Kentucky Gets $300M from Flutter as PokerStars Lawsuit Finally Settled

Posted on: September 22, 2021, 01:55h. 

Last updated on: September 22, 2021, 02:10h.

Steve Bittenbender Read More
Expertise: Legislation, Sports Betting, Horse Racing.

After more than a decade of litigation, Kentucky’s lawsuit against PokerStars ended Wednesday with a joint agreement providing the state with $300 million. That’s far less than the state stood to gain in the courts, but it’s still more than the losses officials claim residents suffered playing poker on the then-offshore site.

PokerStars Kentucky
Kentucky Gov. Andy Beshear speaks at a press conference Monday at the state Capitol in Frankfort. On Wednesday, he announced that the state and Flutter Entertainment reached a settlement in the PokerStars lawsuit, with Kentucky getting $300 million. (Image: Gov. Andy Beshear/Twitter)

The announcements, first by PokerStars parent Flutter Entertainment and then Kentucky Gov. Andy Beshear, came on the same day the state asked the US Supreme Court for a 30-day extension to respond to the company’s petition last month. Stars Interactive Holdings asked the nation’s top court on Aug. 23 to review the Kentucky Supreme Court’s 4-3 ruling from last December, which put the company at risk of paying a “monstrous” amount thanks to a state law that dates back nearly 225 years.

But as a Flutter spokesperson told Casino.org Wednesday, discussions continued between both sides even as the lawsuit progressed. That led to the resolution.

Complete details were not made available. But Flutter said in its statement that it will pay Kentucky $200 million to go with the $100 million in PokerStars bonds the state received from a state court earlier this year. In return, state officials agreed to stop further actions.

“The Group strongly believes that this agreement is in the best interests of Flutter shareholders,” the company’s statement read. “The Group now considers the matter closed.”

Centuries-Old Law Used in Case

As online poker boomed more than a decade ago, Kentucky officials began investigating the unregulated offshore sites and sought to stop them from operating within the state. PokerStars was the largest of the sites, and in 2011, the state’s Justice and Public Safety Cabinet filed a lawsuit against it.

The state filed the suit under the Loss Recovery Act, which it said allowed it to recover losses incurred through gambling. The law, which dates back to 1798, gives bettors six months to recoup their losses, but after that, anyone else could come forward to collect. Those third parties could seek treble, or three times the amount actually lost, if it filed a lawsuit within five years.

Kentucky’s suit claimed its residents lost $290.2 million playing poker on the site over a five-year period. While it initially won in Franklin Circuit Court in 2015, a state appeals court overturned that decision three years later. The appeals court ruled the law called for an individual, not the state, to file suit.

When the state Supreme Court reversed the appellate court’s decision last December, it meant that Kentucky would be in line to get more than just $870.7 million. Thanks to interest accruing at 12 percent annually as the lawsuit was appealed, the value of the award surpassed $1.3 billion.

PokerStars Disputed Accounting of Loss

PokerStars had always contended that the state’s assessment of the losses was extreme and did not take into consideration any money won by residents. In addition, since the poker games were played by other individuals, PokerStars said it only received a fraction of the purported losses from the rake it took for each game.

In its petition to the US Supreme Court, PokerStars said it earned about $18 million from Kentucky residents during the time in question.

The risk of a billion-dollar payout was significant. After the Kentucky Supreme Court’s ruling, Fitch Ratings noted it could impact Flutter’s attempts to reduce its debt load. The firm said it considered a lawsuit loss as a “potentially credit-negative factor” for The Stars Group before Flutter completed its acquisition of the company last year.

The $300 million Kentucky receives will go into the state’s general fund, Beshear said in his statement.

After 10 long years, the commonwealth has not only prevailed, but collected dollars that the General Assembly will be able to direct to critical areas, like education, health care, and economic development,” the governor said.

Beshear’s father, Steve Beshear, was governor when the investigations into online poker began and the PokerStars lawsuit was filed. J. Michael Brown, who was the Justice and Public Safety Cabinet secretary who filed the initial lawsuit, now serves as Andy Beshear’s executive cabinet secretary.

Kentucky Still Has Value for Flutter Brands

A lot has changed about online poker in the US since the Kentucky case started a decade ago. Operators have come into the US from offshore, and six states have passed laws to regulate the game. That includes West Virginia, a neighboring state to Kentucky.

Andy Beshear, like his father, has also publicly supported expanding gaming in the state, and there have been some bills filed to legalize sports betting and online poker in recent years. However, none of those measures ever received a full vote in a chamber of the General Assembly.

Despite that, Kentucky still holds value for Flutter because of its status as a premier horse racing state. TVG is one of the country’s largest online wagering sites for racing, and FanDuel has increased its commitment to the sport over the last couple years.

Earlier this month, FanDuel completed the first year of a three-year title sponsorship with Kentucky Downs. The turf-only track on the Tennessee state line only holds one short meeting each year. But that meet has the highest average purses of any track in the US.