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PokerStars Settles with Kentucky After SCOTUS Petition

Written by Jennifer Newell
Last updated on
Jennifer Newell

The long-running case of PokerStars versus Kentucky is over. After the state battled with the online poker operator at various levels since 2008, the lawsuit seemed to be reaching a crescendo when PokerStars parent company Flutter Entertainment appealed the case to the Supreme Court of the United States. After more than a dozen years, Flutter was going to take it all the way to the highest court in America rather than pay the $1.3B award as ordered by the Kentucky Supreme Court.

Suddenly, something changed. Flutter and Kentucky reached a settlement. And it’s over.

Perhaps PokerStars wants to make nice with Kentucky in order to be considered for an igaming license when the state eventually legalizes the new industry. On the other hand, Flutter could have simply grown tired of the $1.3B tab hovering over its financials.

Either way, it’s done and dusted.

Taking It to the Top

In 2008, then-Governor Steve Beshear led the way when the Commonwealth of Kentucky wanted to fight online poker and igaming. He feared that people playing online would take revenue away from the state’s horse racing industry. So, he took his over-the-top claims of online gaming sites being leeches and part of the underworld to a judge. And with the court’s permission, Beshear seized 141 online gambling domains, including PokerStars.

That battle moved forward, but Kentucky wasn’t happy that PokerStars fought back. The state sued PokerStars in 2011. And several years later, the Franklin County Circuit Court ruled for Kentucky to the tune of $870M, to recover rake PokerStars supposedly collected from the state’s residents between 2006 and 2011…plus damages.

The Kentucky Court of Appeals overturned that ruling in 2018, but the Kentucky Supreme Court shot that down in 2020, reinstating the original judgment. When that high court refused to hear an appeal from PokerStars in early 2021, the online poker operator – alongside parent company Flutter Entertainment – had to make a decision. When a Kentucky judge ruled in April that the state could cash in the $100M in bonds that PokerStars deposited with the state in 2015, Flutter had enough.

Stars Interactive Holdings, under the guidance of Flutter, submitted a petition for a writ of certiorari with the United States Supreme Court on August 23.

Never Mind

On September 22, Flutter issued a corporate announcement. They settled with Kentucky, noting that they believed the move was in the best interest of Flutter shareholders. The total settlement is $300M.

Point 1: “Flutter agrees to pay $200 million to the Commonwealth of Kentucky in addition to the $100 million previously forfeited to the Commonwealth as part of the supersedeas bond in the case.”

Point 2: “In return, the Commonwealth of Kentucky has agreed to cease all further actions with respect to the case.”

After more than a decade of court battles, they can archive the files on this situation between PokerStars and Kentucky.

Reasons Will Become Clear

One of the reasons for the decision to settle may already be clear. Flutter shareholders didn’t like the ongoing drama, especially the $1.3B bill dangling out there. It was understandably unnerving. And the stock market showed the relief when Flutter announced the settlement. The high mark for shares on September 21 was $105.70, but it immediately jumped to $108.29, topping out at $108.89 for the day. Prices settled  bit after that, but the shareholders made their view on the situation clear.

The settlement could also to begin to mend the relationship between Flutter and Kentucky.

Kentucky lawmakers have toyed with the idea of online poker and sports betting for several years. Ironically, one of the biggest supporters of the idea is Governor Andy Beshear, the son of the governor who started the whole mess with online gaming websites in 2008. The current governor began pushing for igaming and sports betting in 2018 – despite supporting the Kentucky court rulings against PokerStars – as a way to create a new revenue stream and possibly solve the state’s ever-worsening pension problems.

Kentucky State Representative Adam Koenig put his first bill up for consideration in 2019, but it failed, as did the one he attempted in 2020.

Koenig tried again this year. He introduced HB.241 on January 9 along with 17 other sponsors. The bill would have updated Kentucky’s laws to legalize online poker, sports wagering, and fantasy contests. However, the bill fell by the wayside as the state – along with every other state in America – tried to wade carefully through post-pandemic waters while managing new Covid-19 variants.

With that said, other states did legalize online poker in the past year, and many more launched sports betting businesses. US online poker is now legal in Michigan and Connecticut, along with Pennsylvania, West Virginia, New Jersey, Delaware, and Nevada. As the list grows, Kentucky lawmakers know that they should considering joining in. If they want to do that – and if PokerStars and Flutter want to be a part of that growth – this settlement was one big step in that direction.

 

 

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