A nonprofit organization has filed a lawsuit against companies associated with cash payout games that have become increasingly common in Kentucky stores in recent years.
The lawsuit relies on a 1798 law that allows third parties to recover money lost in illegal gambling. This law helped Kentucky win a $300 million judgment against an online poker company 13 years ago.
The lawsuit seeks to use the same legal principle against companies dealing with "gray machines," which resemble casinoslots and have appeared in gas stations and retail locations across Kentucky in recent years.
"Gray machines" often refer to gaming or gambling machines that operate in a legal gray area, meaning they aren't clearly classified as legal or illegal under certain laws.
Despite New Law Gray Machines Still a Problem
The growth of these types of machines over recent years pushed the state legislature to act.
In 2023, lawmakers passed House Bill 594 to ban these games and clarify the rules around gray machines.
This law changes the definition of a “gambling device” and affects the legality of certain gaming machines, forcing industry players to adjust their products in the state. But, over a year later, Kentucky still doesn’t have clear guidance on this issue.
Kentucky Attorney General Russell Coleman recently told state law enforcement officials that gray machines and those touted as “risk-free play” devices are illegal under the new law. He emphasized that the ban is now fully in effect and encouraged officials to take enforcement actions, with support from his office.
New Civil Lawsuit Seeks Damages
The new civil lawsuit against Kentucky gray machine industry was filed by the charity nonprofit "Empathy in Action." Vanessa Cantley, who leads the lawsuit, established this nonprofit in 2017 to fight injustices in The Bluegrass State.
The state’s 226-year-old Loss Recovery Act allows a person to file a lawsuit within six months to recover money lost from illegal gambling. After this period, any other Kentuckian can also file a lawsuit to recover up to three times the amount lost from illegal gambling within the last five years.
Back in 2011, former Governor Steve Beshear's administration used this law to sue PokerStars, an illegal online gambling company, to reclaim funds Kentuckians had spent over the past five years. The Kentucky Supreme Court decided in a 4-3 ruling in favor of the state, resulting in a $300 million settlement in 2021.
Millions in Gambling Losses Could be Recovered
Cantley told Kentucky Public Radio that her lawsuit is similar to the PokerStars case. She mentioned that it's difficult to determine exactly how much people in Kentucky have spent on illegal gray machines over the past five years. That's because these machines are mostly unregulated and operate with cash.
“Our hope is that in the discovery process in the lawsuit, they'll (gray machine companies) be compelled to turn over the information that'll give you the answer to that question,” Cantley said. “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.”
The case against the gray machine industry might affect the gaming sector across the country. States dealing with the increase in skill-based gambling devices might use Kentucky's legal approach as an example to control what they consider predatory gambling practices.
