The world’s biggest online betting group, Flutter Entertainment, has said that it is planning to fight a ruling by the Kentucky Supreme Court that imposed a fine of over $870 million in damages as a result of a resurrected lawsuit against one of the company’s newly-acquired subsidiaries.
Shares in Flutter, which also includes the U.S. sports betting group FanDuel, dropped 3% in trading at the end of last week as the market took stock of a court decision that came out of the blue, and could leave the betting group facing a huge bill.
Flutter was formed in 2016 through a merger between bookmaker Paddy Power and online betting exchange Betfair. The new company then acquired Canada’s The Stars Group (TSG) in 2019, with the transaction eventually going through in May of this year.
At the time when it was acquired by Flutter, TSG had itself come through a lawsuit that related to one of its subsidiaries. In 2014, TSG acquired PokerStars, which was already the subject of legal action in the US state of Kentucky over losses incurred during the period from 2006 to 2011.
PokerStars operates an online poker site, which is a form of gambling that was illegal in many US states including Kentucky. This became an issue for TSG, and ultimately for Flutter, because the law of Kentucky says that losses of $5 or more that have been incurred on illegal gambling can be recovered by legal action.
Back in 2015, a Kentucky circuit court concluded that TSG had to pay $870 million in damages on behalf of PokerStars. That decision was overturned by the Kentucky Court of Appeals in 2018, and that was the state of affairs when Flutter acquired TSG.
But that changed dramatically when the Kentucky Supreme Court ruled that the award of damages against TSG should be restored. That effectively puts Flutter in the frame for the $870 million in damages, with compound interest of 12% per year added on top. Once the interest is factored in, the total bill would bring the total facing Flutter to almost $1.3 billion.
Yet Flutter has remained defiant, saying that they would fight the ruling and that it had confidence that it would ultimately only have to pay a proportion of the damages stated in the judgement. In a statement, the company expressed its opposition to the ruling:
“Flutter is wholly surprised by today’s ruling and strongly disputes the basis of this judgement which, it believes, runs contrary to the modern U.S. legal precedent.”
Given the size of the potential bill facing Flutter, the fact that the stock exchange reacted with only a 3% drop in price suggests that Flutter’s investors also have confidence that the final bill won’t be anywhere near the suggested figure of $1 billion.
But even if Flutter can escape or at least, partially escape, this enormous financial burden, the case will serve as a warning to many of the European operators who are seeking to enter the growing US sports market, where gambling legality has had a tangled and difficult history.