Yahoo Finance Paddy Power owner hit with $870m Kentucky Supreme Court penalty
Flutter Entertainment (FLTR.L), the owner of Paddy Power and Betfair, has been hit by a huge $870m (£642m) judgement by Kentucky’s Supreme Court, sending its share price lower on Friday.
The court reinstated an award of damages against The Stars Group (TSG), the US gambling firm that Flutter merged with in 2018, in relation to offshore poker sites that TSG operated. The original award of damages dates back to 2015.
Officials ruled PokerStars, which TSG itself acquired in 2014, had to take responsibility for losses incurred by Kentuckians who played in illegal offshore games. Under Kentucky law, the state is entitled to triple damages.
In its ruling, the court said on Thursday night: “The Commonwealth of Kentucky has losses due to PokerStars' illegal internet gambling criminal syndicate. The amount recovered in this case may not cover the actual cost suffered by the Commonwealth of Kentucky.”
Shares were down by over 1% on Friday:
Flutter said it was “wholly surprised” by the ruling. It is required to pay the penalty plus compounding interest of 12% per annum. Including interest, the amount could be up to $1.4bn.
The bookmaker said: “As previously disclosed, the gross gaming revenues that TSG generated in Kentucky during the relevant period were approximately $18 million. 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.
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“Flutter will have been aware of the issue having done due diligence on The Stars Group but presumably thought it was behind them given an appeal court reversed the initial award in 2018,” said Russ Mould of AJ Bell.
“The market reaction so far is measured, with investors perhaps reassured by Flutter’s insistence that it has legal avenues available to contest the decision and that ultimately in the worst case it would pay a ‘limited proportion’ of the reinstated judgement.
“An interesting takeaway is that in their clamour to take advantage of the opening up of the sports betting market in the US, companies may have somewhat neglected to consider the risks alongside the opportunities.
“This may prove to be an isolated incident, a complete outlier, but the US is a litigious society, including in the corporate sphere, and this news may have a sobering effect on the sector.”
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