In December 2020, PokerStars lost a decade-long legal battle with Kentucky after the state’s Supreme Court ultimately upheld a 2015 Circuit Court ruling, ordering the site to pay damages of almost $1.3 billion for operating illegally in the state from 2006 to 2011.
In March 2021, the Kentucky Supreme Court also declined a request from PokerStars to rehear the case and reconsider the ruling.
Now, Kentucky has scored another victory in the case after Franklin County Circuit Judge Thomas Wingate, the same judge responsible for the 2015 ruling, ordered PokerStars’ new owner Flutter Entertainment PLC to surrender $100 million in secured bonds that the site’s previous owner Amaya Gaming posted to the court when it made an appeal back in 2016.
PokerStars was sued by Kentucky for allegedly operating an illegal online gambling service from 2006 – 2011. This period marked the time between the Congress’ passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) and the US Justice Department’s extensive crackdown on online poker sites, an event known as “Black Friday”.
Judge Wingate handed down the original ruling in favor of the state back in 2015, but it was overturned three years later by an appellate court in Kentucky.
In 2020, the state’s Supreme Court reinstated the original judgment, ruling that online poker caused “tragic damage” to Kentucky citizens and deprived the state of significant taxes to which it is entitled. The Supreme Court decision has left PokerStars on the hook for a massive $1.3 billion in damages, and Kentucky is now attempting to collect an initial payment of $100 million.
Flutter Continues to Dispute Controversial Judgment
The basis of the original judgment is quite controversial. When Judge Wingate calculated the damages that PokerStars owed to the state, he utilized a disputed accounting method in which each played hand was converted into an individual poker game. Because of this, PokerStars profit within the years indicated in the lawsuit ballooned from $18 million to a whopping $290 million.
As if the significant figure was not enough, Wingate then applied a centuries-old law, the Loss Recovery Act, which has a triple damages provision transforming the figure to $870.6 billion. If the 12% annual compounding interest is added in, PokerStars’ total liabilities now amount to approximately $1.3 billion.
Flutter Entertainment PLC, which bought The Stars Group and PokerStars in 2020, is determined to continue the fight. The company already indicated back in March that it would appeal the ruling to the US Supreme Court. But Flutter’s chances of getting the case reviewed by the country’s highest court are quite slim, considering that the court only takes a tiny percentage of appeal requests.
However, the unreasonable amount of damages indicated in the judgment, alongside other issues, might convince justices to accommodate the case.
Flutter can also still very well look for other remedies. For one, the entire Kentucky judgment is treated “void and unenforceable” under UK law, according to the firm’s counsel Sheryl Snyder. Flutter is based in the UK and Kentucky can only successfully collect the amount it’s owed if the country honors the ruling. But Snyder is pretty confident it won’t happen. This means it will be difficult for Kentucky to collect the entire value indicated in the judgment.
This possibility might open the door for a settlement agreement between Kentucky and Flutter to end the long-standing battle once and for all.
Flutter is also already preparing for the worst, in case it would be forced to pay such a huge amount. According to reports, the firm has begun the process of getting consent requests from certain events of default.
Flutter has now reportedly started sending default waivers to investors, but according to Moody’s, a leading provider of credit ratings and risk analysis, even if the worst-case scenario happens, Flutter is capable enough of dealing with it, considering its strong credit record.