On a narrow 4-3 decision, the Kentucky Supreme Court has held that operators of an internet gambling website owes the state nearly $1.3 billion.
While PokerStars does not take part in the real-money poker games played on its site, a “rake” is charged, which is a portion of the bets during all games.
Written by Tom Latek of Kentucky Today
In 2008, J. Michael Brown, then-Secretary of the Justice and Public Safety Cabinet under Gov. Steve Beshear who now serves as Gov. Andy Beshear’s executive cabinet secretary, brought actions on behalf of the commonwealth in Franklin Circuit Court seeking to stop the unregulated, untaxed, and illegal offshore gambling operations that were operating in Kentucky.
The suit was based on a state law known as the Loss Recovery Act, which provides a losing gambler a cause of action to recover any losses suffered. If no action is taken within six months, a third party can seek the reimbursement of the illegal gambling losses.
The justices said, “While the loser can only recover the amount he or she lost, ‘any other person’ can recover treble damages.”
From 2007 to 2011, PokerStars, the largest offshore illegal gambling operator, collected almost $300 million in actual cash losses from thousands of Kentuckians who played on PokerStars websites.
In the high court decision, the majority held Kentuckians lost at least $290,230,077.94 in the five years prior to the filing of this lawsuit, which represented only a fraction of the amount of real dollars lost by Kentuckians over the entirety of PokerStars’ operating history in Kentucky.
That was the amount awarded by a Franklin Circuit Court judge, but it was overturned by the Court of Appeals, which held the state is not a person.
The majority of justices found, “Whatever purpose the statute has, our interpretation must be guided by the plain language that says the suit may be brought by ‘any other person.’ Person includes the state unless the context of the statute requires otherwise. The context of the statute requires a determination that the Commonwealth of Kentucky has standing to bring this lawsuit.”
They reinstated the lower court ruling and added treble damages, making the award nearly $1.3 billion.
Justice Samuel Wright authored the majority opinion, concurred in by Justices Michelle Keller, Debra Lambert, and Christopher Shea Nickell.
Justice Laurence VanMeter wrote the dissenting opinion, in which he was joined by Chief Justice John Minton and Justice Lisabeth Hughes.
“This will never be enough to make up for the damage to Kentucky families and to the state from their years of irresponsible and criminal actions, but this is a good day for Kentucky,” said Gov. Andy Beshear, whose father, Steve, brought the action when he was governor. “This better positions us to emerge from this painful pandemic to help Kentuckians, help our businesses, provide quality health care to more Kentuckians, strengthen our public schools and keep our promise to educators and other public employees – some of whom were on the front lines battling the fallout from their greed.”
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Written by Tom Latek. Cross-posted from Kentucky Today.