorgement verdict of
$719 million for Papaya’s unjust profits and $652 million for Papaya’s unfair
cost savings (in acquiring users through fake liquidity).
Papaya argued that Skillz’s damages expert improperly relied
on a but-for world in which Papaya did not use bots and its advertising
statements were true, making its expenses greater and its profits lower because
it did not rely on bots to build its business. Papaya argued that the expert
was required to model a different but-for world, “specifically one in which
Papaya removed all false statements from its advertising while not altering its
business model or its use of bots.” But Papaya didn’t explain how this could be
done: “Skillz proved at trial that Papaya could not have entered the RMSB
market by using bots in the way that Papaya did … and at the same time
truthfully describe that use and its product to consumers in its advertising.
Papaya has offered no authority to suggest that a plaintiff’s expert must
create a but-for world that could not exist.” Among other things, payment
processors and others wouldn’t have allowed Papaya to use their services had
Papaya told the truth, and consumers wouldn’t have wanted to play against bots.
Given these constraints, Skillz showed that the damages “flowed
directly from Papaya’s false advertising,” which “concerned the very nature of
the product; it was not a false statement about some incidental feature. And
Skillz showed that it was that very advertising that caused consumers to complain
to Papaya about Papaya’s use of bots.”
It was also acceptable to award damages for lost enterprise value
as long as the damages were measurable with reasonable certainty. Papaya argued
that Skillz could only recover its lost profits, but Skillz hadn’t yet made a
profit at the time of trial; “Papaya argues that Skillz cannot recover
enterprise value damages simply because Skillz prioritized growth over profits
in the years it was developing its business.” Yes, Skillz “invested heavily in
developing its business and enlarging its customer base to achieve not only
substantial liquidity but also a network effect,” but that didn’t limit it to
lost profits instead of lost enterprise value.
Nor was Papaya entitled to JMOL on the Lanham Act and NY GBL
claims: falsity, materiality, and harm were all sufficiently shown. Among other
things, “there was abundant evidence that Papaya engaged in deliberate conduct ‘of
an egregious nature’ to deceive consumers, which created a presumption of
deception.”
The court additionally rejected Papaya’s argument that damages
under the GBL must be limited to financial harm that resulted from Papaya’s
deception of New York consumers. As a competitor suing for the effects of
consumer deception on it, “Skillz is entitled to be fully compensated for the
injury it incurred through Papaya’s wrongdoing even though that injury also
impacted consumers who resided outside New York.”
The court also rejected Papaya’s other challenges to the
amount of damages. The amount of the award didn’t shock the conscience when
measured against the legal standard and the trial evidence. “Skillz and Papaya
were competing with each other in a new online industry where billions of
dollars in revenue were available to the successful RMSB company. Papaya’s
fraudulent conduct was extraordinary” and central to its huge success/zero-sum
impact on Skillz.
Among other things, it was ok to use evidence of Papaya’s
success after it stopped using bots: “There was credible evidence at trial that
Papaya benefitted from the network effects of its false advertising even after
Papaya ceased using bots to fill and control tournaments.” Thus, the damages
model could include Papaya’s revenue from running tournaments for the player
base that it had built while engaging in false advertising. Papaya’s own damages expert testified that the
number of Papaya’s tournaments fell only 20% after it turned off the bots, “suggesting
that Papaya continued to benefit from the liquidity it had built through its
false advertising.”
Skillz requested that the court double the jury’s advisory
verdict of $719 million on Papaya’s profits (the jury also identified $652
million as Papaya’s cost savings), or treble the $420 million damages award.
The court declined both requests for enhanced damages, but did award $719
million.
Disgorgement was appropriate because, come on. Skillz didn’t
show that disgorgement was necessary to deter Papaya, since it largely ceased its
false advertising in late 2023 by discontinuing the use of bots in its
tournaments, “and there is no realistic possibility that Papaya will return to
its false advertising campaign now that the unlawful advertising has been
publicly revealed and addressed in this judgment.” The key was unjust
enrichment: “Papaya’s relatively modest financial investment in its start-up
business did not explain its explosive growth …. Even large, deep-pocketed U.S.
companies that had contemplated entering the market to compete with Skillz,
which had already achieved a network effect, decided against doing so.” The
award of Skillz’ loss of enterprise value didn’t fully deprive Papaya of the
benefits of its illegal scheme. “Papaya is still a substantial player in the
market and, because players tend to stay on a platform with which they are
familiar, the impact on Skillz of Papaya’s wrongdoing will continue for the
foreseeable future.”
