The Kentucky Supreme Court has overturned a 2018 ruling by the Kentucky Court of Appeals. The Appeals ruling in question vacated a previous Circuit Court ruling. The Circuit had ruled that PokerStars owed the State of Kentucky for losses incurred by its residents while it was operating illegally between 2007 and 2011.
Running back up the line: the Circuit Court fine which the Court of Appeals threw out has now been reinstated by the Supreme Court. Got it? Good.
In total, with interest, the Supreme Court came up with the follow figure: Stars owe $1.3 billion.
The Supreme Court ruled that the fine was not a “windfall,” but “a recoupment of some portion of the countless dollars the criminal syndicate has cost Kentucky collectively and Kentuckians individually. […] The Commonwealth of Kentucky has losses due to PokerStars’ illegal internet gambling criminal syndicate. The amount recovered in this case may not cover the actual cost suffered by the Commonwealth of Kentucky.”
This news arrives just months after Isai Sheinberg’s sentencing seemed to finally put Black Friday in the rearview mirror. But you gotta read the sticker” “Objects in this mirror may be closer than they appear.”
The bill is in your court
The full story goes back as far as 2008 when J. Michael Brown brought a case looking to bring an end to untaxed and unregulated gambling in KY. Brown was the Secretary of the Justice and Public Safety Cabinet at that time. In that role, he shepherded the case through the Franklin Circuit Court.
In late-2008 state tried to seize online poker domain names and block them in Kentucky. They didn’t succeed, but the D.O.J.’s 2011 Black Friday ruling changed things. Busting Full Tilt and PokerStars meant established nationally that at least some online poker sites broke at least a few laws.
Still, it took until 2015, for the Franklin Circuit Court to judge that The Stars Group owed the state for the $300 million in losses its residents sustained between 2007 and 2011. They linked these losses specifically to subsidiaries of TSG.
State law meant the fine is thrice the losses. So in the end Franklin Circuit settled on the figure of $870 million total.
However, in 2018, the Kentucky Court of Appeals vacated the Circuit Court decision. PokerStars were off the hook for a bit. Until this week when the Supreme Court not only flipped the decision but also decided to charge 12% interest on the original fine.
Hence the $1.3 billion dollar answer to a twelve-year-old question.
A little Flutter
PokerStars has changed hands, along with its subsidiaries and their liabilities. Flutter Entertainment, a UK based gambling firm, bought Stars out earlier this year. Thought Flutter was probably not expecting to have to shell out an additional $1.3 billion on top of the $6 billion they already coughed up in the takeover.
In a statement, Flutter Entertainment called out the ruling.
“Flutter is wholly surprised by today’s ruling and strongly disputes the basis of this judgment,” they wrote. “Which, it believes, runs contrary to the modern US legal precedent. […] Together with its legal advisors Flutter is currently reviewing its position. No liability was previously recognized by either TSG or Flutter in relation to this.”
It sounds like they are not giving up without a fight.
Playing the bluegrass
Our surprise is doubled by the fact that this happened while ostensibly pro-gambling Governor Andy Beshearunder looked on and applauded.
Beshear came out in favor of the ruling saying, “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 undermines many poker players’ hopes in a candidate who ran on a platform of bringing brick and mortars back to the state, and whose opponent famously claimed, “Every night somewhere in America, somebody takes their life in a casino.”
It also puts Flutter in an awkward spot. They pulled out of several huge markets in order to get in good with the U.S. They won’t want a black mark on their name in this state, as it could hurt them with the regulators in other states. But $1.3 billion is a lot of scratch and they’re not gonna sign that check easily.
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