State regulators on Friday suspended Tennessee Action 24/7 — a legal sports gambling outfit with ties to locally based payday lending company Advance Financial — just as the lucrative NCAA basketball tournament was getting underway.
An investigator for the Tennessee Education Lottery’s Sports Wagering Advisory Council told the regulatory body that he had found evidence of money laundering and fraud on the betting app.
The list of issues at the sportsbook was long, according to media reports. Erik Schelzig at the Tennessee Journal reported that the investigator found a potential money-laundering scheme in which a player would sign up for an account, then deposits would be made from multiple credit card numbers, then the balance on the account would be withdrawn abruptly with little gambling action.
According to PlayTenn.com, the investigator also found evidence that an Action 24/7 employee was helping out-of-state residents place bets, a violation of state law. The investigator, a former Secret Service agent, also alleged wire fraud, credit card fraud and identity theft on the app.
The company initially blamed a service outage on maintenance and technical issues. The board ordered the company’s service suspended indefinitely.
"This suspicious activity was detected quickly by Action staff, and Action swiftly suspended the involved player accounts," says Action co-founder Tina Hodges, who also runs Advance Financial along with her husband. "Action instituted additional controls to curb the activity, and no further such activity has occurred since. Yet, the Board relied upon unfounded fears of future speculative recurrences of the activity, and took draconian action just as the NCAA Tournament is beginning. Obviously, we are disappointed in the Board’s decision, but will continue to work with TEL staff and seek all other avenues of relief to have the suspension lifted quickly so that the people of Tennessee may continue to enjoy wagering on the Action 24/7 sportsbook."
Action 24/7 was founded by Advance Financial executives. Though Advance Financial representatives initially said the two businesses were not linked, the companies secured permission earlier this year to allow customers at the payday lender’s more than 100 Tennessee locations to deposit funds into their betting accounts.
A bipartisan bill currently under consideration by the Tennessee General Assembly would prohibit in-person deposits at the payday lender. Rep. Darren Jernigan (D-Nashville) told Legal Sports Report that he was concerned that the two companies were using Action 24/7 customers' winnings to pay down their debts at Advance Financial.
“This is the first time an online sportsbook operator has had its license suspended in the U.S., making it a sad milepost in the sports betting industry,” PlayUSA.com lead analyst Dustin Gouker said. “Tennessee’s sportsbooks are thriving, which makes news like this particularly unwelcome for anyone who has a stake in the success of regulated sports betting. If all these allegations are true, Tennessee regulators can’t let the status quo at Action 24/7 continue. We can only hope that this decision improves the future of sports betting in the state.”
Action 24/7 is the lone Tennessee-based sportsbook. Others, including FanDuel and DraftKings, are largely operated by major national companies.