Nor did Skillz delay unreasonably: “While Skillz came to
suspect and then believe in 2023 that Papaya’s success was due to its false
advertising and employment of bots, Skillz was entitled to sufficient time to
develop the reasonable grounds necessary to plead its claim in federal court in
early 2024. Since that filing, Skillz has proceeded with diligence to prosecute
this lawsuit, despite Papaya’s strategy of making Skillz’s assembly of the
proof of its claims difficult and expensive.”
However, if no disgorgement award were available, the court
would enhance the actual damages award by doubling it to $840 million, because
the actual damage to Skillz was “severe but hard to quantify,” especially given
that Skillz made changes in response to Papaya’s false advertising.
Papaya also argued that any disgorgement amount should be
reduced by 13% to remove non-U.S. revenue, because the Lanham Act is not
extraterritorial. But Papaya’s audited financial statements, introduced at
trial, did not disaggregate U.S. sales from foreign sales. Papaya relied for
its 13% number on a single graphic in a January 2023 PowerPoint presentation
prepared by a third-party for Papaya, apparently to entice investors, while it
was still engaged in false advertising in the United States. The presentation
disclaimed being an “audit or due-diligence review”; it warned that the author
does not give “any representation or warranty, express of implied, as to the
accuracy or completeness of the information” in the document.
The court declined to adjust the figure. The US was
undisputedly Papaya’s target market, and “Papaya denied Skillz access during the
discovery period to relevant information that Skillz sought, including the
information that would permit Skillz to accept the representation in this
graphic, to dispute it, or to place it in context.” On this record, there was
no need to adjust disgorgement, which after all need not be proven to
perfection.
Unsurprisingly, the court also partially granted Skillz’s
requests for attorneys’ fees, costs, and post-judgment interest, but not pre-judgment
interest. The case was exceptional (the Lanham Act standard) and the court
exercised its discretion to award fees under the GBL. Ending the fee period at
the end of 2025 left roughly $10.1 million in fees. Along with the deliberate,
extensive, central deception, Papaya litigated the case unreasonably in 2024-2025,
when it “slow-walked and obstructed the production of critical discovery
material through the entire discovery period,” with ramifications through trial.
“For example, during the presentation of the defense case, Skillz learned for
the first time that Papaya had wrongfully redacted highly relevant passages
from its documents by marking the material ‘nonresponsive.” But “[t]his year,
Papaya changed counsel and the parties were largely involved in preparing for
the April trial. From any point of view, it was reasonable for Papaya to
litigate the amount to be awarded in damages and that was largely the focus of
the trial.”
No prejudgment interest because the attorneys’ fee award was
sufficient to address the exceptional nature of the case, and because the court
had already ordered disgorgement of Papaya’s unjust enrichment.
Skillz Platform Inc. v. Papaya Gaming, Ltd., 2026 WL 2185762,
No. 24cv1646 (DLC) (S.D.N.Y. Jul. 29, 2026)
The court also denied a permanent injunction. First, Skillz
sought an injunction against bot use; that was denied because it was false
advertising, not bot use as such, that was at issue.
Second, Skillz sought a 6-month corrective advertising “splash
screen” shown to each user prior to their playing any Papaya game or when they
enter the Papaya website, informing readers that Papaya once used bots, that it
denied their existence to customers, and that a jury found Papaya liable to
Skillz for false advertising. [Annoying all-caps presentation makes the
proposal unreadable.] Although Skillz suffered an irreparable injury that
monetary damages could only partially remedy, the public interest and the
balance of the equities didn’t weigh in favor of the proposal:
There is no adequate showing
regarding how many of those currently viewing the Papaya website or playing a
Papaya game were subjected to its false advertising. Papaya’s false advertising
ended in late 2023 with its removal of bots as tournament players. That is over
two years ago, which is probably an infinity in the online gaming world.
Moreover, the reference to Skillz in the proposed corrective advertising will
promote Skillz, which is only one of Papaya’s competitors. Finally, the burden
on a consumer of reading and reacting to the statement years after the events
at issues weighs against the requested relief.
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