Kentucky Receives Reversed Decision in PokerStars Case; Flutter Must Pay Up

Around two years ago, the Kentucky Court of Appeals ruled in a long running dispute between the state and online poker operator PokerStars. The court ruled in favor of the operator, which meant a judgement of $870 million did not have to be paid. Since that time, PokerStars has a new owner and they must now pay up after the state’s Supreme Court decided to reverse the decision. 

Flutter Must Pay Fine 

The case involves PokerStars and its operations from 2006 to 2011. Back in 2006, the federal government in the US decided to pass the Unlawful Internet Gambling Enforcement Act (UIGEA). At the time, the goal was to shut down the gray market regarding online poker in the nation. 

PokerStars was one operator that did not shut down services and they continued operations. By 2011, the site was part of a major crackdown known as Black Friday. The domain name of the site along with others were seized. 

The state of Kentucky then decided to file a lawsuit two years later claiming an old statute within state laws. The Loss Recovery Act is still on the books and would have seen PokerStars pay the state $870 million based on the losses of players in the state and tripling that amount. For PokerStars, they were only able to receive around $18 million at the time in rake paid, so the amount being asked for was astronomical. 

Back in 2015, the court rule in favor of the state. Soon after, the Court of Appeals changed the ruling. However, now, the case is back in the limelight again and it looks like Flutter is now on the hook for a substantial amount of cash. 

New Ruling from Supreme Court

For the new ruling, the Supreme Court has basically contradicted the ruling of the Court of appeals. First, the Supreme Court ruled that the legislature is a person in the state. Based on the LRA, which doesn’t specify how it means a person, the Supreme Courts says that lawmakers intended the wording to be broad, so the legislature fits into that category. 

Another issue on the table was the defense of PokerStars. In the earlier ruling, PokerStars said that they collected a rake from games and they were not a winner in the games, since the company is not a participant. However, the Supreme Court ruled that a precedent dating back over 100 years still plays a part. 

In this precedent, the house is counted as a winner in a game of chance if it collects a percentage from a game. This applies even if the operator is not banking the game. 

The State Supreme Court is the last course of action for the case. However, Flutter is not ready to give up. The company announced that there are still legal processes they can pursue. During an investor call, the company discussed the potential processes, but also stated that they will most likely also be held responsible for some portion of the large fine.  We shall see in the coming weeks how the company looks to proceed and what can be done to potentially avoid owing any money.

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Jacqueline Packett