Pong Games Studios Agrees to $3.5M Settlement with California for Illegal Gambling

Posted on: October 29, 2021, 01:16h. 

Last updated on: October 29, 2021, 02:01h.

A Canadian games developer has agreed to pay $3.5 million to the state of California and to permanently halt its operations there. That follows the approval by the Superior State of California of a stipulated judgment against the company, Pong Games Studios, for offering illegal gambling in the state.

Pong Games Studios
Pong’s “Princess Jewels,” seen above in a screengrab, is advertised as a skill game on its website. California prosecutors said the company’s skill elements were too “simplistic.” (Image: Pong Games Studios)

The Ontario, Canada-based company supplied “casino-style games … under the guise of lawful sweepstakes” to internet cafés across California, according to a statement by state AG Rob Bonta.

“Today’s judgment puts a halt to these unlawful activities,” Bonta said. “It protects consumers and it protects the safety of our communities. I’m grateful to our task force partners across the state for their work in securing this important win. Together, we can continue to dismantle illegal gambling operations and make a difference for the people of our state.”

Testing Boundaries

Internet sweepstakes operators throughout the US frequently occupy a gray area in the law. Their games often ape the essential dynamics of games that are legal in the surrounding jurisdiction. But they can push the legal boundaries to the max, often having the look, sound, and feel of slots or video poker machines.

Pong’s “Sweepstakes Gambling System” was designed to conform to laws governing promotional sweepstakes competitions, or at least the company’s interpretation of those laws. The competitions are legal in California, provided they are free to enter. Operators get around this by selling customers time on the machines, instead of receiving a buy-in.

In 2015, the Supreme Court of California analyzed several sweepstakes gambling systems, including one that operated software developed by Pong. The court ruled the system violated the state penal code.

That year, the legislature amended the Business and Professions Code section. The law aimed to ban any method intended to be used by a person interacting with an electronic video monitor “to simulate gambling or play gambling-themed games in a business establishment that . . . implements the predetermination of sweepstakes cash … or otherwise connects a sweepstakes player or participant with sweepstakes cash, cash equivalent prizes, or other prizes of value.”

Pong Carries On

Pong was undeterred. According to prosecutors, the company tweaked its offering in California to provide a product based not on sweepstakes, but skill-gaming. According to court documents, Pong believed this would eliminate chance, and thus it could not be deemed a gambling game.

But the Superior Court agreed with prosecutors that “the purported skill exercise … only required participants to perform a simplistic graphical color bar exercise before cashing out their gambling winnings.”

For years, Pong has flouted California law and flooded our state with illegal gambling devices, profiting off of the harm done to some of our most vulnerable communities,” said Kern County District Attorney Cynthia J. Zimmer.

“Pong’s illegal devices and software have bred unregulated pop-up casinos that have been magnets for criminal activity wherever they have arisen, and today’s judgment will get Pong’s illegal gambling software out of our state and send a clear message to other makers of illegal gambling software: take your business elsewhere.”