Skillz v. Papaya Gaming: Record Lanham Act Verdict Puts Bots, Matchmaking, and 'Skill-Based' Marketing on Trial

Key takeaways

• A federal jury in the Southern District of New York returned a landmark verdict in Skillz Platform Inc. v. Papaya Gaming, Ltd., No. 24-cv-01646 (S.D.N.Y.), finding that Papaya Gaming misrepresented that it was “skill-based” when instead it used bots in its games. 
• The jury found Papaya liable for false advertising under the Lanham Act and deceptive acts or practices in violation of New York’s General Business Law § 349. 
• The use of bots by Papaya ultimately shifted the platform from legal, skill-based gaming to illegal gambling, with the defendant taking on the role of the “house.”
• This Update examines the allegations, the verdict, and the heightened consumer class-action and regulatory risk for skill-based gaming companies. 

Background

Skillz Platform Inc., founded in 2012, provides online mobile games that pair real players in head-to-head competitions with cash prizes at stake. Papaya Gaming, Ltd., founded in 2016, launched competing games that largely mimicked Skillz’s offerings. By 2024, Papaya claimed more than 20 million downloads, one million daily users, and a 95% U.S. user base. Unlike Skillz’s head-to-head model, Papaya operated multiplayer tournaments involving as many as 20 players, funded by entry fees.

Skillz sued Papaya on March 4, 2024, alleging that Papaya falsely marketed its mobile games as “totally fair and skill-based” competitions against real human players while secretly deploying computer-controlled bots in cash tournaments. According to the complaint, those bots inflated player liquidity, accelerated matchmaking, allowed Papaya to control when bots won or lost, and enabled Papaya to determine its revenue from each game—all while Papaya represented across its website, app store listings, and terms of use that its competitions were “games of skill,” that winners were determined by “objective criteria,” that users would be matched with players of the “same skill level,” and that Papaya had “no vested interest in who wins or loses.” Skillz further alleged that Papaya’s own promotion rules prohibited the “[u]se of robotic, mechanical or other forms of pre-programmed entry methods”—the very conduct at issue—and that Papaya’s misrepresentations deceived consumers, diverted Skillz’s player base, and enticed users into what amounted to illegal gambling. 

On April 23, 2026, a jury agreed and found that Papaya misrepresented its games as fair, skill-based competitions among real human players while secretly deploying bots that manipulated tournament outcomes. The jury awarded Skillz $420 million in actual damages, the largest award under the Lanham Act in U.S. history. On top of that, the jury returned advisory findings supporting disgorgement of Papaya’s profits, for either a $719 million profits basis or a $652 million cost-savings basis, to be determined by the court.

Bot problem and conversion to illegal gambling

One consequential aspect of the case is the theory that undisclosed bots can transform otherwise legal skill-based games into illegal gambling. Under New York law, gambling occurs when a person “stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence.” N.Y. Penal Law § 225.00(2). A “contest of chance” includes any game “in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.” N.Y. Penal Law § 225.00(1). The complaint alleged that bots inject house-controlled randomness that overwhelms whatever skill component exists. In other words, if Papaya controlled when its bots won or lost, it allegedly retained entry fees and prizes from losing human players while functioning, in substance, as the “house” in a casino-style game.

According to Skillz’s complaint, for skill-based gaming to remain lawful, skill must predominate and be “overwhelmingly more influential” than chance in deciding the winners. This theory, now credited by a jury in a record Lanham Act verdict, provides a potent weapon for consumer class-action plaintiffs arguing they were unwitting participants in illegal gambling. Plaintiffs’ lawyers can now argue that consumers on other platforms were likewise deceived into staking money on contests they believed were skill-based but were rigged by house-controlled bots, satisfying both the deception and injury elements of a consumer protection class action. 

What this means for future class-action complaints

The Skillz v. Papaya Gaming verdict and record-breaking damages figure may create a new wave of consumer class-action litigation targeting skill-based gaming platforms. Plaintiffs’ lawyers now have a jury-validated roadmap for alleging that platforms using undisclosed bots (1) engaged in false advertising by misrepresenting games as fair, skill-based, and played against real humans and (2) converted otherwise legal gaming into illegal gambling by introducing house-controlled artificial players that negate the skill component required for legality.

Companies in this space should take immediate stock of their practices. At a minimum, platforms should ensure that (1) their marketing and terms of use accurately describe the nature of the competition, including whether and when artificial players may be introduced; (2) the skill component genuinely predominates over chance, even accounting for automated elements; and (3) they do not retain a financial interest in tournament outcomes through the use of artificial players. 

The private litigation is also unlikely to be the end of the exposure. A jury verdict of this magnitude, premised on deception of consumers, creates a factual record that consumer protection regulators frequently follow, and operators should anticipate the possibility of FTC or state attorney general inquiry into bot disclosure, matchmaking, and “skill-based” claims independent of any private suit. Two practical steps can reduce that risk now. First, treat the question of when and how automated or artificial players are disclosed as a board-level compliance issue rather than a marketing decision, and paper the rationale. Second, preserve documents. Skillz’s theory turned on internal evidence of how and when bots were deployed, and the same categories of records will be the first thing any plaintiff or regulator requests.

Contact Perkins Coie if your company operates a skill-based gaming platform or relies on automated players, matchmaking algorithms, or similar game mechanics for help assessing your advertising claims, terms of use, or litigation risk.