Supreme Court reinstates $1.2 billion ruling in internet gambling case

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FRANKFORT, Ky. (WTVQ) – The state is in an even stronger position to help Kentuckians as it emerges from the coronavirus pandemic after the Kentucky Supreme Court reinstated an almost $1.3 billion award for Kentucky in a judgment against PokerStars.

The Supreme Court reinstated the Franklin Circuit Court judgment, concluding the commonwealth’s decade-long fight against illegal offshore internet gambling.

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If ever paid, the judgement is $870 million plus interest.

“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 Gov. Andy Beshear. “This better positions us to emerge from this painful pandemic to help Kentuckians, help our businesses, provide quality health care to more Kentuckians, strengthen our public schools and keep our promise to educators and other public employees – some of whom were on the front lines battling the fallout from their greed.”

The company, Flutter Entertainment which owns PokerStars, says it is considering its legal options.

“The Kentucky Supreme Court has today ruled on legal proceedings that were originally brought by the Commonwealth of Kentucky in 2010 against certain subsidiaries of The Stars Group (“TSG”) prior to its combination with the Flutter Group,” the group said in a statement.

“The Kentucky Supreme Court judgement has reinstated an award of damages against TSG made in 2015 by a Kentucky trial court judge. That 2015 ruling had subsequently been vacated in its entirety by the Kentucky Court of Appeals in 2018. The outcome of today’s Kentucky Supreme Court ruling is that the $870 million judgement against TSG has been reinstated with compounding interest of 12% per annum.

“As previously disclosed, the gross gaming revenues that TSG generated in Kentucky during the relevant period were approximately $18 million. There are a number of legal processes available to Flutter and having taken legal advice, Flutter is confident that any amount it ultimately becomes liable to pay will be a limited proportion of the reinstated judgement,” the statement continued.

“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. This litigation had sought recovery of alleged losses by Kentucky residents during a period between 2006 and 2011 relying on a centuries-old statute. 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. Flutter’s balance sheet remains robust,” the statement continued.

In 2008, J. Michael Brown, then-Secretary of the Justice and Public Safety Cabinet under Gov. Steve Beshear who now serves as Gov. Andy Beshear’s executive cabinet secretary, brought actions on behalf of the commonwealth in Franklin Circuit Court seeking to stop the unregulated, untaxed and illegal offshore gambling operations that were operating in Kentucky.

From 2007 to 2011, PokerStars, the largest offshore illegal gambling operator, collected almost $300 million in actual cash losses from thousands of Kentuckians who played on PokerStars websites.

Under longstanding Kentucky law, the commonwealth brought an action against PokerStars seeking recovery of the $300 million lost by its citizens, and as required by Kentucky law, trebled damages.

Thursday, the Supreme Court of Kentucky affirmed that judgment, which was rendered in December 2015. In 2018, the state Court of Appeals reversed that decision.

Once the Kentucky Supreme Court’s opinion is final, the commonwealth will take aggressive steps to collect the judgment for the benefit of all Kentuckians.

As a majority of the Kentucky Supreme Court said today:

“The Commonwealth’s recovery in this case is certainly not a windfall, as the Court of Appeals seems to assume; rather, it is a recoupment of some portion of the countless dollars the criminal syndicate has cost Kentucky collectively and Kentuckians individually. The Commonwealth of Kentucky suffered financial losses along with the tragic damage to its citizens. Mental and physical healthcare systems that care for the citizens harmed by the illegal gambling are supported in part by the state. Money sent to offshore gambling accounts is lost and the state deprived of the taxes to which it is entitled. The cost to prosecute and incarcerate individuals who resort to crime to support their gambling is a huge cost on Kentucky’s strained and overextended penal system. 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.”