PokerStars v. Kentucky update

Kentucky Court Reverses $870 Million Judgment Against PokerStars

Kentucky Capitol

This is a developing story.

The Stars Group appears to have shed a significant liability after a Kentucky appeals court today reversed a lower court decision that had called for the company to pay the Commonwealth $870 million in damages.

The case in question dates back more than five years and is based on a “loss recovery” statute in Kentucky, which allows individuals to sue to collect losses stemming from illegal gambling plus additional damages. The Commonwealth was attempting to collect based on losses allegedly incurred by PokerStars players in Kentucky.

Read the full text of the decision embedded below.

“We applaud the decision of the highly respected three-judge panel of the Kentucky Court of Appeals,” stated Marlon Goldstein, executive vice president and chief legal officer of the Stars Group. “The merits of the case prevailed, and we look forward to putting this matter behind us as we sharpen our focus on executing on our growth strategy going forward.”

How did the Stars Group pull this one out?

In reversing the lower court’s decision, the court of appeals pointed to two key arguments raised by the Stars Group:

  • The Commonwealth should not be considered a “person” and therefore lacks the standing to bring a claim against the company.
  • The Commonwealth failed to identify any specific individuals who had actually lost money playing on PokerStars.

The appeals court left little room for interpretation regarding where it stands on the relative merits of Kentucky’s action against the Stars Group:

Allowing a complaint, like the one put forth by the Commonwealth, to move forward would lead to an absurd, unjust result. It would mean that any private person with knowledge of the general nature of Appellants’ electronic gaming format could allege an LRA claim in a wholly conclusory and generic fashion and walk away a billionaire without ever having identified a single gaming transaction with specificity. The LRA was never intended to be used in this fashion. It was intended to promote natural persons who had knowledge of specific instances of illegal gambling to file suit to assist the Commonwealth in enforcing its anti-gambling regulations.

Next steps in the case

The Commonwealth now has two options: asking the appeals court for a rehearing or attempting to move the case to the Kentucky Supreme Court.

However, there’s some chance that the case is settled before that step is taken. Back in March, the Stars Group signaled a willingness to come to terms with the Commonwealth.

The Stars Group’s Chief Financial Officer, Brian Kyle, said at the time that:

“Any outcome in Kentucky would be relatively neutral for our leverage level.”

Executive Vice President, Chief Legal Officer and Secretary, Marlon Goldstein added the interesting comment that the Stars Group was “practical,” strongly implying that if they are given an acceptable offer to settle the case out of court, they would accept.

Good for the online gaming industry?

It’s a bit more good news for online gambling, which has expanded to sports betting in the US this year. Michigan also came a step closer to legalizing online gambling.

Here’s Jeff Ifrah, general counsel for the iDevelopment and Economic Association, on the impact of the decision and everything going on legally for online gaming in the US:

“Following the US Supreme Court case in Murphy, and as Justice Alito announced, a new gaming policy is sweeping across our country, and as witnessed last night in Michigan that policy is pro-online gaming. Cases like the trial court decision in Kentucky are a relic of the past and we are happy to be looking forward to a more entertaining future.”

“We should note that at the same time Department of Justice appears poised to consider moving in the opposite direction, by reconsidering its pro-online gaming interpretation of the Wire Act. As the US Supreme Court made clear, gaming is a state policy issue, not a federal one.”

Full text of the decision

ECLR, Stars Interactive v. KY, online gambling
Chris Grove
- Chris is the publisher of OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.