When a company faces a massive court judgment it says it cannot pay, it may seek bankruptcy protection while it challenges the ruling or works to protect its assets.
In the case of Papaya Gaming, the company behind the popular Solitaire Cash game, the company has lost a lawsuit over its advertising practices and has been ordered to pay its rival, Firy, formerly Skillz, $719 million.
“A federal judge ordered the massive payout after a jury found Papaya liable for using computer bots in its real-money games while misleading consumers and violating false advertising laws,” Casino.org reported.
The company, based in Israel, has taken action in its home country and filed for Chapter 15 bankruptcy in the U.S. to protect its assets and continue operations while it appeals the case.
Papaya Gaming files Chapter 15 bankruptcy
Sunni P. Beville, partner and co-chair of the Mass Tort Bankruptcy Practice Group at Otterbourg, P.C. spoke with TheStreet about the Papaya Gaming bankruptcy.
“A Chapter 15 filing, by itself, doesn’t determine whether a company will survive. It’s a procedural tool that allows a foreign restructuring proceeding to receive recognition and protection in the United States. The filing is intended to preserve the company’s assets and operations while the restructuring and related litigation, including any appeals, move forward,” she shared.
As it currently stands, the Chapter 15 filing won’t impact customers.
“The purpose of seeking Chapter 15 recognition is to avoid disruption from creditor enforcement actions that could interfere with ordinary business operations. While customers should continue to monitor developments, the filing itself is not intended to halt day-to-day operations or immediately affect player accounts,” she added.
In the case of Papaya Gaming, which has also started a similar process in Israel, the measures are an attempt to protect its assets in order to continue operations.
“Here, the Company admits it is unable to pay the $719 million judgment. It is using Chapter 15 to protect its assets from the collection efforts of its judgment creditor, to allow an orderly restructuring of all its liabilities to take place pursuant to the proceedings in Tel Aviv. In many ways, this is exactly the type of scenario that Chapter 15 was designed to address,” Beville wrote.
The lawsuit against Papaya Gaming, as well as the court’s decision, along with the company’s Chapter 15 bankruptcy filing, can be found in legal documents filed on Pacer Monitor.
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Papaya Gaming has also made legal moves in Israel
In addition to its U.S. Chapter 15 filing, Papaya Gaming has also won a temporary stay of proceedings from an Israeli court as it fights to overturn a U.S. ruling it says was based on significant legal and factual errors.
“The Tel Aviv District Court, under Judge Iris Lushi-Abudi, approved Papaya’s request for a temporary stay of proceedings as part of the company’s effort to establish a supervised payment arrangement. The move is intended to preserve business continuity and protect the company’s employees and customers while Papaya continues its appeal process in the United States,” CTech reported.
Under the terms of the deal presented to the Israeli court, Papaya will transfer available cash balances into a designated fund overseen by an official appointed on behalf of the court.
“The fund is expected to include approximately $100 million during 2026, along with tens of millions of additional dollars annually, which would serve as a potential source for settling claims should the U.S. ruling remain in place and become enforceable in Israel,” according to CTech.
In the Chapter 15 filing, the company admits it cannot pay the verdict.
“The Applicants acknowledge that they are unable to pay the debt owed to Skillz if that debt becomes enforceable, as well as their remaining debts,” Casino.org reported.
Skillz operator celebrates its court win
Both Papaya and Firy, better known as Skillz, operate real-money online gaming competitions and tournaments.
Firy CEO Andrew Paradise issued a statement when the verdict was first handed down.
“We founded this industry and built its biggest and best company on one value above all others: honor,” he said in a press release. “When growth stalled, investors decided our moat was a story. It was not. In a winner-take-most market, Papaya could not beat us fairly, so it used bots to fake the competition we invented. This judgment sets the record straight. The moat was real.”
As a regular player of Skillz’s solitaire game, I can see why the company argues it has built a moat. I have money in my account on the platform, and switching to a competitor would require abandoning that balance while learning a new system.
The $719 million court award includes damages as well as covering certain attorney’s fees and costs for Firy. The false advertising lawsuit was filed in 2024 against Papaya Gaming for violations of the federal Lanham Act and the New York General Business Law.
Papaya was deemed financially responsible for damaging Skillz’s financial and reputational standing in a ruling by U.S, District Judge Denise Cote.
“Papaya, which says it no longer uses bots in its real-money head-to-head mobile skill games, is appealing Cote’s penalty. In the interim, the court filings, should the District of Delaware’s U.S. Bankruptcy Court approve the Chapter 15 petition, would prevent Skillz from initiating collection efforts until the appeal is concluded,” added Casino.org.
