More than a decade removed from the online poker industry’s “Black Friday” shutdown of unregulated operators, and just shy of 15 years since the highly controversial legislation banning payment processing for online gambling, a significant legal and financial holdover from that era has finally been put to bed.
The commonwealth of Kentucky initially sought $870 million from PokerStars for a combination of resident losses on the site and gambling addiction costs incurred, and that number ballooned since to nearly $1.6 billion due to interest. On Wednesday, Flutter Entertainment, now the parent company of PokerStars (as well as U.S. sports betting brands FOX Bet and FanDuel), revealed it had reached a settlement with Kentucky, agreeing to pay another $200 million on top of $100 million paid earlier this year.
It’s not $1.6 billion, but $300 million is still a hefty chunk of change in a peculiar one-off case between a single operator and a single state for a company that had no involvement with PokerStars at the time of the alleged wrongdoing.
But Flutter, having lost multiple legal challenges before the Kentucky Supreme Court over the past nine months, decided cutting its losses was the wisest course of action and declared “the group now considers the matter closed.”
Flutter Entertainment said of the $300m settlement with Kentucky that “the group strongly believes that this agreement is in the best interests of Flutter shareholders. The group now considers the matter closed.” @GamblingComp https://t.co/bOsv9aPBhT
— Chris Sieroty (@sierotyfeatures) September 22, 2021
Kentucky Supreme Court held all the cards
PokerStars said that during the post-UIGEA, pre-Black Friday time period, it earned only $18 million in rake from Kentucky players, but the state pursued a much higher figure based on a supposed $300 million lost by approximately 34,000 Kentucky players, plus costs to the state associated with problem gamblers.
A lower court ruled against then-PokerStars parent The Stars Group in 2015, and the Kentucky Supreme Court upheld that ruling against Flutter in December 2020 via 4-3 decision. Flutter petitioned the court for a rehearing, only to see that petition denied in March — by which time the amount sought by the state had risen by hundreds of millions of dollars.
Flutter tried to take its case to the U.S. Supreme Court this month before reaching the decision to bring the saga to a costly close.
Expensive as it was for Flutter, it’s perhaps surprising that Kentucky vs. PokerStars was the only state vs. site duel of its kind.
This saga thankfully concludes. So many states with qui tam gambling laws and recovery statutes, so many poker and DFS sites operating in those states over the last 18 years, and so much money up for grabs in lawsuits – it's strange this was the only really significant one. https://t.co/GbyLTYet5R
— Cal Spears (@CalSpears) September 22, 2021
Flutter and, previously, The Stars Group both contended that Kentucky’s claim was based on a more than 300-year-old piece of state legislation called the “Loss Recovery Act,” which enabled Kentucky courts to seize illegal gambling revenue.
Unable to escape the reach of an 18th century edict, Flutter executives now believe they’ve finally put the matter of PokerStars’ decade-old gray-area operations in the past.
Photo: Ronen Boidek/Shutterstock