A Tel Aviv judge ordered Papaya Gaming to rework its debt plan in the Skillz case, with a 45-day stay now contingent on Skillz's consent to the process.
Papaya Gaming must rework its proposed debt arrangement, which aims to cover a $719 million U.S. judgment, before a Tel Aviv judge will approve it. The Tel Aviv District Court ruled on August 25, 2026, that the plan cannot rely solely on future operating income and requires direct shareholder contributions, according to Globes.
What Did the Tel Aviv Court Rule on August 25?
On August 25, 2026, Judge Iris Lushi-Abudi of the Tel Aviv District Court instructed Papaya Gaming's attorneys that the company's debt arrangement proposal needs a combined financial model. This model must incorporate shareholder contributions, rather than being built exclusively on projected operating income, as reported by Globes. The judge expressed her intent to appoint a special arrangement administrator and grant a 45-day stay of proceedings, contingent on competitor Skillz agreeing to this by August 26. Judge Lushi-Abudi denied Skillz's request to bypass this process and proceed directly to appointing a trustee.
Why Does Papaya Gaming Need Debt Protection?
Papaya Gaming is seeking protection from the Israeli court because it cannot pay a $719 million judgment issued by a U.S. federal court for false advertising, according to its own filings. U.S. District Judge Denise Cote of the Southern District of New York entered this judgment on July 27, 2026, in Skillz Platform Inc. v. Papaya Gaming Ltd., No. 1:24-cv-01646. The order included $719 million in disgorgement and approximately $10.1 million in attorneys' fees, following an April 2026 jury finding that Papaya was liable under the Lanham Act and New York General Business Law for false advertising, based on a Firy Inc. filing with the SEC.
Papaya applied to the Tel Aviv District Court for a stay on August 2, 2026, and for Chapter 15 recognition in Delaware on August 3, 2026. The company stated to both courts that it is "unable to pay the debt owed to Skillz if that debt becomes enforceable, as well as their remaining debts," as Judge Lushi-Abudi noted in her August 2, 2026, order, according to Casino.org.
For background on Papaya's business model, its founders and the bot-fraud verdict behind this judgment, see Papaya Gaming: Inside the Solitaire Cash Company.
What Debt Plan Did the Judge Reject and Why?
Judge Lushi-Abudi rejected Papaya Gaming's debt plan, which was based solely on six and a half years of projected revenue from ongoing operations, stating that the company's shareholders must also contribute directly, according to Globes. She informed Papaya's counsel that a viable arrangement requires a combined model. This model should pair owner contributions with an active search for an outside investor, particularly during the plan's initial years, Globes reported.
Judge Lushi-Abudi observed that shareholders who received a $10 million dividend at the end of 2025, before payouts ceased, should be prepared to reinvest in the business instead of relying only on future income. Papaya's attorney, Pini Yaniv of Meitar Law Offices, argued in court that the company has a successful product, pays dozens of suppliers on time, and maintains high profitability, with gross margins consistently above 90% in recent years, according to the same Globes report.
What Does Skillz Say About the Situation?
Skillz, operating as Firy Inc. (NYSE: FIRY), told the Tel Aviv court that Papaya Gaming's plan assumes market conditions will remain unchanged through 2032, according to Globes. Skillz attorney Yaron Alkalai of Gornitzky & Co. advocated for an arrangement with additional layers of protection. He rejected the notion that Skillz aims to eliminate a competitor, stating that its sole interest is collecting the owed amount, Globes reported. The judge indicated that she does not interpret the U.S. verdict as a finding of intent to defraud customers, though she acknowledged the trial record established misleading conduct, according to Globes.
What Happens Next in the Papaya Gaming Case?
An arrangement administrator will oversee Papaya Gaming's revised plan after the court appoints one from candidates submitted by Israel's Insolvency and Rehabilitation Commissioner, according to Globes. The judge noted that finding an outside investor will be challenging, questioning why an entity would invest $300 million for a 20% to 30% stake in a company facing a judgment of approximately $700 million, Globes reported. Papaya has stated its intention to appeal Judge Cote's ruling to the U.S. Court of Appeals for the Second Circuit, though it had not filed a formal notice of appeal as of early August, according to Casino.org. Skillz has declared its intent to "vigorously pursue full collection" of the judgment, according to the Jerusalem Post.
How much does Papaya Gaming owe Skillz?
Papaya Gaming was ordered to pay $719 million in disgorgement plus approximately $10.1 million in attorneys' fees. This judgment, entered by U.S. federal Judge Denise Cote on July 27, 2026, superseded an earlier $420 million jury verdict.
Why was Papaya Gaming found liable?
In April 2026, a federal jury found Papaya Gaming liable for false advertising. The company used undisclosed computer bots, including "tailored bots" that produced predetermined outcomes, while advertising games like Solitaire Cash as fair, skill-based, peer-to-peer competitions, according to trial findings reported by Casino.org.
Is the U.S. judgment enforceable in Israel right now?
No, the U.S. judgment against Papaya Gaming is not currently enforceable in Israel. Papaya has informed both Israeli and U.S. courts that the judgment is not yet enforceable and is seeking a supervised arrangement to manage the risk that it could become enforceable after any appeal concludes, according to the Jerusalem Post.
What did Papaya Gaming originally propose to the Tel Aviv court?
Papaya Gaming originally proposed to funnel available cash and ongoing profits into a fund overseen by a court-appointed official. This included an estimated $100 million in 2026 and tens of millions more annually, according to CTech.
בעברית
בית המשפט המחוזי בתל אביב, בראשות השופטת איריס לושי-עבודי, קבע ב-25 באוגוסט 2026 כי פאפאיה גיימינג צריכה לתקן את הסדר החוב שהציעה בטרם יינתן צו הקפאת הליכים. זאת, בעקבות פסק דין אמריקאי המורה לה לשלם 719 מיליון דולר לסקילז. השופטת דרשה מודל משולב שיכלול תרומת בעלים ואיתור משקיע, ולא רק הכנסות פעילות עתידיות, בכפוף להסכמת סקילז. מקור: גלובס.
The Olam Editorial Team