A Kentucky Circuit Court judge has ordered current PokerStars parent Flutter Entertainment PLC to surrender $100 million in secured bonds to the Commonwealth of Kentucky. The money would constitute an initial payment toward the massive judgment — now approaching $1.6 billion with accrued interest — granted to the state over PokerStars pre-Black Friday online poker services to Kentuckians.
On Tuesday, Franklin County Circuit Judge Thomas Wingate ordered that Flutter surrender the bonds first posted to the court in 2016 by PokerStars’ prior owner, Amaya Gaming, in 2016, when Amaya appealed the original $870 million granted to Kentucky over Stars’ allegedly illegal activity. The Lexington Herald-Leader reported that the office of Kentucky Governor Andy Beshear has acknowledged Wingate’s ruling and plans to create an escrow account for the bonds, once ownership is transferred. Kentucky first moved to claim the posted $100 million bond last month.
Judge Wingate is the same judge who ruled against PokerStars in 2015, though his judgment was overturned in 2018 by a Kentucky appellate court before being reinstated by the Kentucky Supreme Court in 2020. In calculating damages, Wingate used a controversial accounting method that transformed each played hand into a separate poker “game,” thus translating PokerStars’ $18 million in profit from 2006-11 from Kentuckians’ action into $290 million.
Wingate then applied an antiquated 19th-century anti-gambling statute to that sum, in addition to affirming Kentucky’s right to collect said damages, bringing the original judgment to $870 million. Interest continues to accrue on that judgment at a rate of more than a half million dollars per day.
SCOTUS appeal is PokerStars’ next step
In late March, Flutter announced in a regulatory update that it was “potentially appealing the ruling of the case to the US Supreme Court.” The Herald-Leader’s report on Tuesday’s Kentucky hearing asserts that Flutter has since submitted its appeal.
However, though it appears such an appeal attempt will occur, Flutter has not announced such on its own corporate site, nor does any appeal attempt appear in the US’s federal-court system’s online database. Even if Flutter does attempt to appeal to SCOTUS, that court accepts only a tiny percentage of cases it is asked to review. Nonetheless, the exorbitant nature of the judgment’s total relative to any actual damages incurred is one of several issues that may pique the US Supreme Court’s interest in hearing the case.
Flutter asserts other remedies remain
Whether or not SCOTUS accepts the case, other circumstances suggest that Kentucky will have difficulty collecting the full value of the existing judgment. According to the Herald-Leader, Kentucky must attempt to collect that judgment in the United Kingdom, where Flutter is domiciled, and where different rules apply.
“The statute in the United Kingdom treats the entire judgment as void and unenforceable,” Flutter’s Kentucky counsel Sheryl Snyder told the court. “So the simple point is, my client believes that when you get to the United Kingdom to collect, they won’t let you domesticate the judgment.”
Whether the Kentucky judgment would be nullified in whole remains to be seen, but it is among the possibilities that may induce both sides to settle for an intermediate amount.
Kentucky’s lawyers also asserted that Flutter is currently “hiding” assets connected to PokerStars, and the state asked Judge Wingate to increase the ordered surety bond behind the $100 million already ordered transferred to the state. However, that $100 million is already the maximum bond called for under Kentucky state law.
Flutter may seek default waivers from investors
Given the wide range of financial outcomes, Flutter has also begin exploring getting consent requests from “certain events of default” in the case one of the worst possibilities should become the case’s final outcome. According to Moody’s Investors Service, in a paywalled update, Flutter began sending such waivers to certain creditors, including some loanholders and entities holding senior unsecured notes.
Moody’s also noted that while it rated recent developments in the Kentucky case as “credit negative,” it appears that Flutter could weather even the worst financial outcome. According to the investment-news outlet, Flutter has over $830 million in cash and over $520 million in revolving credit already available, in addition to the $100 million bond posted by Amaya in 2016.
The Moody’s update notes that Flutter retains several options, but that it also “highly unusual and unexpected” for a company with Flutter Entertainment’s high credit rating to face such a heavy financial hit.
Flutter acquired PokerStars after the initial Kentucky judgment had been tossed out but before it was reinstated by that state’s Supreme Court on a narrow 4-3 vote.
