Consumer-facing terms of service need a dispute-resolution provision, and a significant decision a game developer will make is whether that provision sends disputes to arbitration or leaves them in court. It’s a decision that’s easy to set once and forget, until a wave of player complaints turns it into a major expense. Whether a company’s arbitration clause becomes a strong shield or an expensive liability often depends on decisions made long before a dispute arises, and which may not have been revisited in years.

A situation involving Valve is a useful example. Valve operates digital games distributor Steam and for years, Steam’s terms of service sent user disputes to arbitration, a standard approach meant to keep individual claims out of court and away from class actions. Plaintiffs’ firms eventually decided to put pressure on Steam by implementing a mass arbitration strategy to rapidly increase the costs of defense. Rather than filing one class action, they recruited thousands of players and filed thousands of individual arbitration demands at once. Each filing can trigger administrative fees the company must pay before any claim is evaluated on the merits, and at scale those fees may reach into the millions before arguments begin. Facing that pressure alongside a parallel class action in federal court, Valve dropped its arbitration requirement in September 2024 and moved disputes to court instead. However, this reversal didn’t end the fight, and plaintiffs’ counsel is challenging whether the change can apply to users who agreed to the old terms. But many other games companies still include an arbitration provision in their terms.

Whether arbitration is the right fit for a company often depends on several factors. These include the risk that the company will face a mass arbitration, and if it does, whether it can afford the large administrative fees involved. Companies should also weigh the pros and cons of reduced discovery exposure in arbitration compared to litigation in court, as well as the benefit of private versus public resolution.

Key Considerations

1. Mass arbitration risk means the company should be able to absorb high up-front fees.

The central trade-off in deciding whether to include an arbitration provision is whether to take on the somewhat predictable and attenuated costs of litigation or the potential enormous costs of mass arbitration. Litigation is public and it comes with the risk of a class-action lawsuit, with expensive discovery and the possibility of company-wide relief if a class is certified. But the cost of litigation often grows proportionally with the company. Arbitration, on the other hand, keeps claims individualized and out of class actions, but a company may outgrow that protection. The larger its player base, the more attractive a target the company becomes for a coordinated mass filing.

If a games company attracts enough players, an arbitration provision may open the door to mass arbitration. Depending on the arbitration provider’s rules, initial per-claim administrative and arbitrator fees can add up quickly at scale. Because plaintiffs’ firms now often organize thousands of simultaneous demands, those fees may climb into the millions before a single claim is tested on the merits, and the provider typically expects the company to pay a significant portion of them up front. A company that can comfortably absorb a seven-figure fee very early in the process may choose to keep their arbitration provision in their terms as the company grows, while a company with a significant player base that could not cover those fees may be pressured into settling even meritless claims simply to avoid the cost of arbitration. This is the bind Valve faced, and it is why the ability to absorb high up-front fees, not merely the theoretical benefit of keeping claims individualized, determines whether an arbitration clause functions as a shield or a liability.

2. Arbitration is a good fit when the company can defend itself in connection with an early dispositive motion and does not need discovery from players to prove its case.

Arbitration generally comes with far narrower discovery than a court case, and that cuts both ways. On the upside, limited discovery keeps costs down and reduces interference with business operations by needing to collect documents and prepare employees for deposition. The flip side is that discovery is also a tool: a company that needs to reach into players’ evidence—to show a claimant isn’t a real user, to expose coordinated or fraudulent filings, or to prove chargeback abuse—may give up some key procedural levers to win the dispute by choosing arbitration.

Arbitration is therefore the better fit when a company can prove its case, or defeat the other side’s, on a thin and largely self-contained record that the company controls via an early dispositive motion. When the decisive facts sit with the players, litigation’s fuller discovery may be worth its cost and exposure.

3. Arbitrations are private, which may help keep damaging facts out of the public record.

Arbitration is private by design; court is public by default. Confidential proceedings keep individual disputes, settlement terms, and internal facts out of the press and off the public docket, and they avoid handing plaintiffs a public ruling to cite in the next case. In court, complaints, motions, exhibits, and deposition testimony land on a public docket. Although the substance can sometimes be sealed from the public, unflattering facts may eventually become publicly known and they can become both a press story and a template for the next plaintiff’s filing. With arbitration, these details stay private. Companies can’t control what claims are filed against them, but when they can anticipate the kinds of claims they’re likely to face, they should decide whether they’d rather fight those battles in the public eye or in a private arbitration setting.

The Bottom Line

There is no universal right answer to the arbitration/litigation decision. A games company’s exposure to a mass arbitration and ability to absorb its fees, how much it stands to lose or gain from discovery, and the value it places on private versus public resolution all factor into whether arbitration is the right forum. This is exactly why the decision may benefit from proactive legal review and re-review as the company grows and changes. Mass arbitration is a viable plaintiffs’-side strategy and switching approaches after a wave of filings has already landed, as Valve’s experience shows, doesn't make the underlying dispute go away. The better time to decide is before that wave hits.