Skillz Challenges Papaya Gaming's Chapter 15 Bankruptcy Filing as Bad Faith Forum Shopping

The dispute between Skillz (now operating as Firy Inc.) and Papaya Gaming has escalated into a significant legal battle over bankruptcy procedure and debtor accountability. In April 2026, a federal jury ruled that Papaya deceived consumers by deploying computer bots in its head-to-head mobile games, allowing the company to artificially inflate player counts and speed up peer-to-peer matching times. Judge Denise Cote subsequently ordered Papaya to pay $719 million in damages for unfair competitive practices that lured players away from Skillz's legitimate skill gaming platform.

Facing the judgment, Papaya moved quickly to seek protection through cross-border insolvency channels. The company, headquartered in Israel, obtained a temporary stay from Tel Aviv District Court and filed a Chapter 15 petition with the U.S. Bankruptcy Court for the District of Delaware. Chapter 15 is designed to govern cross-border insolvency proceedings when foreign companies with significant U.S. operations become insolvent, allowing them to reorganize while protecting creditors across multiple jurisdictions.

However, Skillz argues that Papaya's use of Chapter 15 fundamentally misapplies the statute. In its objection, Skillz contends that Papaya's petition lacks standing because the company's business operations are based almost exclusively in the United States, even though it maintains a technical headquarters in Israel. More problematically, Skillz alleges that Papaya is wielding Chapter 15 as a strategic weapon against a single creditor rather than for the collective administration the statute contemplates.

Skillz's legal team characterized the filing as "bad faith forum shopping," noting that Papaya has left all ordinary-course creditors untouched while targeting the one creditor whose judgment it wishes to defer. The company also preserved shareholder equity, granted a $10 million dividend to shareholders at the end of 2025, and sought releases for insiders who directed the deceptive conduct. Skillz argues this selective use of insolvency machinery, combined with Papaya's documented fraud, makes the petition manifestly contrary to U.S. public policy.

Complications arose when Tel Aviv District Court Judge Iris Lushi-Abudi rejected Papaya's proposed repayment arrangement in August 2026, which would have allowed the company to settle the judgment over 6.5 years using operating profits. To date, Papaya has not submitted an alternative debt restructuring plan or clarified how it intends to address Skillz's claim. The absence of a credible payment proposal strengthens Skillz's position that the Chapter 15 filing is merely a delay tactic rather than a genuine reorganization effort.

The case underscores growing tensions between legitimate gaming operators and bad-faith actors who exploit regulatory gaps and procedural tools. Papaya Games operates Solitaire Cash, Bingo Cash, and Bubble Cash, products that rely on deceptive mechanics to generate user engagement. As the skill gaming and casual gaming markets mature, operators using dishonest practices face increased scrutiny from both regulators and competitors willing to litigate. The outcome of Skillz's Chapter 15 objection will signal whether U.S. courts will permit companies to leverage cross-border bankruptcy procedures to escape accountability for consumer fraud.