Shares of Skillz Inc. experienced extreme volatility this week after a Manhattan federal jury ordered rival Papaya Gaming Ltd. to pay $420 million in damages in a false-advertising lawsuit, a ruling that briefly transformed the thinly traded gaming stock into one of the market's most dramatic movers.
The jury's decision, reached on Thursday, found that Papaya had misled users by promoting its games as fair and skill-based while allegedly deploying bots—automated non-human players—in some tournaments. According to a prior court order, Skillz argued that Papaya's advertising implied human competition, when in reality bots were used against human players.
Skillz shares skyrocketed 238.32% to $12.45 on Thursday, only to retreat 25.14% to $9.20 in pre-market trading on Friday, as reported by Benzinga. The sharp reversal underscores the market's struggle to value two competing narratives: a potentially massive legal windfall and a still-loss-making operating business.
The verdict is not yet final. Judge Denise Cote is scheduled to rule in early June on a separate disgorgement request, which could force Papaya to surrender additional profits or savings tied to the alleged misconduct. The jury also provided advisory disgorgement figures of $719 million and $652 million, though the judge will determine the final remedy.
Skillz CEO Andrew Paradise expressed relief in an interview with GamesBeat, calling the outcome "pretty vindicating." The company issued a brief public statement saying it was "pleased with the jury's verdict" and remained committed to "fair competition" and a "trusted, transparent experience."
Papaya said it respected the jury's decision but was disappointed and expected the verdict to undergo court review. During closing arguments, Papaya's legal team argued there was no evidence it earned "a single dollar" from the disputed portion of winnings and noted its total revenue was below $1 billion, according to Investing.com.
The legal battle adds another chapter to a fiercely contested corner of mobile gaming: real-money skill-based contests where users pay entry fees to compete for cash prizes. Skillz previously settled a patent lawsuit with AviaGames after a jury awarded it nearly $42.9 million, while AviaGames faced separate allegations over bots, which it denied.
Beyond the courtroom, Skillz's financial performance remains challenging. The company reported 2025 revenue of $104.5 million, a net loss of $70.4 million, cash and cash equivalents of $194.5 million, and total outstanding debt of $129.7 million at year-end. Adjusted EBITDA, a non-GAAP measure that excludes interest, taxes, depreciation, and other items, was negative $50.5 million for the year.
Investors now face the reality that a jury verdict does not guarantee immediate cash. The disgorgement question remains unresolved, Papaya has signaled it will seek appellate review, and any collection process could be protracted. Meanwhile, Skillz must demonstrate that its core platform and RZR ad-tech unit can translate revenue growth into sustainable profitability.
