Flutter Unit Takes “Monstrous” Kentucky PokerStars Ruling to US Supreme Court

Posted on: August 27, 2021, 11:50h. 

Last updated on: August 28, 2021, 07:44h.

Steve Bittenbender Read More

Expertise: Legislation, Sports Betting, Horse Racing.

A Flutter Entertainment subsidiary that operates PokerStars has asked the US Supreme Court to weigh in on a Kentucky Supreme Court decision. In that ruling, the Court awarded more than $1 billion to the state, which sued to recoup losses suffered by residents from online poker games.

On Monday, Stars Interactive Holdings filed its petition with the nation’s top court. It asked if a 4-3 December 2020 decision by Kentucky justices to use a law that dates back to at least 1798 to award such a substantial figure violates the excessive fines clause of the Eighth Amendment of the US Constitution. That amendment, best known for prohibiting “cruel and unusual punishment,” also contains the Excessive Fines Clause.

There’s also a question of whether the award violated Stars Interactive’s due process rights under the 14th Amendment.

The Kentucky Supreme Court overturned a state appeals court decision, determining the state had grounds under the Loss Recovery Act. As such, the state could collect triple damages, taking the $290.2 million to $870.7 million. In addition, since the case started in 2011, the accrued interest pushed the award to more than $1.3 billion.

These monstrous damages cry out for this Court’s review,” the Stars Interactive petition states. “Even in matters of state concern, this Court applies constitutional brakes to ‘damages that run wild.’”

According to the US Supreme Court’s website, the state has until Sept. 24 to file a response.

Unless SCOTUS Acts, Other States May Follow Kentucky

If the US Supreme Court does not intervene, lawyers for Stars Interactive wrote, then the decision will allow states to “pursue novel claims” for purported losses by residents “and keep the proceeds to pad state budgets.”

The case itself dates back to 2007. At that time, state officials began investigating unregulated offshore poker sites, such as PokerStars. In 2011, it sued the company and claimed it did not stop operating in the state and sought $290.2 million. State officials calculated that as the amount Kentucky players lost from 2006 to 2011 on hands in which PokerStars claimed a rake.

In the SCOTUS filing, Stars Interactive claims Kentucky officials calculated the losses suffered by residents by determining the value of every losing wager, without factoring in any winning bets.

The company claims the amount lost by residents was far smaller. First, it stated that its revenue from Kentucky players’ losses amounted to just $18 million. Also, it claimed the 12 percent interest rate greatly exceeded what federal courts often impose on such cases.

In April, a Kentucky Circuit Court judge ruled that the state was entitled to $100 million in bonds Stars Interactive filed years ago when it appealed the initial circuit court ruling in the case.

Online Poker Now Legal in Six States

Online poker in the US has changed substantially in the decade since Kentucky moved forward with its lawsuit.

States have begun to regulate iGaming and license operators, including online poker apps. PokerStars now operates as a licensed app in Michigan, New Jersey, and Pennsylvania. Other online poker apps are available in those states, as well as Delaware and Nevada. Online poker is also legal in West Virginia, but no operator has rolled out an app there.

Additional states are expected to legalize online poker within the next year.

As online poker has become regulated, Delaware, New Jersey, and Nevada have entered a shared liquidity agreement that allows players in those states to play against each other. Other states are expected to join or create their own pacts, since a federal appeals court has struck down a Trump Administration-era opinion that reaffirmed the Wire Act only pertains to sports betting.

However, attorneys general in other states have called on Justice Department officials to take the First Circuit Court of Appeals ruling from January and cite its opinion as to how it interprets the act. They claim it’s necessary, since the First Circuit’s Wire Act opinion does not apply nationally.

Flutter, previously known as Paddy Power Betfair, purchased The Stars Group in a $12.2 billion deal that closed in May 2020.