by Luke Pluta-Ehlers*

For the bulk of American history, most forms of gambling have been illegal or heavily regulated. To further deter unlawful gambling, 30 states have passed Loss Recovery Acts (“LRAs”), which allow the loser of an illegal gambling transaction to sue the winner. Some states’ LRAs go further, allowing a third party to sue for doubled or tripled damages if the loser does not bring suit. One such state is Kentucky. In 2020, the Kentucky Supreme Court decided Commonwealth ex rel. Brown v. Stars Interactive Holdings, ruling that the state of Kentucky qualified as “any other person” and could thus sue for treble damages under the state’s LRA. The court reasoned that because the state has exclusive domain over prosecuting criminal cases, the state should not be presumed excluded from the group of persons with standing to sue under the LRA. This Contribution argues that the appellate court decision overturned by the Kentucky Supreme Court better handled the novel question of whether a state can sue under an LRA. The appellate court’s approach was more in line with the cautious manner in which other courts have interpreted who can sue and be sued under penal qui tam gambling statutes. Further, this Contribution argues that permitting a state to sue under an LRA is a troubling grant of authority, as it allows the state to delegate and pursue enforcement of its criminal laws under the more generous standard of a civil lawsuit. This Contribution briefly discusses the history of LRAs, compares the holdings of the Kentucky appellate court and Supreme Court, and explains why the appellate court better examined the state’s role in law enforcement via a penal LRA.

While legal gambling has accelerated in recent years, for most of American history, states have taken measures to curtail gambling.1 One method states have used to discourage illegal gambling is Loss Recovery Acts (“LRAs”). LRAs are qui tam laws—a type of law where one party’s claim is assigned to another party who may sue on its behalf—whereby a state creates a right of action for people who have lost money illegally gambling.2 Under an LRA, the loser of a gambling transaction can sue the winner to recover the amount lost.3 Often, if the loser does not bring suit, a designated third party can sue for the winnings instead.4

American LRAs have their roots in British law. Under the 1710 Statute of Anne, an individual who lost more than ten pounds through gambling could sue the winner to recover that amount lost.5 If they failed to do so within three months, any other person could bring the suit on their behalf, with the damages split between the plaintiff and the local parish.6 Many American states adopted similar laws, which remain in effect in 30 states.7 Like the original Statute of Anne, some states’ LRAs include multiple damages when brought by a third party.8 Five states’ LRAs allow for treble damages9 when another person brings the suit, while one state allows for double,10 and one quadruple.11 LRAs are justified on the idea that they allow individuals and families adversely affected by gambling to avoid financial ruin.12 With third-party recovery, the threat of multiple damages obliterating any winnings can also serve to deter illegal gambling.

One state allowing third-party recovery for treble damages is Kentucky. Under Ky. Rev. Stat. §§ 372.020–372.040, anyone who, within a 24-hour window, loses five or more dollars through illegal gambling may sue the winner for the amount lost.13 If they fail to do so within six months, “any other person” may sue for treble the value of the loss.14 The statute came to attention in 2010 when Kentucky authorities completed a years-long investigation into poker website PokerStars, concluding that Kentuckians had lost roughly $290 million in rakes—fees paid to a host of a game—to PokerStars through illegal games.15 Claiming that the state of Kentucky qualifies as “any other person,” Kentucky state officials sued PokerStars for roughly $871 million, three times the value of those losses.16 The lawsuit was the first time since 1949 that a party with no personal relationship to the loser had initiated an action under the LRA.17

Kentucky’s lawsuit culminated in Commonwealth ex rel. Brown v. Stars Interactive Holdings, one of the most significant LRA cases in recent history. The primary question of this case was whether the state of Kentucky, as a body politic, qualified as “any other person” under the LRA and could thus sue for the gambling losses of its citizens.18 By a vote of 4-3, the Kentucky Supreme Court held that the state qualified as “any other person” and could sue under the LRA.19

