Kentucky Court Rules $1.3B Award for State Against Flutter Entertainment & PokerStars

• A stunning surprise for Flutter Ent. considering this case closed two years earlier
• Flutter Entertainment acquired The Stars Group in 2018 in a $6 billion dollar deal
• Kentucky has ruled proceeds from this award earmarked to aid state COVID-19 victims

In a somewhat startling announcement, the Kentucky Supreme Court is aiming to help the state emerge from the coronavirus pandemic by reinstating an almost $1.3 billion award for Kentucky in a judgment against Flutter Entertainment division, PokerStars.

The decision, which was originally upheld by the Franklin Circuit Court, was settled in 2018 when the Kentucky Court of Appeals vacated the matter in its entirety. If this verdict is indeed upheld, parent company Flutter Entertainment will be facing losses estimated at $870 million-plus interest to settle the case. As part of their statement, Flutter disclosed the interest rate is 12% per annum.

Kentucky state Supreme Court Justice Samuel Wright invoked the state’s Loss Recovery Act on December 17. The Supreme Court decided that Kentucky had sufficient grounds to pursue a legal course of action in the matter of collecting gambling losses paid by Kentucky citizens to what the court described as an unlawful gambling operation, referring to PokerStars.com during a period between 2006 and 2011.

Flutter Entertainment is currently operating important assets in the United States, that includes FanDuel, which is available in over eleven US states with its retail sportsbooks and in eight with the online betting application. Responding to the recent news, Flutter Entertainment included this statement:

The Kentucky Supreme Court has today ruled on legal proceedings that were originally brought by the Commonwealth of Kentucky in 2010 against certain subsidiaries of The Stars Group (previous sole owner of PokerStars) prior to its combination with the Flutter Group.

A Long Historied Case

In 2008, J. Michael Brown, then-Secretary of the Justice and Public Safety Cabinet under Gov. Steve Beshear who now serves as Gov. Andy Beshear’s executive cabinet secretary, brought actions on behalf of the commonwealth in Franklin Circuit Court seeking to stop the unregulated, untaxed, and illegal offshore gambling operations that were operating in Kentucky.

Pleased by the decision, Gov. Andy Beshear of Kentucky said:

This will never be enough to make up for the damage to Kentucky families and to the state from their years of irresponsible and criminal actions, but this is a good day for Kentucky. 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.

From 2007 to 2011, PokerStars reigned as one of the largest offshore illegal gambling operators, collecting almost $300 million in actual cash losses from thousands of Kentucky customers who played on PokerStars’ websites.

Flutter Remains Confident, Reassuring Investors

In receiving the surprising news Flutter remains confident it can legally navigate its way through the Kentucky court order and does not expect to have to settle near the full amount of the ruling. In reasoning the period mentioned, Flutter explained the time covered had PokerStars collect $18 million in gross gaming revenue.

Also, according to the original case, Kentucky citizens lost $290 million between 2006 and 2011, in what the court stipulated was rake fees.

In another key point of contention within the charges is the “definition of the market”. To Kentucky courts, PokerStars was operating illegally whereas the company considered the status as “grey market,” in the lack of regulation and clear regulatory action against companies running poker operations at the time.

The main trouble for PokerStars along with other offshore wagering websites operating within the US came in 2011 when the US Department of Justice enacted the UIGEA (the Unlawful Internet Gambling Enforcement Act). The period was known as “Black Friday” on April 15, 2011, when online poker was temporarily halted.

That situation led to a settlement between the US DOJ and PokerStars founder Ian Scheinberg. After the 2011 indictment and following Black Friday, Scheinberg was sentenced to time served and a $30,000 fine earlier this year. Before that, in 2018 the case was considered closed, allowing Flutter Entertainment to acquire PokerStars parent company The Stars Group in a $6 billion dollar deal.  Still controversial, today Scheinberg is considered a folk hero and legend by many active poker players.