Kentucky court reverses $870m pre-Black Friday PokerStars ruling

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The Stars Group has seen an $870m Black Friday ruling against the operator in the US state of Kentucky overturned by an appeal court, reversing in full a December, 2015, trial court judgement.

When, on April 15, 2011 – so-called Black Friday – the US government took sweeping actions against the country’s online gambling operations, enforcing the 2006 Unlawful Internet Gaming Enforcement Act, a series of actions and reactions were set in motion – including the $870m lawsuit against PokerStars, lodged by the Commonwealth of Kentucky.

The Stars Group, which subsequently acquired PokerStars, was facing a huge cost relating to the recovery of alleged losses by Kentucky residents who played real-money poker on PokerStars’ website during a period between 2006 and 2011. But not anymore.

The Kentucky Court of Appeals stated that “allowing a complaint, like the one put forth by the Commonwealth, to move forward would lead to an absurd, unjust result.”

“We applaud the decision of the highly-respected three-judge panel of the Kentucky Court of Appeals,” said Marlon Goldstein, EVP and chief legal officer of The Stars Group. “The merits of the case prevailed and we look forward to putting this matter behind us as we sharpen our focus on executing on our growth strategy going forward.”

The litigation was initially filed by the Commonwealth of Kentucky in 2010, around four years prior to The Stars Group’s acquisition of PokerStars. The filing relied on a centuries old statute that was intended to allow individuals who incurred gaming losses to bring an action against their winning opponents.

The Stars Group said it now intends to petition for the release of the $100m supersedeas bond it posted, which includes $5m in cash collateral and $65m in letters of credit securing the same. A supersedeas bond is a holding payment submitted by defendants wishing to seek appeal against a judgement with a ficudiary penalty.

Stars also said that approximately $300m continues to be held in an indemnity escrow fund established under the merger agreement governing The Stars Group’s acquisition of the PokerStars business. The group previously filed an indemnification claim relating to the Kentucky litigation, which is currently pending against the sellers of the PokerStars business, for all losses, costs and expenses related to the litigation. This claim and the release of the outstanding escrow funds will be resolved in accordance with the provisions of the merger and escrow agreements related to the acquisition.

In a statement, Stars said it expects the Commonwealth to either petition the Court of Appeals for a rehearing or seek discretionary review of the Court of Appeals decision by the Kentucky Supreme Court and intends to vigorously dispute any and all liability in the event the Kentucky Supreme Court grants review and hears the appeal.