When times are tough, and perhaps we’ve overspent our budget, the sensibly minded among us will do the honorable thing; cut back on unnecessary outlay, work a little harder, maybe shut off the cable for a month until things are under control. Then there are the rare few who will go to extreme and ludicrous measures, such as robbing a bank to make up the extra cash.
That’s a frighteningly realistic comparison to what Kentucky is trying to do, using its longtime case against PokerStars to pay for its own mishandling of the state budget.
In what is being called a “ridiculous” and “frivolous” ruling by Judge Franklin Circuit Judge Thomas Wingate, PokerStars has been ordered to pay the exorbitant amount of $870 million to the Commonwealth. The ruling came down on Christmas Eve, ironically just weeks after Kentucky’s new Governor-elect Matt Bevin condemned the former Beshear administration for his inheritance of the state’s “financial crisis”.
On December 1, Bevin said in a news release that, “According to the Beshear administration, they are leaving Kentucky burdened with a projected biennial budget shortfall of more than $500 million.” Thus the $870 million Christmas gift – err, I mean, ruling against PokerStars – couldn’t have come at a more opportune moment.
The case stems from action taken against the world’s largest online poker room, PokerStars, back in 2010. Litigation against PokerStars stalled for the last 6 years, during which time the US Department of Justice went after the operator in 2011 for providing what amounted to illegal online gambling services to Americans following passage of the 2006 UIGEA.
PokerStars settled its claim with the US government in 2012, agreeing to pay $731 million – an amount well below Judge Wingate’s ordered payment of $870 to compensate a single US state. It should also be noted the DOJ handed over $6 million of that settlement to Kentucky’s Beshear administration for ‘cracking down’ on illegal online gambling.
According to prosecutors, an estimated 34,000 residents of the Commonwealth played real money online poker on PokerStars. It was alleged that those players lost $290 million during the 5-year span of alleged illegal gambling activity, from 2006 to 2011.
Basing their case on a centuries-old law that permits Kentuckians to take legal action to collect gambling losses from the winners, Wingate tripled the amount of estimated debt in his ruling against PokerStars, resulting in total damages of $870 million. Furthermore, the company must pay an additional 12% interest on the debt until it’s paid in full.
It should go without saying that PokerStars owners have every intention of appealing the decision.
Strong Points for PokerStars Appeal
Amaya Gaming, the Canadian-based parent company that’s been ordered to fork over the grossly excessive amount in damages, did not even own PokerStars during the 5-year span for which the claim was made. The company was privately owned by Isai Scheinberg at that time, and later sold to Amaya for $4.9 billion in 2014.
Additionally, PokerStars did not “win” the money from Kentuckians. Online poker pits players against other players, therefore it was “other players” on the network that won the money. PokerStars stake in the case should only amount to, at most, $18 million, based on rake and fees collected from Kentuckians during that time.
Furthermore, the whole point of the outdated law on which the ruling was based is to return funds lost from gambling to the original owner(s). Kentucky has no intention of sharing the money with former PokerStars members, instead having every intention of paying down the excessive budget deficit.
“This is a frivolous and egregious misuse of an antiquated state statute to enrich the contingent-fee plaintiff’s attorneys hired by the commonwealth and not the people of Kentucky,” said Marlon Goldstein, General Counsel for Amaya. “A damages award in excess of $800 million is notable only for its absurdity.”
Amaya responded to the ruling by promising an appeal, and noting that any amount PokerStars may have to pay will be the responsibility of the online poker site’s previous owners.