The Tel Aviv-Jaffa District Court granted Israeli gaming company Papaya Gaming a temporary stay of proceedings on Monday as the company sought a court-supervised payment arrangement following a $719 million judgment against it in the United States.
Judge Iris Lushi-Avudi issued the temporary order while the court considers Papaya’s proposed arrangement, which the company said was designed to preserve its business operations and prevent individual creditors from taking enforcement action before its US appeal is resolved.
Papaya said the arrangement applies only to legal claims against the company and would have no effect on its regular business activities. The company said it continued to pay employees, suppliers and service providers and that players remained able to withdraw money owed to them.
“In light of the company’s success, and in order to protect our employees and customers and enable us to continue operating as usual until the appeal is decided in the United States, we applied to the court for a supervised payment arrangement,” Papaya said.
“This is a proactive, responsible and controlled step designed to safeguard the company’s operations and the rights of all parties during the appeal period, which may last several years.”
Papaya challenges $719 million US judgment
Papaya applied for the Israeli arrangement after US District Judge Denise Cote ordered it to pay $719 million to Skillz Platform Inc. in a false-advertising lawsuit in the Southern District of New York.
A federal jury found in April that Papaya had falsely advertised its mobile games as fair, skill-based competitions while failing to disclose its use of automated players, or bots. The jury initially awarded Skillz $420 million in damages and recommended that Papaya surrender $719 million in profits associated with the conduct.
Cote adopted the $719 million disgorgement figure in place of the $420 million damages award, since Skillz may recover only once for the same injury. The court also awarded Skillz approximately $10 million in legal fees for 2024 and 2025, according to Skillz’s parent company, Firy Inc.
Papaya has said the US judgment contains material errors and that it plans to challenge both the finding of liability and the amount awarded. The company said it believed its chances on appeal were strong.
“We believe that the judgment contains material errors and that the prospects of the appeal are strong,” Papaya said. “The framework we have proposed will enable the company to continue operating and growing, while also generating, over time, the resources required to protect the rights of all parties, including Skillz, should the judgment be upheld and become enforceable in Israel.”
Skillz vows to pursue full collection
Skillz has described the US ruling as the largest false-advertising recovery in US history and said it intends to “vigorously pursue full collection” of the judgment. The company acknowledged, however, that the timing and amount of any recovery could be affected by Papaya’s appeal and other legal proceedings.
Papaya said the US judgment is not currently enforceable in Israel. Its application seeks to prevent enforcement attempts from disrupting its operations or allowing one claimant to gain priority while the Israeli court considers the proposed arrangement.
Under the plan presented by Papaya, available funds would be transferred into a designated account administered under the supervision of a court-appointed official. The money would eventually be used to satisfy judgments arising from legal claims if those judgments survive appeal and become enforceable in Israel.
Papaya submitted a cash-flow forecast that it said showed its ongoing operations would produce significant positive balances in the coming years, allowing it to continue operating while regularly transferring money into the supervised fund.
The company also filed an application with the federal court in New York seeking recognition of the Israeli proceeding as the principal proceeding governing the payment arrangement.
Papaya, founded in Israel in 2016, develops mobile games in which users compete in skill-based tournaments. The company said it employs approximately 350 people in Tel Aviv and Poland.
Papaya is represented in the Israeli proceeding by attorney Pini Yaniv, a partner in the litigation department at Meitar Law Offices.