Flutter to Fork Out $1.3bn as Kentucky Supreme Court Reinstates Ruling Against PokerStars

  • The Kentucky Supreme Court ruled in favor of the state recovering residents’ online poker losses
  • The state is entitled to treble losses and compound interest of 12% per annum
  • Flutter is confident that it will only have to pay a limited portion of the damages
  • The original case dates back to a 2008 lawsuit following an investigation into offshore poker sites
  • PokerStars catered to Kentucky residents from 2006 to 2011, after the passage of the UIGEA
judge's gavel
The Kentucky Supreme Court has reinstated a judgment against PokerStars, putting parent company Flutter Entertainment on the hook for as much as $1.3bn in damages. [Image: Shutterstock.com]

Not a drop in the bucket

The Kentucky Supreme Court has reinstated a judgment from a 2008 lawsuit against PokerStars. As a result, Stars’ parent company, Flutter Entertainment, is suddenly facing damages of around $1.3bn.

The court ruling was 4-3 in favor of the Kentucky state government having a legal right as a “person” to seek damages for losses that residents incurred when playing PokerStars’ “illegal” online poker games. 

the Loss Recovery Act’s phrasing of “person” also applies to companies

Justice Samuel T. Wright III wrote the opinion on the Supreme Court case, published Thursday, outlining how the Loss Recovery Act’s phrasing of “person” also applies to companies. He said that the poker operations were part of an illegal internet criminal gambling syndicate that violated numerous court orders. Per state law, the government is entitled to triple damages. This means that the penalty is $870m plus compound interest of 12% per annum.

Justice Wright also opined that the actual cost to Kentucky could be greater than the financial penalty because of the harms of illegal gambling. Justices Michelle M. Keller, Debra Hembree Lambert, and Christopher Shea Nickell also ruled in favor of the state.

Reaction to the ruling

In a statement following the ruling, Flutter claimed that the state government’s argument does not follow modern established precedent. The company has not recognized any liability in the case.

Flutter Entertainment became the owner of the PokerStars brand following a merger with The Stars Group in 2020. The latter acquired PokerStars in June 2014.

Flutter did note that there are a few different potential legal avenues to explore following this ruling. Referring to the significant sum, the company said: “Flutter is confident that any amount it ultimately becomes liable to pay will be a limited proportion of the reinstated judgement.”

Kentucky Governor Andy Beshear welcomed the news of the Supreme Court decision. He outlined plans for the state to begin collecting the penalty from Flutter as soon as the court ruling becomes final. 

Origins of the case

Online poker in the United States effectively became illegal in 2006 following the passing of the Unlawful Internet Gambling Enforcement Act (UIGEA). Several poker sites, however, continued catering to US players, including PokerStars.

The UIGEA did not explicitly make the act of offering or partaking in online gambling illegal, but rather made the acceptance of payments for internet gambling illegal. Instead of trying to wrangle overseas sites, it aimed to cut off the flow of funds. Of note, the UIGEA included a carve-out for fantasy sports, which led to the rise of daily fantasy sites.

Kentucky authorities began to investigate offshore poker sites targeting its residents in 2007. The following year, the state government filed a lawsuit against Pokerstars, as it was still operating in the Kentucky, doing so until April 2011. Between 2006 and 2011, PokerStars operations earned about $18m in gross gaming revenue from Kentucky players. 

As part of the original case, Kentucky authorities claimed that players in the state lost $290.2m in rake while playing on the PokerStars during the five-year period. The actual losses from playing were more substantial, according to the lawsuit.

State law dictates that if a gambler does not file a lawsuit seeking damages within six months, a third party can sue up to five years from when the losses occurred and seek treble damages.

In 2018, the Kentucky Court of Appeals overturned the Franklin Circuit Court’s 2015 ruling on the case, saying that the government did not meet the definition of a person.