Kentucky Sues PokerStars for Flaunting UIGEA Between 2006 and 2011

Home » Poker News » Kentucky Sues PokerStars for Flaunting UIGEA Between 2006 and 2011

Monday, January 4th, 2016 | Written by Adam Brown

When Amaya purchased PokerStars, the company not only bought the most well known brand in the whole of the online poker industry, but it also purchased some legal troubles as well. Due to the unregulated actions of its previous owner in the US, Amaya has had to try and polish up the reputation of PokerStars and show that it will be operating the network lawfully. While Amaya has succeeded in convincing New Jersey to allow PokerStars to operate in the state, the company has not been able to completely avoid PokerStars’ controversial past. In fact, PokerStars’ parent company has now had a huge fine of $870 million levied against it by the state of Kentucky for the site’s flaunting of the UIGEA between 2006 and Black-Friday (2011).

About the Lawsuit

The state of Kentucky sued Amaya for damages due to the fact that PokerStars operated in Kentucky even after the Unlawful Internet Gambling Enforcement Act of 2006 was passed. In spite of the piece of legislation, PokerStars took advantage of the lucrative unregulated US market by continuing to accept deposits and allow American gamblers to play on its site until the Department of Justice eventually stepped in and pulled the plug on its stateside operation on April 15, 2011.

The aforementioned lawsuit purportedly seeks to reclaim the money that players who lived in Kentucky during that time period lost at PokerStars’ illegal tables. To argue their case, the state used a 19th century statue that makes it possible for poker players to sue those people who cheated in order to win money from them. The move has been criticized due to the fact that this old statue was never meant for use by the state to obtain money. Commenting on the issue, Amaya General Counsel Marlon Goldstein has stated:

“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.”

A Victory for Kentucky, a Loss for Amaya

Ultimately, Judge Thomas Wingate, the Franklin County Circuit Judge charged with determining the outcome of the lawsuit sided with Kentucky. In late December, he ruled that Amaya would be required to pay Kentucky fines of roughly $870 million because of PokerStars actions. Amaya has contended throughout the lawsuit that only about $18 million was collected from poker players in Kentucky from 2006 to 2011 and protested the huge sum of money that the state was requesting. To add insult to injury, Judge Wingate also ruled that Amaya will have to pay 12 percent interest every year if the fee remains unpaid, meaning that the company could be saddled with additional costs of $104 million annually if the debt remains unpaid.

Amaya’s Way Forward

Amaya has stated that it does not intend to pay the fine without a fight, and the company has already issued a statement saying that they it will appeal the ruling. In the statement, Amaya again pointed to the discrepancy between the amount of money actually lost by Kentucky players and the size of the damages awarded to the state, and referenced the use of the statue to argue the case, accusing the state of misapplying the law.

Even if Amaya is not successful in appealing the court case, the company has made it clear that it does not plan to pay the full $870 million on its own. Amaya has announced that it will go after the previous owners of PokerStars for as much of the settlement as possible, as it was their actions and not Amaya’s that led to the lawsuit. This wouldn’t be the first time that PokerStars’ previous owners were required to make payments to the government; back in August 2012, they paid $731 million to the U.S. to repay player losses of non-U.S. players who used the site Full Tilt.

Kentucky Budget Deficit

In the meantime, Kentucky is facing a huge shortfall in its state budget as it heads towards its 2016 legislative session. Describing the situation in which the state currently finds itself, last week Kentucky Chamber President Dave Adkisson commented:

“It’s a pretty deep ditch that we find ourselves in, and it’s gonna take probably 20 to 30 years to climb out of it.”

This has lead the Las Vegas Review-Journal to even suggest that Judge Thomas Wingate’s recent ruling may have been influenced by Kentucky’s huge budget shortfall. As Las Vegas Review-Journal reporter Howard Stutz wrote in his post:

“It looks like Wingate came up with his own a way to use gambling money for a budget fix.”

While this suggestion may seem extreme, if any money retrieved did end up in the pockets of the Kentucky Treasury, and not returned to the 34,000 affected Kentucky residents, then that might potentially be viewed as large scale fraud.