Zula Casino Lawsuit Sent Back to Georgia State Court: Arbitration Clause Can't Bind Gambling-Loss Plaintiff

A federal judge has sent the Zula Casino lawsuit brought by Georgia Gambling Recovery LLC back to Georgia state court. On November 3, 2026, Judge Clay D. Land of the Middle District of Georgia held that the arbitration clause in Zula's terms and conditions could not support federal jurisdiction under the New York Convention, because the plaintiff never signed the agreement or agreed to be bound by it and its claim comes from a Georgia statute, not a contract. The case, Georgia Gambling Recovery LLC v. Blazesoft Ltd., No. 4:26-cv-00914-CDL, now returns to the State Court of Muscogee County.

The order decides only where the case will be heard. It does not decide whether Zula's dual-currency sweepstakes games are gambling under Georgia law, and it awards no money. Its importance is structural. Sweepstakes casino operators have relied heavily on arbitration clauses, and on the Convention Act's removal provision, 9 U.S.C. § 205, to move consumer cases out of state court and then into arbitration. The Zula Casino lawsuit shows where that strategy stops working: when the plaintiff is not a player who clicked through the terms, but a third party suing under a statute that gives "any person" a right to recover gambling losses.

This article covers what the court decided, why the Convention theory failed, how the ruling fits with the same judge's October 28 order keeping three similar suits in federal court, whether the defendants can appeal, and what it means for operators, drafters, claimants' counsel and the funders behind these recovery entities.

What happened in the Zula Casino lawsuit in Georgia?

Georgia Gambling Recovery LLC sued the companies behind Zula Casino in Georgia state court, seeking to recover Georgia residents' losses under the state's gambling-loss recovery statute, O.C.G.A. § 13-8-3. The named defendants are Blazesoft Ltd., Blazegames, Inc. and SCPS LLC, which operates the Zula Casino brand. A state-court docket listing on Trellis shows a Georgia Gambling Recovery case, No. SC2025CV001602, that names those three companies alongside Dabble Sports, Betr Holdings, Blitz Studios (Sleeper) and PTT LLC (High 5 Games), which suggests the plaintiff first sued a wide group of online gaming operators together before the cases were split in federal court.

The Zula defendants removed the case to the Middle District of Georgia. Their theory was that the dispute "relates to" an arbitration agreement falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the New York Convention, because Blazesoft is a Canadian company and Zula's terms require arbitration. Section 205 of the Federal Arbitration Act allows a defendant to remove a state-court action on that basis at any time before trial, and federal jurisdiction then rests on the Convention Act itself rather than on diversity or a federal question.

Judge Land granted the plaintiff's motion to remand. According to reporting by Law360 on November 4 and gHacks on November 5, and the remand judgment entered on the federal docket, he found that the defendants had not shown federal jurisdiction based on an arbitration agreement that the plaintiff never signed.

Why did the judge send the Zula Casino lawsuit back to state court?

The court gave three related reasons, as reported:

1. No agreement by the plaintiff. Georgia Gambling Recovery had neither signed Zula's arbitration agreement nor agreed to be bound by it. The company is not a Zula player. It is a separate entity suing in its own name.
2. No Georgia-law route to bind it. The defendants argued that Georgia law would let them enforce the clause against the company anyway. Judge Land rejected that argument. That matters because, after the Supreme Court's 2020 decision in GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, state-law doctrines such as equitable estoppel can be used to extend a Convention arbitration agreement to nonsignatories. The defendants needed one of those doctrines to apply and, on the court's reading, none did.
3. The claim comes from a statute. The plaintiff's right to relief comes from O.C.G.A. § 13-8-3, not from a contract that contains an arbitration clause. A plaintiff who sues under a statute that gives it its own cause of action does not step into the player's contract the way an assignee or a third-party beneficiary would.

Taken together, those findings meant the arbitration clause had no real connection to the parties actually in the case, so it could not anchor removal under § 205.

Can an arbitration clause let a defendant remove a case to federal court?

Yes, but only within limits, and the Zula Casino lawsuit falls outside them. Section 205 permits removal where the subject matter of a state action "relates to an arbitration agreement or award falling under the Convention." The agreement must have some foreign element (here, Blazesoft's Canadian domicile) and must be commercial in the Convention's sense. Courts do not treat § 205 like ordinary removal statutes, which are read narrowly. The Eleventh Circuit, in the earlier appellate stage of the Outokumpu litigation, 902 F.3d 1316 (11th Cir. 2018), described the "relates to" test as generous: removal is proper so long as the defendant's argument that the case relates to a Convention agreement is not immaterial, frivolous or made only to obtain jurisdiction.

