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Papaya Gaming’s attempt to turn the tables on its rival Skillz hasn’t worked out, as a federal judge in New York granted three motions for summary judgment by Skillz. The ruling dismissed Papaya’s counterclaim, its affirmative defense through the “doctrine of unclean hands,” and its attempt to strike the testimony of two of Skillz’s expert witnesses.
Skillz and Papaya are rivals in the real-money skill gaming space. Their products pit users against one another in a variety of games, including a competitive form of solitaire, with cash prizes on the line. Skillz had sued Papaya for false advertising, alleging that Papaya had misled users by hiding the fact that some of its matches included house-operated bots in place of human players. Papaya no longer disputes that it used bots until November 2023, though it claims to have stopped thereafter.
The case caused a brief controversy when it first emerged, but the dropped off the radar until ESPN commentator Stephen A. Smith signed an endorsement deal with Papaya to promote one of the games mentioned in the lawsuit, Solitaire Cash. That move came shortly after a ruling allowing the case to proceed. Resulting media coverage of the deal and the case produced considerable public attention and backlash.
Much earlier, Papaya’s legal team had initiated the strategy of accusing Skillz of a similar set of wrongdoings. Papaya simultaneously countersued Skillz and argued that the original case should be dismissed due to the “doctrine of unclean hands.” Under that legal principle, a plaintiff can’t claim damages from a defendant if was also engaged in the same behavior it accuses the defendant of.
However, Judge Denise Cote of the U.S. District Court for the Southern District of New York identified differences in the respective parties’ claims in an opinion issued November 21.
Skillz Statement
A spokesperson for Skillz provided PokerScout with the following statement:
We are pleased that the Court has granted Skillz’s Motion for Summary Judgment and rejected Papaya’s counterclaims. This follows the Court’s prior Summary Judgment ruling in Skillz’s favor. This case has always been about getting the deceptive use of bots out of the real-money, skill-based gaming space, and we look forward to presenting our claims against Papaya to a jury.
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Not All Bots Are Equal
Much of the November 21 ruling concerns whether Papaya can claim to have suffered damages from Skillz’s advertising. However, from the point of view of gamblers following the case, the most relevant accusation was that Skillz had also used bots.
The primary basis for Papaya’s counterclaim was Skillz’s documentation for third-party developers detailing how to implement bots in their games. Unlike Papaya, which is vertically integrated, Skillz only provides a matchmaking and monetization platform, relying on third parties to create the games.
However, the context of that documentation was for the use of bots in tutorials, to teach players the game mechanics before they participate in real-money contests.
By contrast, Papaya’s use of bots, as uncovered in the case’s discovery phase, included two types related to real-money play — one to fill up tournaments with insufficient human players, and the other to arrange specific outcomes, such as a win or a loss for a human player.
Papaya claimed that Skillz’s assertions that it “never” used bots were nonetheless false advertising. That aspect isn’t addressed in the court ruling, which rejects the counterclaim for lack of clear damages before reaching that argument.
However, Judge Cote wrote that the difference between the two situations is important when it comes to invoking the unclean hands defense:
A jury would be entitled to find that Papaya used bots to compete with human players, including to control the outcome of games […] Papaya has not shown that Skillz used bots in an equivalent manner. Players in Skillz’s games lost because other human players out played them, not because they were outscored by a bot.
Two Companies on Opposite Trajectories
On the damages issue, both companies claim the other’s allegedly false advertising harmed them by, essentially, stealing customers that might otherwise have been theirs.
The court granted Skillz’s motion for summary judgment against Papaya’s claim, while denying Papaya’s motion against Skillz’s claim. Despite the similarities of the arguments, Judge Cote identified two differences that led her to rule differently in each case.
For one thing, during the period in question, Skillz’s revenue was in freefall, while Papaya was boasting of explosive growth. Skillz’s lawsuits against Papaya and other rivals came against the backdrop of cratering stock prices, executive resignations, and a class action lawsuit against Skillz by its shareholders. Facially, that makes it easier to argue that Skillz was losing customers its competitors than the other way around.
The ruling clarifies that, on its own, Papaya’s comparatively good performance doesn’t rule out the possibility that harm occurred. However, it provides context for differences in the expert testimony put forward by each party.
Papaya’s expert witness, Jonathan Orszag, provided an estimate of how much additional money Skillz made through use of a particular piece of matchmaking technology, detailed below, that Papaya characterizes as unfair. However, he did not equate that amount to any particular loss by Papaya. Conversely, Skillz’s expert, Jim Bergman, did provide an estimate of the company’s losses.
The ruling makes it clear that Papaya can challenge Skillz’s expert’s claims at trial. However, the lack of corresponding specifics on Papaya’s side was the primary reason for the court to summarily dismiss its counterclaim.
Ruling Doesn’t Address All Papaya’s Allegations
Papaya provided PokerScout with the following statement:
Papaya strongly disagrees with the court’s ruling. A whistleblower (a former senior Skillz employee) confirms Skillz’s own deceptive matchmaking practices – Skillz has deceived, and continues to deceive, its players and investors by using bots, manipulating matchmaking, and delaying withdrawals.
The ruling turned a blind eye to the well‑documented evidence of Skillz’s deceitful practices, and focused solely on finding insufficient evidence of damages to Papaya.
Papaya will continue to vigorously defend itself and contest Skillz’s false and unjustified accusations. In the meantime, Papaya will continue to lead the industry through innovation while remaining focused on our mission to provide players with fair, skill‑based competition.
Although the ruling notes a key difference between the companies’ respective use of bots, its focus on the damages issue does mean that the other two things mentioned in Papaya’s statement went unaddressed.
The mention of delayed withdrawals appears to be a reference to a separate lawsuit, Nathaniel Tsegay v. Skillz Inc., in which the plaintiff accuses Skillz of denying him his winnings. Tsegay claims he was required to perform numerous verifications to demonstrate that he could actually play at the high level of skill his winnings indicated, and then was still accused of cheating and denied $55,000 in winnings.
Aggressive Matchmaking Practices
The reference to “manipulating matchmaking” appears to relate to aspects of Papaya’s counterclaim that went unaddressed, specifically a component of Skillz’s matchmaking algorithm called DOM, short for Determined Outcome Matcher.
The memorandum detailing DOM’s functionality is partially redacted. However, the thrust of it, as described by Papaya in the memo, seems to be that it’s a system that overrides standard matchmaking to pair a player who is “winning too much or too little” with an opponent far outside their usual skill band, to ensure a win or a loss as needed to bring them closer to parity.
Even the normal matchmaking on products like Papaya’s and Skillz has the effect of making it difficult to turn a profit. Although presented to players as a matter of “fairness,” the non-random pairing of players based on skill drives everyone’s win rate toward 50%.
Online poker sites typically use random matchmaking or allow players to choose their own seats. Under those circumstances, strong players profit, while weak players lose faster than they would in a game of chance.
However, “fair” matchmaking or even more heavy-handed approaches (like DOM, if Papaya’s characterization is accurate) ensure that few players profit. A 50% win rate means players trade money back and forth, while their accounts are gradually depleted by the entry fees paid to the site.
