Kentucky Judge Issues $871M Judgment Against PokerStars

Updated: December 26th, 2015 by Dev Ops

The Commonwealth of Kentucky this week received a massive $870.6 million judgment against former US-facing online poker site PokerStars.  The decision, rendered on Wednesday by Franklin County (KY) Circuit Court Judge Thomas D. Wingate, attempts to inflict a massive financial penalty on PokerStars’ former and current owners — Rational Group, primarily the creation of co-founding father and son Isai and Mark Scheinberg, and as of 2014, Amaya Gaming.

kentucky-stampThe decision covers the declared activity of PokerStars in serving Kentucky players from late 2006, when the Unlawful Internet Gambling Enforcement Act (UIGEA) was signed into law, until April of 2011, when Stars and other major US-facing sites were forced to leave the US market as of a result of the infamous “Black Friday” indictments.

The effective timeframe of the lawsuit was adjusted over time by the plaintiffs, and the case itself was brought against several major online sites back in 2010.  The case is related to but separate from the 2008 case also brought by Kentucky that sought to seize over 140 online-gambling domains.  The same judge, Wingate, sided with Kentucky’s interests throughout both cases, and has continued to demonstrate an extreme, pro-Kentucky interpretation of the state’s laws that will leave this latest decision ripe for appeal, which current Stars owner Amaya has already promised will be filed.

Amaya issued a corporate statement on Thursday, immediately following Wingate’s expected but farcical ruling.  As the statement duly noted, Kentucky misused a law nearly two centuries old that was originally designed to return gambling losses to settlers who were fleeced in skin games, by traveling confidence men.  The law’s most recent update occurred relatively recently… in 1948.  And the law was -never- designed as tool through which the state could attempt to enrich itself without even claiming to be on behalf of the Kentucky players, who Wingate amazingly claimed were “fleeced.”

“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, Executive Vice President, Corporate Development and General Counsel of Amaya. “Given that PokerStars only generated gross revenues of approximately US$18 million from Kentucky customers during the five years at issue, a damages award in excess of US$800 million is notable only for its absurdity.”

PokerStars revenue from the period covered by the lawsuit amounted to roughly $20 million. Only the combination of creative accounting designed to maximize “losses” and an utter disregard for the fact that all such losses were done to other players, and not to PokerStars, allowed Wingate to devise a rationale as basis for his award.  The $870.6 million represents a trebled initial summary judgment of $290.2 million, issued by Wingate in November.

Amaya’s Thursday statement hinted at other grounds for appeal as well.  “In the decision,” it reads, “the judge imposed an approximately US$290 million award, which he trebled to approximately US$870 million excluding interest and applicable costs, in favor of the Commonwealth. The latest ruling is in stark contrast to the same trial court’s decision just last month when it determined that damages should be based on the net losses of players. Yesterday’s order applies a methodology that is not grounded in applicable law as it calculates damages based on gross losses of players without any reduction for winnings, bonuses or free play.”

Amaya announced that it will post a bond to stay the enforcement of Wingate’s order, and that the actual appeal will be filed in January.  In the event that some judgment is eventually rendered — meaning that the ruling and the case itself isn’t tossed out — then the amount that Stars’ original owners will have to pay will also have to be finalized.  A statement made by Amaya a week ago promised to use all means available to collect such a judgment from Stars’ original owners, and it is believed that as much as $300 million from Stars sale to Amaya has been held in escrow pending the resolution of the Kentucky case.

The latest Stars statement reiterated that intent, stating, “Regardless of the dollar amount, to the extent the PokerStars entities may be ultimately obligated to pay any amounts following exhaustion of all appeals and other legal remedies, Amaya intends to seek recovery against the former owners of the PokerStars business.”

Amaya has also been quick to note that since purchasing PokerStars in 2014, the company has been at the forefront of pro-legalization efforts for online poker in the US.  Amaya has already been granted approval to operate the Stars and Full Tilt brands in New Jersey one of the three US states where online poker is officially regulated.

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