The same line of Eleventh Circuit authority also says a district court deciding jurisdiction generally should not decide whether the arbitration agreement actually binds the parties. That is the most interesting tension in the Zula order. As reported, Judge Land's decision turned largely on the finding that the plaintiff was not bound, which looks like a merits question about arbitrability. The likely reconciliation, which the full order would confirm, is that an arbitration clause that cannot plausibly apply to the plaintiff at all, because the plaintiff is a stranger to the contract suing on a statutory right, does not "relate to" the case in any non-frivolous sense. Public reporting does not show how the order dealt with that precedent, and practitioners should read the opinion before relying on the reasoning.

For comparison, a domestic arbitration clause governed only by Chapter 1 of the FAA gives no basis for removal at all; the Supreme Court has held that the FAA does not create federal-question jurisdiction on its own. The Convention Act is the exception, and Georgia Gambling Recovery v. Blazesoft is a reminder that the exception still requires a real link between the clause and the claim.

The three Georgia orders side by side

The Zula remand came six days after the same judge reached the opposite result in three parallel suits by the same plaintiff. The outcomes are consistent once the removal theory is separated out.

Order	Defendants	Removal basis	Result	Key reasoning (as reported)
February 2026	Kalshi, Robinhood, Webull and others (No. 4:25-cv-00310)	Federal question and CAFA	Remand denied	Dispute raised federal issues tied to Kalshi's CFTC-regulated status
October 28, 2026	VGW Holdings, Blitz Studios, Dabble Sports	Diversity jurisdiction	Remand denied in all three	Georgia Gambling Recovery LLC is the real party in interest; the statute does not let it pursue a claim belonging to the state
November 3, 2026	Blazesoft Ltd., Blazegames, Inc., SCPS LLC (Zula Casino)	New York Convention, 9 U.S.C. § 205	Remanded to State Court of Muscogee County	Plaintiff never signed or agreed to be bound by the arbitration clause; claim arises from statute

The October 28 order matters for Zula too. In rejecting the argument that the state was the true party, Judge Land treated Georgia Gambling Recovery as a private plaintiff suing on its own claim. That same characterization helped sink the Convention argument a week later: if the company is suing on its own statutory right, it is not suing on a Zula player's contract.

The table also explains why the Zula defendants could not simply fall back on diversity. The gHacks reporting does not say why diversity was unavailable or unargued in the Blazesoft case, and Law360's summary frames the decision solely around the arbitration clause, so that question remains open on the public record.

Who is Georgia Gambling Recovery LLC?

Georgia Gambling Recovery LLC is a company that sues online gaming and prediction-market operators under O.C.G.A. § 13-8-3 to recover gambling losses suffered by Georgia residents. It is not itself a player. Its suits rely on the statute's second clause, which lets "any person" sue once the loser's own six-month window has closed.

The model has spread. Similar entities have filed under comparable statutes in other states, with mixed results. According to a May 2026 release from Orrick, counsel to VGW, an Ohio Court of Common Pleas dismissed an Ohio gambling-loss recovery action against VGW in full for lack of common law and statutory standing, describing the plaintiff as an entity formed for the suit and backed by litigation funders. Bloomberg Government reported in August 2026 that a Kentucky federal court dismissed a similar suit against Underdog and two other platforms for lack of standing. A separate case, Ohio Gambling Recovery LLC v. Kalshi, was sent back to state court in March 2026. Standing, not jurisdiction, is the main defense in the Georgia cases still to come.

What is Georgia's gambling loss recovery law?

O.C.G.A. § 13-8-3 has two parts. Subsection (a) declares gambling contracts void. Subsection (b) creates the recovery action: money or property paid on a "gambling consideration" may be recovered by the loser in a civil action brought within six months of the loss. If the loser does not sue in that time, any person may bring the action within four years, for the joint use of that person and the educational fund of the county.

That two-step structure is why third-party recovery suits exist. It also limits them. The Georgia Supreme Court held in Hardin v. NBC Universal, Inc. (2008) that a plaintiff must show a gambling contract, supported by a gambling consideration, between the parties; fees paid to enter a televised game show's text-message contest did not qualify, even if the contest was an illegal lottery. Whether a dual-currency sweepstakes model, in which players buy "Gold Coins" and receive promotional "Sweeps Coins" that can be redeemed for cash prizes, is a gambling contract under Hardin is the central merits question the Muscogee County court will eventually face.

Can the Zula Casino defendants appeal the remand order?

Probably not. Under 28 U.S.C. § 1447(d), an order remanding a removed case to state court for lack of subject-matter jurisdiction is generally not reviewable on appeal. In Fu Jing Wu v. Chun Liu, No. 24-10397, 131 F.4th 1295 (11th Cir. Mar. 19, 2025), the Eleventh Circuit applied that bar to a case removed under § 205, dismissing an appeal from a single order that both denied a motion to compel arbitration and remanded the action. The court held that § 1447(d) has no carve-out for Convention removals and that the FAA's appeal provision for orders refusing arbitration, 9 U.S.C. § 16, does not override it.

The practical result is that the Zula defendants' next forum is the State Court of Muscogee County. They can still move there to compel arbitration, and a Georgia court will apply the same FAA and Convention principles, including Outokumpu's allowance for state-law nonsignatory doctrines. But the federal finding that the plaintiff never agreed to arbitrate will be difficult to overcome a second time.

