Flutter Entertainment, the current owner of PokerStars, could be on the line for $1.3 billion after the Kentucky Supreme Court rendered a 4-3 decision in favor of the state in a decade-long case relating to the pre-Black Friday days of PokerStars in the US.
According to the ruling, PokerStars is to pay close to $1.3 billion to cover player losses accrued in the post-UIGEA period. When the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006, many online poker rooms decided to leave the US market. PokerStars made a decision to stay and continue catering to American players despite potential legal issues.
“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,” said Governor Beshear in a statement Thursday.
Where Does the $1.3 Billion Amount Come From?
If PokerStars were to pay the full amount, it would be by far the largest fine a gambling company had to pay. The question is, how did the Supreme Court get to this number?
The process that was used in the trial suggests that the operator is on the line for all players “losses” between the years 2006 and 2011. However, the figure does not include any withdrawals from the period.
So, if someone deposited $5000 into their PokerStars account in total and withdrew $7000, the state holds PokerStars accountable for $5000, despite the fact the player in this particular example ended up making a profit.
Back in 2015, the Circuit Court accepted the state’s arguments and ruled against Amaya (the then-owner of PokerStars), citing the total loss by the players as $290 million. Then, invoking an 18th century law (Loss Recovery Act) against illegal gambling, the number was tripled, arriving at a total of $870 million.
Not surprisingly, Amaya appealed the decision and the company found more success with the Kentucky Court of Appeals. In 2018, the panel of three judges completely dismissed the verdict against PokerStars.
It was the state’s turn to appeal and the case was accepted by the highest court in the state, the Kentucky Supreme Court. The Supreme Court decided the initial decision from 2015 was valid, disagreeing completely with the Court of Appeals and reinstating the $870 million fine. On top of it, they added 12% interest for the past five years, bringing the total amount to almost $1.3 billion.
An Unexpected Turn of Events
Flutter Entertainment was shell-shocked by the Supreme Court decision, especially after the Court of Appeals found the case lacking in numerous aspects.
“Flutter is wholly surprised by today’s ruling and strongly disputes the basis of this judgement which, it believes, runs contrary to the modern US legal precedent,” the company stated.
The 2018 appeal by PokerStars was not focused on the amount but rather on the merits of the lawsuit. The illegal gambling law that the state invoked was meant to protect individuals and give them a way to recoup their losses from an illicit gambling establishment.
The Commonwealth is not a private person and cannot sue under this law, argued PokerStars’ lawyers. The Court of Appeals agreed.
The second argument was that even if the state were allowed to sue under this law, they would have to name the individuals and exact amounts lost by these individuals to create a valid case. No individual names or specific amounts connected to those names are mentioned in the filing.
Clearly, the Supreme Court did not agree. In the latest ruling, they explained that the statute can extend to political entities and that PokerStars was the “winner” in the games even if the players did not play against the house. They found the fact that the room was collecting rake and fees sufficient to merit such a decision.
PokerStars also tried to argue the total amount, requesting that the fine, if any, should be calculated based on the amount of rake collected (around $18 million).
The Supreme Court not only disagreed with that point but even refused to take into account player withdrawals over the period, leaving Flutter on the line for the total amount of deposits over the period of five years multiplied by three, plus the 12% interest.
It is Not Over, Flutter Says
Although the State Supreme Court is the final stop for this case, meaning there is no way to appeal the decision, Flutter says that the battle is far from over. The company explains they have many legal remedies still at their disposal and will be looking into them moving forward.
Flutter Entertainment finalized the deal to buy The Stars Group in May of 2020, adding PokerStars to the list of renowned gaming brands owned by the company. The total yearly revenue of the company is around $5 billion, so, while perhaps not detrimental, a fine in excess of a billion dollars would certainly hit Flutter pretty hard.
Judging by public statements coming from the company, Flutter has accepted the fact they will have to pay a fine of some sorts. However, they are confident that the final amount will be substantially smaller than the $1.3 billion cited in the Supreme Court decision.
