BUSINESS

The Stars Group beats $870m Kentucky lawsuit, hoists UFC belt

TAGs: commonwealth of kentucky, Kentucky, PokerStars, The Stars Group, UFC

stars-group-kentucky-lawsuit-ufc-poker-sponsorshipOnline gambling operator The Stars Group (TSG) is – for the moment – off the hook for an $870m civil judgment imposed three years ago in the state of Kentucky.

On Friday, TSG announced that the Kentucky Court of Appeals had “reversed in its entirety” the preposterous $870m judgment that a Commonwealth of Kentucky judge imposed as punishment for PokerStars’ activities in the state prior to the brand’s US market exit in 2011.

The original judgment was issued in November 2015 by Franklin Circuit Court Judge Thomas Wingate, who ordered TSG – then known as Amaya Gaming – to pay $290m to the state for serving state residents without a state permission. The following month, Wingate trebled those damages to $870m (plus interest).

The state targeted a number of online gambling companies in this fashion using a 19th century statute that allowed individuals or entities to recoup unrelated third parties’ gambling losses. Some companies, such as Bwin.party (now GVC Holdings) chose the path of least resistance and cut the state an eight-figure check.

From the start, TSG maintained that it wasn’t liable for the alleged sins of PokerStars’ former owners Isai Scheinberg and his son Mark, who sold the company to Amaya in 2014. And much like Donald Trump’s efforts to get Mexico to pay for his border wall, Amaya/TSG found it hard to convince the Scheinbergs to cough up the $870m to get Stars’ new owners off the hook.

TSG’s chief legal officer Marlon Goldstein applauded the Court of Appeals’ ruling, saying “the merits of the case prevailed.” However, Kentucky officials have already stated they will pursue an appeal at the state Supreme Court, so this ball game may yet go into extra innings.

Regardless, investors cheered the news, pushing TSG’s stock up over 7% on the Nasdaq exchange and more than 8% higher on the Toronto market at time of writing.

TSG says it will now petition the court for the release of the $100m surety the company was forced to submit in order to appeal the court ruling. There’s also the $300m that was held in an indemnity escrow fund at the time the Scheinbergs sold the company, but TSG cautioned that there’s no guarantee that the company will benefit from the release of these funds.

TSG INKS UFC POKER DEAL
Friday also saw TSG announce a new marketing sponsorship deal with the UFC mixed martial arts organization. The deal will see PokerStars declared the UFC’s ‘official poker partner,’ which the groups claim represents “a new sponsorship category.”

Stars will enjoy a “branded presence” inside the octagon at the UFC’s final pay-per-view event of 2018 on December 29 in Las Vegas. Stars will also have lots of branding opportunities during the broadcast as well as across the UFC’s digital and social media channels. In return, the UFC will (presumably) get scads of TSG’s money.

TSG doesn’t operate in Nevada’s online poker market, as its “tainted assets” software has been more or less permanently banned from use under the state’s online gambling legislation. PokerStars does have an active site in New Jersey, and is expected to be among the first to launch in Pennsylvania’s new intrastate online market come the new year.

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