PokerStars owner Flutter has filed a petition to the US Supreme Court, appealing what it calls a “monstrous” $1.3bn damages claim it has been ordered to pay to the state of Kentucky, for offering illegal gambling.
The case began as the state claimed PokerStars offered online gambling to 34,000 Kentucky players between October 2006 – when the Unlawful Internet Gambling Enforcement Act (UIGEA) was introduced – and April 2011, when its US operations were shut down by authorities.
Flutter said PokerStars made $18m from Kentucky customers during this time period.
In 2015, then-PokerStars operator Amaya was ordered to pay $290m by Franklin Circuit Court Judge Thomas Wingate for this Kentucky activity. The total was equal to the value of every losing wager made by a player in Kentucky, without deducting winning wagers.
This total was then tripled following a request from the state, under an 18th-century state law: the Loss Recovery Act. Amaya later rebranded as The Stars Group and was acquired by Flutter.
However, the Kentucky Court of Appeals ultimately reversed the decision in 2018. It said that allowing the fee to be upheld would “lead to an absurd, unjust result”.
This decision was then appealed in the state Supreme Court, which reinstated the $870m payment. With interest, this total has grown to $1.3bn.
The court then denied Flutter’s request for a new hearing on the matter. As a result, Flutter opted to appeal the case to the US Supreme Court.
In its Supreme Court appeal, Flutter raised two questions The first was “whether an award of statutory damages violates due process when it exceeds by a factor of more than 30 any conceivable harm”.
The second question was of “whether the Excessive Fines Clause 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 operator noted that the decision not to deduct winnings was particularly unusual given that as a poker platform, PokerStars took only a portion of players’ losses. Flutter said the damages would be only one tenth of the size if instead they were based on overall net losses.
“These monstrous damages cry out for this Court’s review,” Flutter said. “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.
“Here, the Kentucky Supreme Court upheld a billion-dollar judgment that is utterly disconnected from any rational measure of real-world harm.
“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.”
The operator added that the ruling would allow states to pursue “novel claims” of damages on behalf of their citizens, in order to raise funds rather than provide recourse after harm is committed.