Flutter Pays US300 Million to Commonwealth of Kentucky

Betfair and Paddy Power owners Flutter Entertainment paid the Commonwealth of Kentucky US$300 million last week. The colossal sum resolves a long-running dispute involving the online poker site PokerStars.

The dispute dates back more than a decade before Flutter’s mega-merger with The Stars Group. PokerStars and Full Tilt Poker continued operating in the United States after the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The company’s offered their services to Americans from 2006 until entirely leaving the U.S. in 2011.

Kentucky claimed damages relating to losses its residents sustained. PokerStars’ then-owner Amaya showed it made approximately US$18 million from Kentucky residents. However, Judge Thomas Wingate awarded US$290 million in damages in 2015. Judge Wingate trebled the damages award, leaving Amaya on the hook for US$870 million. Furthermore, the judge ordered Amaya to pay 12% interest each year, an additional US$104 million annually.

Executive Vice President of Corporate Development and General Counsel of Amaya, Marlon Goldstein, called the award absurd.

“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. 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.”

Kentucky Court of Appeals Reverses Decision

December 22, 2018, saw The Stars Group receive an early Christmas present. The Kentucky Court of Appeals reversed the US$870 million. The court pointed to two critical factors argued by PokerStars. First, the Commonwealth is not considered a person and, therefore, cannot bring a claim against the company. Second, the Commonwealth failed to identify any specific individuals that lost money playing on PokerStars.

Goldstein made interesting comments regarding a possible settlement with Kentucky. He strongly implied PokerStars was willing to settle out of court if the offer was deemed acceptable.

Another Twist In The Tale

The Supreme Court of Kentucky reinstated the US$870 million judgement at 12% interest payments in December 2020, much to Flutter’s dismay. The same court denied Flutter the right to appeal the decision on March 25, 2021.

A lack of right to appeal resulted in intense negotiations between Flutter and Kentucky officials. Those discussions bore fruit and resulted in Flutter agreeing to a US$300 million settlement. The gambling giant informed investors via the London Stock Exchange.

“Further to the announcement of 25 March 2021, the Group today announced that the legal dispute between Flutter and the Commonwealth of Kentucky has now been settled in full.

“The key elements of the settlement are as follows:

• • Flutter agrees to pay $200 million to the Commonwealth of Kentucky in addition to $100 million previously forfeited to the Commonwealth as part of the supersedes bond in the case
  • In return, the Commonwealth of Kentucky has agreed to cease all further actions with respect to the case

“The Group strongly believes that this agreement is in the best interests of Flutter shareholders. The Group now considers the matter closed.”

Flutter’s Business Is Booming

Although US$300 million is a massive sum, Flutter Entertainment can afford it. Furthermore, US$300 million is far less than the US$1 billion it could have paid.

The company’s latest financial figures show business is booming. Flutter released its financials for the six months up to June 30, 2021. Revenue soared 28% to £3.503 billion (AU$6.595 billion) for H1 2021.

Profit before tax skyrocketed 221% to £77 million (AU$144.98 million) from £24 million (AU$45.18 million). It spent vast sums of money reducing the company’s net debt by 7%. However, Flutter currently owes £2.682 billion (AU$5.049 billion) to various institutions.

Flutter’s Australian business continues thriving, especially Sportsbet. Sportsbet enjoys a market share in excess of 50% in H1 2021.

CEO Peter Jackson revealed Sportsbet integrated BetEasy into its business in only 89 days. Jackson is excited for the future of Flutter Australia.

“As we look forward to the future, we remain excited about the prospects for the business and believe it continues to have a long runway of substantial growth ahead of it.”