Flutter Entertainment said it was taken aback by a ruling published Thursday by the Kentucky Supreme Court that reinstated a judgment against subsidiaries of The Stars Group in a lawsuit that dates back to 2008 and case law that dates back to 1798.
In a 4-3 ruling, the court opined that the state government did have legal standing as a “person” to seek treble losses incurred by Kentuckians who played in illegal offshore online poker games. A release by Gov. Andy Beshear’s office put the value on the ruling at just under $1.3 billion.
In its statement, Flutter, which owns The Stars Group, said it the state’s argument ran counter to modern established precedent. The company estimated it made $18 million in gross gaming revenues from Kentucky players from 2006 to 2011.
There are a number of legal processes available to Flutter and having taken legal advice, Flutter is confident that any amount it ultimately becomes liable to pay will be a limited proportion of the reinstated judgement,” the company said.
In addition, Flutter said it recognized no liability in relation to the lawsuit, but the company’s finances “remain robust.”
In the time that the case has been in the court system, The Stars Group has become a player in legal US online markets. Currently, they operate in both New Jersey and Pennsylvania. Those real-money sites are only available to players in those states.
Judge: Award in PokerStars Case Not a “Windfall” to Kentucky
Kentucky began its investigation of offshore poker sites, including PokerStars, in 2007. A year later it filed suit as Poker Stars subsidiaries continued to operate in the state, which it did until April 2011.
In the case, Kentucky officials cited in-state players lost $290.2 million from PokerStars sites on the rake alone for a five-year period. The actual losses, it claimed, were more substantial over the entire time the sites were available.
The majority of justices ruled, in an opinion written by Justice Samuel T. Wright III, that because PokerStars failed to provide the state with information on the players, it now makes the company liable for the losses since “under the Loss Recovery Act because it chose to form an illegal internet criminal gambling syndicate, violated court orders to stop, and hid the identity of the co-conspirators until they could no longer be sued under the Loss Recovery Act.”
Under Kentucky law, the state is entitled to triple damages, which puts the award at $870.7 million, plus interest.
Still, Wright opined the award while not disproportionate is also not a “windfall,” as appellate judges claimed.
“The Commonwealth of Kentucky suffered financial losses along with the tragic damage to its citizens. Mental and physical healthcare systems that care for the citizens harmed by the illegal gambling are supported in part by the state,” Wright wrote. “Money sent to offshore gambling accounts is lost and the state deprived of the taxes to which it is entitled. The cost to prosecute and incarcerate individuals who resort to crime to support their gambling is a huge cost on Kentucky’s strained and overextended penal system. The Commonwealth of Kentucky has losses due to PokerStars’ illegal internet gambling criminal syndicate. The amount recovered in this case may not cover the actual cost suffered by the Commonwealth of Kentucky.”
Justices Christopher Shea Nickell, Debra Hembree Lambert, and Michelle M. Keller joined in the majority opinion.
Who, or What, is a Person?
When a state appeals court overturned the circuit court’s 2015 ruling in the case, it did so because it felt the state government did not meet the definition of a person.
Kentucky’s laws on recouping losses from gaming date back to at least 1798, according to the Supreme Court opinion. While the Loss Recovery Act may not have defined who or what can seek recoupment, the four majority justices said that other state statutes do, Those laws, they said, allow the state to file suit.
Under state law, if the gambler does not file a suit for his losses within six months, a third-party could file suit and seek treble damages if the case is filed within five years of the loss.
Not all justices agreed with that interpretation. In the dissent, Justice Laurence B.VanMeter said that changes to the law were made in 1873 that allowed the state to take illegal gaming funds through forfeiture and allowed private individuals to seek relief from courts.
“Had the legislature intended to confer on the Commonwealth standing to sue or collect under the recovery section, it could have easily done so,” he wrote.
Chief Justice John D. Minton Jr. and Deputy Chief Justice Lisabeth T. Hughes joined in the dissent.
Beshear Welcomes Poker Ruling
In a statement, Gov. Andy Beshear agreed that the award would not make up for the damages the online poker sites created, but he said the decision was welcome news, especially as the state’s been hit by COVID-19.
This better positions us to emerge from this painful pandemic to help Kentuckians, help our businesses, provide quality health care to more Kentuckians, strengthen our public schools and keep our promise to educators and other public employees – some of whom were on the front lines battling the fallout from their greed,” Beshear said.
He added that once the court’s ruling is finalized, the state will take action to collect.
While Beshear’s father Steve, who served as Kentucky’s governor from 2007-2015, fought against offshore gaming, the two have pushed unsuccessfully for the state to legalize gaming. Andy Beshear in his successful 2019 campaign to unseat then-Gov. Matt Bevin ran on a platform to legalize sports betting and introduce casinos in the state. Attempts to pass sports betting have not yet cleared the state House of Representatives.
Currently, Kentucky allows horse racing, a state lottery, and such charitable games as bingo. The state’s horse racing tracks have also offered historical horse racing for nearly a decade, but the future of those games – and the millions in revenue HHR produces – is in jeopardy after the Supreme Court ruled the machines do not meet the definition of pari-mutuel gaming.
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