The Kentucky Supreme Court provided two significant bases for its decision. First, as a baseline, it emphasized that a separate Kentucky statute, Ky. Rev. Stat. § 446.010(33), states that the term “person” may extend to bodies politic unless context requires otherwise.20 With that established, it declared that the state has the right to “[s]ue under Civil Laws to Protect its Citizens.”21 The court rejected the “ignoble assumption” that the state was driven by the “motive of profit” in bringing a suit for treble damages.22 Rather, it reasoned that just as the state can use civil lawsuits to enjoin nuisances when criminal laws are inadequate, the state here can seek to protect its citizens from illegal gambling by recovering their gambling losses.23 The court emphasized the necessity of a civil action in this context because “[s]ome criminal entities are so strong, organized, and insidious that they are almost impossible to deal with using traditional police tools and methods.”24

Second, the court found that the state has “standing as an extension of its power to prosecute criminal cases.”25 It further noted that “the Executive Branch of the Commonwealth of Kentucky has exclusive jurisdiction to enforce the criminal laws of the state.”26 In enacting an LRA, the state had expanded the reach of its criminal laws against gambling by “deputizing any person . . . to help with the enforcement of the criminal illegal gambling statutes by authorizing the filing of civil lawsuits to render the illegal gambling unprofitable.”27 The court reasoned that because the state has exclusive domain over the enforcement of criminal law, it would be illogical to presume it was excluded from the class of persons deputized to enforce that criminal law through these civil lawsuits.28

Before reaching the Kentucky Supreme Court, the Kentucky Court of Appeals had done its own thorough analysis of whether the state qualified as “any other person” under the LRA, and came to the opposite conclusion.29 It focused on the purpose of the LRA, finding that it serves the dual goals of deterring gambling and restoring to an individual something of which they were deprived.30 The appellate court further noted that while the gambler himself may be a loser, his dependents suffer the consequences of those losses as well. Thus, the LRA’s third-party recovery provision created a method by which the affected family could sue when the loser themself was unwilling or unable to.31 While the court acknowledged that allowing the state to sue would advance the policy goal of deterring illegal gambling, it found that doing so also deprived the affected family of a remedy, thus contravening the purpose of the statute.32

The appellate court also explored the treble damages provision, finding that it served to incentivize lawsuits from third parties who would otherwise not be bothered to sue under the LRA.33 Such measures were important because, at the time of the law’s passage, “the absence of an organized police authority to enforce criminal statutes made necessary the use of such rewards for informers.”34 Examining the history of the LRA, the court noted that the purpose of the treble damages provision was to “incentivize private individuals to undergo the burdens associated with enforcing the LRA.”35 It found such an incentive to be unnecessary for the state, which is already obligated to enforce its laws.36 Significantly, the court noted that treble damages are a penal provision.37 It observed that the state derives nothing from punitive damages but “the hope that it will deter a violation of one of its criminal laws.”38

Finally, the appellate court considered the history of Kentucky’s gambling laws to find that the state does not qualify as “any other person.” It found that, as with the original Statute of Anne, Kentucky’s LRA had once provided that half of any third-party recovery went to the state, thus creating a presumption that the state cannot be the one to initiate third-party recovery, and that subsequent history did not overcome the presumption.39 Finally, it found that the state already has its own mechanism of deterring illegal gambling through the criminal code.40 Kentucky law allows the state to retain any money obtained from a violation of the code prohibiting gambling following a conviction.41 This mechanism further suggested that the LRA was meant to be a tool of private citizens, not of the state.

Considering the reasonings of the two courts and the history of LRAs, the appellate court’s decision more fairly assessed the role of the state in LRA enforcement. In contrast, the Kentucky Supreme Court’s decision was ill-advised for two primary reasons. First, it is inconsistent with how courts in other states have interpreted similarly worded LRAs. Second, its logic is out of line with the history of LRAs and expands LRAs beyond their traditional reach.

The Kentucky Supreme Court’s interpretation is inconsistent with other state courts’ interpretations of similarly worded LRAs. The specific question in Stars Interactive—whether a body politic has standing to sue under an LRA—was novel to Kentucky courts, and therefore came with little in-state caselaw to guide their interpretations. As the appellate court noted, neither the state of Kentucky nor any other state with an LRA had ever sued as a third party under its LRA; nor had the Kentucky LRA been invoked by a third party without a personal relationship to the transaction since 1949.42 However, other states have more recently analyzed their own LRAs, providing a guideline Kentucky courts could have used when interpreting Kentucky’s LRA.

