In 2023, Kentucky enacted a ban on skill games, also known as “gray machines,” setting the stage for a significant legal battle. A recently filed lawsuit aims to recover three times the amount of money lost by Kentucky players through an old clawback law.
A Kentucky law dating back 226 years, the Loss Recovery Act (LRA), could make gray machine manufacturers and operators liable for hefty payouts. The lawsuit, initiated by the charity nonprofit Empathy in Action, was filed in Franklin Circuit Court last week. The LRA was originally designed to safeguard the families of gamblers who had lost everything. It stipulates that gamblers have six months to sue to recover their losses from illegal wagering. If they fail to act within this period, any Kentucky resident is entitled to file a claim to recover up to three times the amount lost, with a look-back period of five years.
This legal maneuver has precedent. In a notable case against PokerStars in 2011, Kentucky utilized the LRA to claim $870 million, three times the amount it alleged Kentuckians lost on the poker website. Despite the controversy—since the players lost money to each other, not PokerStars directly—the state’s aggressive approach paid off. In September 2021, PokerStars’ new owner, Flutter Entertainment, settled with Kentucky for $300 million.
The current lawsuit by Empathy in Action names nine defendants, including well-known manufacturers like Pace-O-Matic, Prominent Technologies, and Skill State. If the suit succeeds, the charity plans to donate any proceeds to state programs that combat gambling addiction, as well as supporting small businesses and rural communities.
Gray machines fall into a murky legal area, resembling slot machines but incorporating elements of skill to argue for their legality under Kentucky’s gambling laws, which allow for “games of skill.” However, in 2023, the state legislature clarified its stance by expanding the definition of a slot machine to cover games that are “partially or predominantly based on skill.”
The scale of losses from gray machines over the past five years is difficult to quantify due to the industry’s lack of regulation. Vanessa Cantley, founder of Empathy in Action and the lead attorney for the lawsuit, expressed hope that the defendants would be required to disclose their financial records during the recovery process.
“We certainly expect it to be many millions of dollars. Otherwise, they wouldn’t be so prevalent, they wouldn’t be all over the state,” Cantley told Kentucky Public Radio.
As Kentucky navigates this complex legal terrain, the outcome of this lawsuit could have far-reaching implications for the future of skill games and gray machines in the state.