State of Kentucky fined PokerStars $1,3 billion
The whole “Black Friday” story for PokerStars – when in 2011 the US federal bureau blocked a number of local rooms for illegal online gambling – ended only last month. Another “black” day for PokerStars was December 17, 2020 when the Kentucky court announced a huge fine of $1,3 billion.
What happened in Kentucky?
The Kentucky Supreme Court, in it’s ruling, called PokerStars a “crime syndicate” and awarded the company a fine that could amount to almost $1,3 billion. This amount includes a $870 million fine and a multi-year interest of 12% annually.
The largest fine for a gambling company so far was $18,000,000. And the largest corporate fine in history ($22,000,000) was paid by British Petroleum for a damage caused by oil spill in Gulf of Mexico.
The history of the Kentucky lawsuit against PokerStars dates back to 2013. In the United States the UIGEA (Unlawful Internet Gambling Enforcement Act) is in force and Kentucky lawyers claim that from 2006 to 2011 PokerStars illegally accepted money from money from the residents of the state (up to 34,000 people) and turned a profit of around $290,000,000. In actuality, PokerStars received only $18,000,000 rake money from Kentucky residents during that period.
After three years of litigations, the court ruled to fine the room threefold. 130 years ago there was a similar precedent in the state and the old law on damages (LRA) was still in force. But the litigation dragged on: PokerStars filed an appeal and actually won in 2018, the decision of Kentucky authorities was canceled. But not for long, in 2020 unexpectedly for the room the State Supreme Court found the lawsuit valid and issued a humongous fine of $1,3 billion. Here’s the document:
Gov. Andy Beshar strongly supported court’s decision calling the day of the verdict “a great day for all of Kentucky” and noted that “there is no amount that can compensate local famalies for the damage PokerStars has caused through their irresponsible activities”. When asked by the media how the state will spend the money from gambling company, the official said they would use it to cope with the consequences of coronavirus.
Why did PokerStars become the target?
Well, there are suspicions the Themis in America is very politicized. In the conditions of economic depression any methods of acquiring money would be welcomed by the population (voters, that is).
Naturally, the new owners of The Stars Group are not thrilled with the latest developments. It is clear that they are not able to pay the fine - this will ruin the company. Moreover, at the time of the acquisition of TSG everything was settled with Kentucky and the room was successfully making its way to the American market.
But the coronavirus pandemic and the dire economic situation forced local authorities to change their political course and resort to tough action. Even if Flutter Ent. would only pay a part of the fine, this may become a precedent for other states. Then such lawsuits may arise repeatedly and it is absolutely impossible to work in US under these conditions.
There is an answer after all why PokerStars became the scapegoat. Everyone has heard of Isaiah Steinberg case, he is a man who ran the stellar company, which then was a part of Rational Entertainment. He is famous for organizing illegal gambling, which ultimately led to the events of “Black Friday” in online poker. He was persecuted by the American authorities, hiding for 9 years, but eventually detained in Switzerland in January 2020.
After the proceedings, Steinberg was extradited to the US, where he was convicted and sentenced to a fine of $30,000. What will happen next? It is clear that the Flutter Entertainment holding does not intend to pay this huge fine and will continue to fight. But the position of PokerStars in the US market will surely get worse, compared to competitors in the industry.