An emblematic case of this approach is Humphrey v. Viacom.43 Here, the district court of New Jersey had to decide whether money a host site received from users of pay-to-play fantasy sports constituted gambling winnings under the New Jersey LRA.44 To answer this question, the court surveyed the LRAs of eight states—including Kentucky—that allowed a third party to recover a person’s gambling losses.45 Analyzing historical decisions from these states, it found that each state’s LRA was penal or quasi-penal.46 It also looked at the status of qui tam laws as a historical exception to the common law, which did not allow such third-party actions.47 Finding that both factors favored a narrow interpretation of liability, the court held that the hosts of fantasy sports sites could not be considered winners under the state’s LRA.48 The court confined liability to parties clearly enumerated in the statute.

Illinois courts have taken a similar approach to new cases brought under its LRA. Illinois’s LRA reads almost identical to that of Kentucky. It allows someone who loses fifty dollars or more in a gambling transaction to sue the winner to recover that money within six months.49 If the loser does not file suit within six months, “any person may initiate a civil action against the winner” for treble damages.50 When dealing with new questions about liability, Illinois courts have consistently held that liability under the LRA must be narrow.51 In Anderson v. Naperville Rotary Charities Inc., for example, the appellate court decided whether a charity operating a raffle was a winner under the LRA.52 It found that LRAs authorizing suit by a third party are penal and thus “strictly construed, ‘to the end that penalties shall not be inflicted except in cases clearly intended to be included in such statutes.’”53 Applying this approach, the court found that the defendant was not a winner and thus could not be liable under the LRA.54

Following the approaches of the New Jersey district court and Illinois appellate court produces a result far more in line with that reached by the Kentucky appellate court. Principally, the appellate court recognized that the LRA is penal and interpreted it narrowly. It analyzed the history of the Kentucky LRA and the Statute of Anne to find evidence that the LRA had traditionally been understood not to grant standing to the state.55 Understanding these factors to create a presumption against standing, the appellate court declined to read in an expansion of liability beyond the history of the Kentucky LRA and the Statute of Anne that was not clearly warranted by the text.56 In contrast, the Kentucky Supreme Court sought reasons to expand the reach of the LRA. It relied on a statute permitting courts to find “person” to apply to bodies politic57 and on a general sense of exigency58 to expand standing to the widest reach of any state, despite history and caselaw advising otherwise.59 Only the appellate court heeded Humphrey’s admonition that it should tread lightly in conferring liability under qui tam laws.60

The Kentucky Supreme Court’s decision is misguided for a second important reason: it dramatically expands liability under the LRA by circumventing both the purpose and structure of qui tam laws. The Kentucky Supreme Court effectively flipped the typical qui tam structure. Historically, qui tam laws have allowed a state to deputize its citizenry to assist with the enforcement of its laws.61 In contrast, Stars Interactive II holds that along with the citizenry, the state can deputize itself to enforce its own laws.

This interpretation is a troubling self-grant of authority. Stars Interactive II noted that the LRA extends enforcement of the state’s criminal prohibition on gambling to the citizenry.62 It then held that the state, as the entity responsible for enforcing criminal law, may sue under that delegation.63 The Kentucky Supreme Court considered such a power to be particularly necessary in a case that deals with such an elusive adversary.64 But by permitting the state to sue under the LRA, it effectively held that the state of Kentucky can deputize itself to enforce criminal law under civil standards when it is too difficult to do so under criminal standards. As a result, the state can use its criminal investigatory tools in civil lawsuits, for injuries sustained by private parties, with the proceeds of such lawsuits going exclusively to the state.65

Such a grant of authority contravenes the historical understanding of qui tam laws. Qui tam laws exist “in derogation of the common law,”66 “born in a vanished era where the absence of an organized police authority to enforce criminal statutes made necessary the use of such rewards for informers.”67 This history prompted the Humphrey court to “decline any construction which would extend and enlarge the thrust and scope of the legislation in question.”68 As the Kentucky appellate court found, there is no record of any other state filing suit under their LRA.69 That finding, paired with the hazard of a state delegating its criminal enforcement power to itself under a civil standard, cautions against the expansive view adopted by the Kentucky Supreme Court.

