A ruling by a federal judge in Las Vegas halted the sale and distribution of a popular slot machine produced by gaming equipment provider Light & Wonder, which will keep the dragon-themed game from being displayed at next month’s Global Gaming Expo (G2E) trade show.

U.S. District Judge Gloria Navarro, in a ruling Monday, granted gaming equipment provider Aristocrat Technologies’ request for a preliminary injunction in a trade secrets claim against Light & Wonder regarding the company’s Dragon Train slot machine product. 

Australia-based Aristocrat claimed the game was a copy of its Dragon Link and Lightning Link games, alleging former Aristocrat game designers helped develop Dragon Train after leaving the company.

Navarro, in her ruling, instructed Las Vegas-based Light & Wonder to halt “any continued or planned sale, leasing, or other commercialization of Dragon Train.” The ruling sent shares of Light & Wonder tumbling more than 19 percent on the Nasdaq National Market on Tuesday, closing at $90.71, down $21.97.

Truist Securities gaming analyst Barry Jonas said the stock sell-off “could ultimately create a buying opportunity for investors, given the popularity of the company’s multiple other slot machine titles. 

“We will be closely monitoring for additional litigation risks (on both sides) as well as future legal-related costs,” Jonas told investors in a research note. 

According to Eilers & Krejcik Gaming, a Southern California research and advisory firm, Light

& Wonder already had about 2,000 Dragon Train slot machines installed in casinos throughout the U.S. and Canada, generating roughly $40 million in annual revenue for the company.

In a research note, Jefferies Securities gaming analyst David Katz wrote the ruling presented several questions about Light & Wonder, including the effect it will have on the company’s pipeline of new games and if they will have to be altered or delayed.

Todd Eilers, principal for Eilers & Krejcik, said in an email that the firm estimated Dragon Train is Light & Wonder’s third largest slot machine title among its leased games — slot machines where the company shares a percentage of the gaming revenue with the casino. 

“They will most likely need to replace the Dragon Train games with other premium leased games in their portfolio,” Eilers said.

Eilers said he didn’t think the ruling would affect Light & Wonder’s G2E presence by the removal of the Dragon Train games. G2E, which runs Oct. 7-10 at the Venetian Expo, is the gaming industry’s largest annual trade show and conference.

“It’s obviously a negative event for the company and in the near term they might see some net removals [of the game],” Eilers said. “But [Light & Wonder has] a strong portfolio of premium games and [operates] game studios that are producing a number of good titles that will help to offset some of those removals.”

In a statement late Monday, Light & Wonder CEO Matt Wilson said he was confident in the company achieving its long-stated goal of producing $1.4 billion in cash flow in 2025. 

The company said in the statement it disagreed with the judge’s decision “and will promptly file an appeal. We will continue to vigorously defend against Aristocrat’s claims, including presenting our defenses to a jury at a trial.”

Aristocrat, in a statement, criticized Light & Wonder for “misappropriating trade secrets related to Dragon Link and Lightning Link and was able to develop Dragon Train without investing the equivalent time and money.” 

Aristocrat Chief Product Officer Matt Primmer said the ruling “underscores the value of our intellectual property and reaffirms our commitment to protecting the integrity of our business.”

Aristocrat, which has its U.S. headquarters in Summerlin and recently opened a warehouse and distribution center in Henderson, filed the lawsuit in February, questioning the roles of two former Aristocrat game designers who reportedly worked on Dragon Link. The lawsuit claimed they led the development of Dragon Train for Light & Wonder after leaving the company.

Wilson was the head of Aristocrat’s U.S. operations in Las Vegas before leaving in July 2019 to join Light & Wonder to oversee the games division and is one of several former Aristocrat executives now at Light & Wonder, including chairman Jamie Odell and director Toni Korsanos.

Wilson was named CEO in October 2022, becoming the company’s fourth top executive in the previous seven years. 

Updated at 1:25 p.m. on 9/24/2024 with Tuesday’s closing stock price for Light & Wonder and an additional analyst comment.