Does the ruling affect Zula Casino arbitrations and class actions elsewhere?

Not directly. The Georgia order binds only the Georgia case, and Blazesoft has won arbitration rulings against its own players elsewhere:

• In Ambrosia v. Blazesoft Ltd., No. 1:25-cv-01723 (N.D. Ill.), a court compelled arbitration of a proposed nationwide class action alleging that Sportzino and Zula Casino are illegal gambling sites. The court held that the agreement was governed by the New York Convention and that only defenses applicable neutrally on an international scale, such as fraud, mistake, duress or waiver, render a Convention agreement "null and void." The plaintiffs sought reconsideration and certification for interlocutory appeal.
• In Boatner, a Southern District of New York judge also sent a class action against Blazesoft's brands to arbitration, as SBC Americas reported in December 2025.
• On the mass arbitration front, plaintiffs' firms filed AAA demands for roughly a thousand Zula and Sportzino players. A court filing in the District of Columbia records that Blazesoft's March 7, 2024 terms required AAA arbitration, but its June 28, 2024 revision moved the forum to ADR Chambers in Ontario, Canada. Blazesoft's suit against the firms in Washington, D.C. was dismissed for lack of jurisdiction.

The Zula Casino lawsuit in Georgia is different in kind. Players who accepted the terms are bound by the clause, and courts have enforced it against them. A statutory plaintiff who never accepted the terms is not, and Judge Land held that the clause cannot be used to move such a plaintiff into federal court.

What it means for operators, drafters, claimants' counsel and funders

Operators and defense counsel. The Convention Act's removal provision is a strong tool against players, but it does not reach plaintiffs who sue on their own statutory rights. Defendants facing third-party recovery suits should expect to defend on standing, the Hardin gambling-contract requirement and personal jurisdiction, not on arbitration. Where complete diversity exists, the October 28 order shows that ordinary removal is still available.

Drafters. No terms-of-service clause can bind a stranger to the contract. Drafters can tighten assignment provisions (barring players from assigning claims to recovery entities) and add clear delegation clauses, but those provisions work only against claims that come from the player's own contract. A statute that gives "any person" a cause of action after six months creates a right the player never held to assign.

Claimants' counsel and recovery entities. The ruling confirms that structuring a claim around a statutory cause of action, rather than an assignment of player claims, can keep it out of arbitration and in state court. It also highlights the cost. Ohio and Kentucky courts have dismissed similar entities for lack of standing, and Georgia's statute requires a recovery for the joint use of the plaintiff and the county educational fund, which affects how any recovery is split.

Funders. Litigation finance behind recovery entities faces standing challenges, as the Orrick-described Ohio dismissal shows. A state-court forum may be friendlier procedurally, but the merits question under Hardin is untested for sweepstakes casinos.

For context, sweepstakes casinos face pressure from legislatures as well as courts. Industry reporting by Lines.com counts eight states (California, Indiana, Louisiana, Maine, Montana, Nevada, New York and Tennessee) that have banned dual-currency sweepstakes casinos since October 2025. Georgia is not among them, which leaves § 13-8-3 litigation as the main legal pressure point there.

FAQ

What did the court decide in the Zula Casino lawsuit?

Judge Clay D. Land of the Middle District of Georgia granted Georgia Gambling Recovery LLC's motion to remand on November 3, 2026, sending its suit against Blazesoft Ltd., Blazegames, Inc. and SCPS LLC (Zula Casino) back to the State Court of Muscogee County. He held that the New York Convention did not supply federal jurisdiction because the plaintiff never agreed to Zula's arbitration clause.

Does the ruling mean sweepstakes casinos are illegal in Georgia?

No. The order is about jurisdiction only. No Georgia court has yet decided whether a dual-currency sweepstakes casino involves a "gambling contract" under O.C.G.A. § 13-8-3 as interpreted in Hardin v. NBC Universal.

Why did the VGW cases stay in federal court but Zula's did not?

The VGW, Blitz and Dabble defendants removed on diversity grounds, and on October 28, 2026 Judge Land found diversity satisfied because Georgia Gambling Recovery is the real party in interest. The Zula defendants relied on the New York Convention, which requires a real connection to an arbitration agreement, and the court found the plaintiff was not bound by one.

Can Zula Casino still force the case into arbitration?

The defendants can ask the Georgia state court to compel arbitration, but the federal finding that the plaintiff never signed or agreed to be bound by the clause makes that difficult. Appellate review of the remand itself is generally barred by 28 U.S.C. § 1447(d), as the Eleventh Circuit held in Wu v. Chun Liu.

Who can sue under Georgia's gambling loss recovery statute?

The person who lost the money may sue within six months of the loss. After that, any person may sue within four years, for the joint use of that person and the county's educational fund, which is the provision Georgia Gambling Recovery LLC relies on.