Unlike the Kentucky Supreme Court, the appellate court considered the state’s authority to carry out criminal enforcement as a reason to be skeptical of giving the state the ability to sue as “any other person” under the LRA. First, it noted that with penal statutes, the state should be motivated only by its desire to promote law-abiding behavior, not by any monetary incentive.70 The appellate court also noted that the Kentucky code already permits the state to recover gambling losses following a conviction of the criminal prohibition of gambling.71 This holding reflects what the state’s duty to enforce criminal law entails: while the state enjoys exclusive domain over criminal law enforcement, it also bears the obligation to meet the higher standard of proof to secure convictions. It follows from that view that if the state delegates some of that power to the citizenry under the standard of a civil lawsuit, the state would remain obligated to enforce the criminal law through the mechanisms provided to it by the state’s criminal code. In this decision, the appellate court respected the limitations that have historically accompanied qui tam laws. With no legislative command to find otherwise, it declined to break new ground in qui tam standing.

Stars Interactive presented the Kentucky courts with a novel question of state standing under an LRA. While these courts had little specific guidance from sister states on how to address the question of state standing to sue under an LRA, they had ample guidance on how to approach a novel application of a penal LRA. Considering the unique history of LRAs in general and the Kentucky LRA in particular, the appellate court’s holding better reflected the cautious approach championed by other courts.

* Luke Pluta-Ehlers is a J.D. Candidate (2025) at New York University School of Law. This piece is a commentary on the 2024 problem at the Schreck Gaming Law Moot Court Competition, hosted by the William S. Boyd School of Law at the University of Nevada, Las Vegas. This Contribution distills one side of the argument, and the views expressed herein do not necessarily represent the author’s views.

1. Joseph Kelly, Caught in the Intersection Between Public Policy and Practicality: A Survey of the Legal Treatment of Gambling-Related Obligations in the United States, 5 Chapman L.J. 87, 90 (2002).

2. Humphrey v. Viacom, No. 06-2768 (DMC), 2007 U.S. Dist. LEXIS 44679, at *6–8 (D.N.J. June 19, 2007) (describing the origin of qui tam laws and explaining how New Jersey’s LRA creates a right of action for people impacted by gambling).

3. Kelly, supra note 1, at 93.

4. Id.

5. An Act for the Better Preventing of Excessive and Deceitful Gaming, 1710, 9 Ann. c. 14, § 2 (Eng.) [hereinafter Statute of Anne].

6. Kelly, supra note 1, at 88.

7. Chuck Humphrey, State Laws on Ability to Recover Gambling Losses, Gambling-Law-US.com, (September 3, 2024), http://www.gambling-law-us.com/Articles-Notes/loss-recovery.

8. Compare Statute of Anne (allowing a person “to sue for and recover the same, and treble the Value [of the loss], with Costs of Suit, against such Winner or Winners as aforesaid”), with 720 Ill. Comp. Stat. 5/28-8(b) (2013) (allowing “any person” to recover “judgment of triple the amount” lost), and Mass. Gen. Laws ch. 137, § 1 (2022) (allowing “any other person [to] sue for and recover in tort treble the value [lost]”).

9. D.C. Code § 16-1702. (1981); 720 Ill. Comp. Stat. 5/28-8; Ky. Rev. Stat. § 372.040 (1958); Mass. Gen. Laws ch. 137, § 1.

10. Or. Rev. Stat. § 30.740 (1997).

11. See S.C. Code Ann. § 32-1-20 (1991) (allowing the plaintiff to “recover the same and treble the value thereof”) (emphasis added).

12. See e.g., Berkebile v. Outen, 426 S.E.2d 760, 763 (S.C. 1993) (“The legislature adopted a policy to protect a citizen and his family from the gambler’s uncontrollable impulses.”).

13. Ky. Rev. Stat. § 372.020 (1956).

14. Id. § 372.040.

15. Commonwealth ex rel. Brown v. Stars Interactive Holdings (IOM), 617 S.W.3d 792, 797 (Ky. 2020) [hereinafter Stars Interactive II].

