One of the worlds biggest betting companies, Flutter Entertainment, which is better known in the UK as the owner of Betfair and Paddy Power, has been dealt a blow in court .
Flutter was hit with a massive $870 million fine by the Kentucky Supreme Court in a judgement on Friday that led to a significant fall in the company’s share price. The judgement related to a previous award of damages that had been made against The Stars Group (TSG). Flutter merged with TSG in 2018, but the award of damages that was reinstated by the Kentucky court related two offshore poker sites that had been operated by TSG and goes back to 2015 .
That damages award was related to the company called PokerStars, which had been acquired by TSG in 2014. Officials had ruled at that time that PokerStars were liable for all losses incurred by citizens of Kentucky who had played in illegal offshore games, and under existing Kentucky law the state is entitled to receive triple damages from the company.
In its ruling, which was made last Thursday, the court said that the losses to the Commonwealth of Kentucky had been incurred due to what it described as PokerStars’ ‘illegal internet gambling criminal syndicate.’ The judgement went on to sugges that the money recovered by the state in this case was not enough to cover the cost of the losses incurred by the state.
In response, Flutter said that it was surprised by the ruling, under which it will be required to pay the stated penalty, along with compounded interest worth 12% per year, with the total amount due to be paid reaching an eye-watering $1.4 billion. Referring to the sums involved, the bookmaker issued a statement arguing that the gross gaming revenues generated by TSG in Kentucky during the relevant period were roughly $18 million, and that they would be taking further action:
“There are a number of legal processes available to Flutter and having taken legal advice, Flutter is confident that any amount it ultimately becomes liable to pay will be a limited proportion of the reinstated judgement.”
According to market analysts, Flutter are likely to have been aware of the issue when they carried out their due diligence processes ahead of the TSG acquisition, but may have assumed that the problem had been resolved by the decision of the appeal court to reverse the original award.
The immediate response by Flutter, indicating that it believed there were legal remedies, served to calm markets in the wake of the judgement, but the whole case could represent a warning to other gambling operators seeking to enter the fast growing US market.
Since the US Supreme Court legalised sports betting back in the spring of 2018, many high profile operators have been pushing to gain access to the market, with William Hill, Flutter and 888 Sport among them, but the decision by the Kentucky Supreme Court could serve as a reminder that there considerable risks as well as rewards involved in entering the new market.