Kentucky Lawsuit Seeks Triple the Losses of All Gray Machine Gamblers

Posted on: October 10, 2024, 09:14h. 

Last updated on: October 10, 2024, 10:06h.

Philip Conneller @casinoorgphilc Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

Kentucky explicitly banned skill games or so-called “gray machines” in 2023. Now, a lawsuit is seeking to recoup three times the amount of money lost by Kentucky players under an archaic clawback law.

Kentucky gray machines, skill games, Loss Recovery Act, Empathy in Action
An old law in Kentucky means that gray machine manufacturers and operators could be on the hook for three times the money lost by gamblers in the state. (Image: Courier-Journal)

The lawsuit, filed in the Franklin Circuit Court last week by charity nonprofit Empathy in Action, cites the state’s 226-year-old Loss Recovery Act (LRA), which was designed to protect the families of destitute gamblers.

Under that law, a gambler has six months to sue to recover funds lost from illegal wagering. If the gambler doesn’t do so after six months, any other Kentuckian can file a claim to recover up to three times the funds the gambler lost, going back five years.

It Worked with PokerStars

It’s not as crazy a gambit as it sounds. Just ask PokerStars. In 2011, the State of Kentucky sued the online poker giant, which had previously offered unlicensed online poker in the US because no such licensing was available.

The state sought $870 million under the LRA, triple the $290 million it claimed Kentuckians lost at the site.

This was controversial because Kentuckians hadn’t lost this figure to PokerStars, but to other players, with the online poker site taking a small rake. Nevertheless, in September 2021, PokerStars’ new owner, Flutter Entertainment, settled with Kentucky for $300 million.

If successful, Empathy in Action will donate any proceeds from its lawsuit to state programs that help fight gambling addiction and aid small businesses and rural communities. The complaint names nine companies as defendants, including leading manufacturers Pace-O-Matic, Prominent Technologies, and Skill State.

Shades of Gray

Gray machines, so-called because of their previously gray legal status, have the look and feel of slot machines but typically involve some element of skill, such as memorizing intricate patterns. The manufacturers argue this makes them legal because Kentucky gambling laws make an exemption for “games of skill.”

In 2023, the legislature expanded the state’s definition of a slot machine to include games that are “partially or predominantly based on skill.”

It’s difficult to know just how much Kentuckians have lost playing gray machines in the past five years because the industry is unregulated. Empathy in Action founder Vanessa Cantley, who is also the lead attorney in the suit, told Kentucky Public Radio that she hoped the defendants will be compelled to turn over their financial information as part of the recovery process.

“We certainly expect it to be many millions of dollars. Otherwise, they wouldn’t be so prevalent, they wouldn’t be all over the state,” she said.