The lawsuit, which is seeking class-action status, said Take-Two's alleged misconduct violated consumer protection laws in all 50 states and the District of Columbia. Since the suit was filed in July 2005, a number of cases making the same claim have been consolidated in Manhattan federal court.
Take-Two and its subsidiary, Rockstar Games, had argued in the motion to dismiss parts of the lawsuit that the plaintiffs could only file claims in the states where they resided, not in all 50 states.
But U.S. District Judge Shirley Wohl Kram denied Take-Two's motion and said she would reconsider if class-action status were granted in the case.
"If class certification is granted, the court will have the benefit of a well-defined class and a more fully developed treatment of potential choice of law questions," Kram wrote in an opinion dated Wednesday.
A representative for Take-Two was not immediately available to comment on the judge's order.
The best-selling "in 2005. The , known as "Hot Coffee," allowed players to engage in virtual sex acts.
When the scenes were discovered, the video game ratings board slapped a restrictive "adult" rating on the game. Take-Two had to pull the games off store shelves and repackage them with the "adult" rating, which crimped sales and disrupted the company's operations.