16. Id.

17. Stars Interactive Holdings (IOM) Ltd. v. Commonwealth ex rel. Tilley, NO. 2016-CA-000221-MR, 2018 Ky. App. Unpub. LEXIS 980, at *25 (Ky. Ct. App. Dec. 21, 2018), rev’d by Stars Interactive II, 617 S.W.3d 792 [hereinafter Stars Interactive I].

18. Stars Interactive II, 617 S.W.3d at 798.

19. Id.

20. Id. See also KRS § 446.010(33) (“As used in the statute laws of this state, unless the context requires otherwise . . . ‘Person’ may extend and be applied to bodies-politic and corporate, societies, communities, the public generally, individuals, partnerships, joint stock companies, and limited liability companies.”).

21. Stars Interactive II, 617 S.W.3d at 802.

22. Id.

23. See id. at 803.

24. Id.

25. Id. at 801.

26. Id.

27. Id.

28. Id.

29. See generally Stars Interactive I, 2018 Ky. App. Unpub. LEXIS 980.

30. Id. at *21.

31. Id. at *23–24.

32. Id. at *26.

33. Id. at *22–23.

34. Id. at *23 (quoting Salamon v. Taft Broad. Co., 475 N.E.2d 1292, 1298 (Ohio Ct. App. 1984)).

35. Id. at *28.

36. Id.

37. Id. at *23.

38. Id. (quoting Salonen v. Farley, 82 F. Supp. 25, 27 (E.D. Ky. 1949)).

39. Id. at *27–28.

40. Id. at *29.

41. Id.

42. Id. at *25.

43. No. 06-2768 (DMC), 2007 U.S. Dist. LEXIS 44679 (D.N.J. June 19, 2007).

44. See id. at *5.

45. Id. at *9–10. The Humphrey court analyzed those eight LRAs because the plaintiff asserted claims under each of those statutes. See id.

46. Id.

47. Id. at *10–11.

48. Id. at *27–28.

49. 720 Ill. Comp. Stat. 5/28-8(a).

50. Id. 5/28-8(b).

51. See, e.g., Anderson v. Naperville Rotary Charities Inc., 2019 IL App (1st) 180312-U, at *P17 (Ill. App. Ct. 2019); Reuter v. MasterCard Int’l, Inc., 921 N.E.2d 1205, 1211 (Ill. Ct. App. 2010) (affirming lower court’s adoption of a narrow construction of “winner” despite public policy reasons to interpret an anti-gambling statute more broadly).

52. Anderson, 2019 IL App (1st) 180312-U, at *P17.

53. Id. at *P16

54. Id. at *P22.

55. Stars Interactive I, 2018 Ky. App. Unpub. LEXIS 980, at *23, *27–28.

56. Id. at *29.

57. Stars Interactive II, 617 S.W.3d at 799.

58. See id. at 803 (describing the difficulties states face in enforcing laws against online gambling platforms located abroad).

59. See generally Humphrey, 2007 U.S. Dist. LEXIS 44679, at *10–11 (describing narrow interpretations of LRAs in eight jurisdictions).

60. See Stars Interactive I, 2018 Ky. App. Unpub. LEXIS 980, at *33–34.

61. Humphrey, 2007 U.S. Dist. LEXIS 44679, at *8 (“The statutes were also intended to supplement states’ general anti-gaming provisions in an era when local governments’ own regulatory and enforcement powers were much less effective than they are today.”).

62. See Stars Interactive II, 617 S.W.3d at 801.

63. Id.

64. Id. at 803 (describing PokerStars as a “criminal entit[y]” that is “almost impossible to deal with using traditional police tools and methods”).

65. See id. at 801 (describing the history of Kentucky’s investigation into defendant).

66. Humphrey, 2007 U.S. Dist. LEXIS 44679, at *10.

67. Id. at *8 (quoting Salomon, 475 N.E.2d at 1298.).

68. Id. at *13 (quoting Salomon, 475 N.E.2d at 1298).

69. Stars Interactive I, 2018 Ky. App. Unpub. LEXIS 980 at *25.

70. See id. at *23 (quoting Salonen, 82 F. Supp. at 27).

71. Id. at *29.