An Israeli court has rejected a proposed debt settlement plan by Papaya Gaming, citing insufficient funding sources and ordering the company to submit a revised proposal that includes additional capital, such as a rights offering or new investor backing.
The District Court of Tel Aviv-Jaffa, presided over by Judge Iris Lushi-Abudi, declined to convene creditors’ meetings on August 26, effectively halting the process until Papaya strengthens its plan. Attorney Gil Oren has been appointed as an arrangement manager to facilitate negotiations between the company and its creditors.
Papaya, which holds approximately $151 million in cash, had proposed a funding structure reliant on future operating profits over six and a half years. The court ruled that this approach alone was inadequate, noting that the company must explore alternative funding avenues to ensure creditor repayment.
The rejection follows a series of legal setbacks for Papaya. On July 27, a U.S. District Court ordered the company to pay $719 million in disgorgement of profits for false advertising, a judgment Papaya has indicated it intends to appeal without posting a bond. Earlier, in April, a jury awarded Skillz Platform Inc.—Papaya’s largest creditor and a wholly owned subsidiary of Firy Inc.—$420 million in damages after finding Papaya liable for false advertising under federal law.
Papaya also faces a 45-day temporary pause on collection efforts, which began on August 3, following its filing for Chapter 15 bankruptcy protection in Delaware to seek recognition of its Israeli insolvency proceeding. The court noted that the likelihood of successfully overturning the U.S. judgment on appeal is typically low and declined to address Papaya’s arguments regarding the ruling.
Papaya had distributed a $10 million dividend to shareholders at the end of 2025, while Skillz was awarded approximately $10 million in attorney’s fees. Papaya’s counsel previously cited gross margins exceeding 90% in recent years as a potential source of funding, though the court did not consider this sufficient under the current plan.
