Published on: October 10, 2024, 09:14h.
Last updated on: October 10, 2024, 09:14h.
Kentucky prohibited skill games and “gray machines” in 2023. A lawsuit is now seeking to recover triple the amount of money lost by Kentucky players under an old clawback law.
The lawsuit, filed by charity nonprofit Empathy in Action in the Franklin Circuit Court, refers to the state’s 226-year-old Loss Recovery Act (LRA) aimed at safeguarding the families of impoverished gamblers.
According to the law, a gambler has six months to sue for lost funds from illegal wagering. If no action is taken within six months, any other Kentuckian can file a claim to recover up to three times the lost funds, dating back five years.
Successful Precedent with PokerStars
It’s not as far-fetched as it may seem. In 2011, Kentucky sued online poker giant PokerStars for offering unlicensed online poker in the US due to the absence of available licensing.
The state sought $870 million under the LRA, tripling the $290 million claimed losses by Kentuckians on the site.
This raised controversy as Kentuckians did not directly lose this amount to PokerStars but to other players, with the site collecting a small rake. Nonetheless, in September 2021, PokerStars’ new owner, Flutter Entertainment, settled with Kentucky for $300 million.
If successful, Empathy in Action plans to donate any proceeds from the lawsuit to state programs combating gambling addiction and supporting small businesses and rural communities. The complaint names nine companies as defendants, including top manufacturers Pace-O-Matic, Prominent Technologies, and Skill State.
Gray Area
Gray machines, named for their previously uncertain legal status, resemble slot machines but involve a skill element, like memorizing patterns. Manufacturers argue this makes them legal as Kentucky laws provide an exemption for “games of skill.”
In 2023, the legislature broadened the state’s slot machine definition to cover games that are “partially or predominantly based on skill.”
The actual losses of Kentuckians playing gray machines in the past five years are hard to gauge due to lack of regulation in the industry. Vanessa Cantley, founder of Empathy in Action and the lead attorney in the case, stated to Kentucky Public Radio that she anticipates defendants will be required to disclose financial details during the recovery process.
“We anticipate it to be many millions of dollars. Otherwise, they wouldn’t be so prevalent across the state,” she noted.