- Flutter is facing a $1.3 billion penalty over PokerStars’ operations between 2007 and 2011 which allegedly inflicted hundreds of millions of poker losses on Kentuckians
- The company said that it will challenge the penalty in court citing dated legislation as the reason why and PokerStars already settling the matter in 2018 under its previous owner
- Flutter reassured investors that they have nothing to worry about and the company will settle the penalty with a much smaller sum if it has to pay in the end
An already settled case against PokerStars, and the company’s current owner, Flutter Entertainment, has been reinstated by the Kentucky Supreme Court, with the court deciding that Flutter and PokerStars are still subject to a $1.3 billion penalty which was originally settled by the Kentucky Court of Appeals in 2018.
Based on this new ruling, the Supreme Court is reinstating a previously judgment from the Franklin Circuit Court, and upholding a verdict that PokerStars had indeed facilitated illegal offshore gambling, allegedly costing Kentucky residents over $3000 million in net losses.
Commenting on the ruling, Kentucky Governor Andy Beshear said that justice has been dealt and that the penalty would allow the state to emerge from what he described as a painful economic downturn brought on by the covid-19.
However, Flutter Entertainment has already sought legal advice, and the company is not convinced that the reinstatement of the penalty is constitutional or in line with modern legal precedent.
Flutter Reassures Investors, Prepares to Appeal Penalty
Originally, the case was settled in 2018 after PokerStars’ parent company at the time, The Stars Group, appealed the judgment rendered by the Franklin Circuit Court successfully. In the original verdict, the court found PokerStars to be a facilitator of illegal offshore gambling in the period between 2007 and 2011.
According to the court’s statement at the time, PokerStars had collected almost $300 million in cash losses from Kentuckians, but based on the company’s record of the time, PokerStars’ gross gaming revenue for the period was $18 million, hardly the amount stated by the court.
Furthermore, PokerStars does not collect losses, it collects rake fees that it uses to host games and support tournaments. Based on this, Flutter Entertainment has said that it is unlikely for the company to have to pay the full size of the penalty which is $870 million and 12% compound annual interest.
Another matter that Flutter brought up was that the legal basis on which the court’s argument is based is centuries old leaving an opportunity for Flutter to challenge it successfully.
Overall, the company said that it would seek to appeal the verdict and reassured investors that they should expect no issue with the company’s shares and long-term prospects. In the Supreme Court stated, however, the state argues that “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.”
Flutter will certainly seek to challenge this interpretation.