Flutter takes £870m Kentucky ruling to US Supreme Court

Flutter Entertainment has taken its legal contest with the Commonwealth of Kentucky regarding a $870 million ruling against the firm to the US Supreme Court.

Describing the ruling as having caused ‘monstrous damages’ against its commercial operations, the FTSE100 company has questioned whether “an award of statutory damages violates due process when it exceeds by a factor of more than 30 any conceivable harm”.

Additionally, Dublin-headquartered Flutter has also queried as to whether the Excessive Fines Clause of the Eighth Amendment of the US Constitution “prohibits a prohibits a state from punishing a defendant by imposing a penalty 50 times in excess of the defendant’s revenue earned from the prohibited conduct”.

The case relates to the reinstatement of the £870 million fine by the Commonwealth of Kentucky, first imposed by the Commonwealth in 2010 against subsidiaries of The Stars Group, prior to the firm’s merger with Flutter last year.

The primary objective of the case was to recover alleged losses by Kentucky residents who had played real-money poker on the PokerStars platform between 2006 and 2011, with the 18th century ‘Loss Recovery Act’ allowing Kentucky courts to seize illegal gambling revenue cited in support.

Under the terms of the Unlawful Internet Gambling Enforcement Act (UIGEA) – first passed in 2006 – PokerStars US activity after 2006 was prohibited, although the firm maintained that online poker was a ‘grey area’ under the legislative scope of the act.

A Kentucky judge made the first ruling in December 2015, initially setting an award of $290 million, which was later tripped to $870 million excluding interest and applicable costs, whilst gross gaming revenues generated by The Stars Group during the 2006 to 2011 period were around $18 million.

In  2018, Kentucky judges ruled four-to-three in favour of reversing a previous dismissal which cleared PokerStars former owner Amaya Inc from paying a $870 million settlement to the Commonwealth of Kentucky.

As a result, the fine was reinstated with an annual compounding interest rate of 12%, taking the damages claim to $1.3 billion. Flutter’s appeal to the Kentucky Supreme Court for a rehearing of the litigation against PokerStars was denied in March of this year.

Flutter has argued that if the decision is “left uncorrected,” it will “invite states to pursue novel claims in state court for the combined value of injuries supposedly suffered by their citizens”.

“In cases involving punitive damages, this court has repeatedly admonished that awards exceeding actual harm by more than a single-digit ratio likely violate the Constitution,” the gambling group stated. “Here, the Kentucky Supreme Court upheld a billion-dollar judgment that is utterly disconnected from any rational measure of real-world harm. 

“The PokerStars platform accounted for only a tiny fraction of the gaming occurring in Kentucky, much of which takes place in the State’s own lottery. Yet the Kentucky Supreme Court blessed a damages award that exceeded the actual losses of four Kentucky players by a factor of 34 and petitioners’ revenue by a factor of 50. 

“This case is the poster child for a grossly excessive punishment prohibited by the Due Process Clause of the Fourteenth Amendment and the Excessive Fines Clause of the Eighth Amendment.”

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