In a whirlwind turn of events, Tennessee sportsbook Action 24/7 had its license reinstated after a Nashville judge granted an injunction.
Users can now wager, deposit, and withdraw from the operator’s sportsbook.
The injunction comes after the judge found the regulators acted “erroneously” in the chain of events leading to the book’s suspension.
The actions leading up to Action’s court case
During an emergency meeting last Friday, the Tennessee Education Lottery (TEL) raised issues of money laundering, proxy betting, and credit card fraud on the site.
After discussion and testimony from TEL Investigator Danny DiRienzo, members ratified the decision to suspend Action 24/7’s license.
TEL chair Susan Lanigan originally suspended the operator’s license on Thursday, March 18 – one day before the TEL Board took an official vote on the issue.
This is where Action 24/7 found leverage for its case in court.
The Board ultimately upheld and approved Lanigan’s decision. However, it didn’t follow the appropriate chain of events.
According to the state’s rules, the Board has grounds to issue a suspension after members vote on the issue.
The hasty action of Lanigan is all Action 24/7 needed to be granted the injunction.
TEL gets caught not playing by the rules
When it comes to sports betting, regulations are important on both sides of the coin. Proceedings might have taken a different turn had the TEL followed the appropriate measures to suspend the operator:
“There is no provision in the Rules, however, for the TEL Board to convene an emergency meeting to “ratify” the temporary suspension decision of the Committee’s designee, making it a final decision, without conducting a hearing or, at a minimum, allowing the licensee to address the TEL Board, upon request. … Based on the limited record, the Court preliminarily finds there is a likelihood of success on the merits that the TEL Board’s actions were clearly erroneous when it did not follow the steps set forth in its own Rules and “ratified” the temporary suspension decision of the TEL Board Chair, but without providing Action 24/7 an opportunity to be heard.”
Action 24/7 asked to be heard during the TEL’s emergency meeting on March 19 when its suspension was voted on.
However, the Board stated that commentary is not allowed from outsiders during meetings unless it is to ask a question.
Action argued it was denied due process during the chain of events, and the judge seemed to agree.
The TEL is learning the hard way that sometimes it pays to slow down.
Judge rules in Action 24/7’s favor
Davison County Chancery Court judge Patricia Head Moskal concluded that Action 24/7 would face “irreparable harm” from suspension, thus temporarily reinstating its license.
The Order On Temporary Injunction states:
“The loss of business, customers, good will, and reputational damage can constitute irreparable harm that cannot adequately be compensated with money damages. … The Court concludes at this early temporary injunction stage of the proceedings that Action 24/7 has clearly shown it will suffer irreparable losses of its customers, good will, and reputation by having its license suspended indefinitely and all wagering operations stopped.”
Action 24/7’s official reinstatement is contingent on the outcome of its current regulatory violations.
The injunction does not absolve Action 24/7 of the potential money laundering and proxy betting that happened on the site.
It does, however, allow the book to operate in the meantime while these issues are worked out with the TEL.
A final reinstatement decision will be made once the operator and the TEL address the situation in a scheduled hearing.
Reasons for Action 24/7 license suspension
Action 24/7 uncovered a series of 23 suspected fraud and money laundering instances on its site in early March.
One week later, the operator revealed the findings to the TEL.
DiRienzo says the issues should have been quickly reported. Since they were not, he feels the operator does not have adequate internal controls in place for such monitoring.
The operator admitted to not providing round-the-clock monitoring of its platform at the time of the events. Therefore, Action’s team did not catch the issues until the morning after they happened.
The operator ultimately self-reported its findings to the TEL on March 17.
Regulators argued issues should have been reported immediately.
Action chalks it up to a fraud prevention learning curve
The TEL was originally notified about the instance when Action 24/7 sent a .zip file of the accounts in question. The email inquired about whether the Tennessee Bureau of Investigations should be involved.
At Tuesday’s hearing, Action 24/7 counsel Steele Clayton explained the operator’s delay in alerting the TEL of the issue:
“Really two reasons: One, you have to compile the reports, which we were doing. Two, to be honest your honor, it’s something we will definitely do going forward but when you look at the [regulations], respectively, it seems to contemplate reporting, to us, wagering activity, which we take to mean things like fixing a game, improper betting lines, changing betting lines. Things you would think of as wagering.
“Whereas we view this as debit card fraud that you would go to the [Tennessee Bureau of Investigations] with. And again that’s why we went to the investigator once we got the incident reports compiled to give these to him and say ‘We want to go to the TBI, is that something we would do or do you want to do that?’
But according to TEL representative Lindsay Sisco, there should have been no question as to the proper steps.
More fraudulent activity involving proxy betting
Action 24/7 is also under investigation regarding someone under contract with the book facilitating 45 proxy betting accounts.
Back in February, the TEL revealed that two operators suspended 74 user accounts due to fraudulent Super Bowl betting.
Now, DiRienzo reveals that one of the involved sportsbooks was Action 24/7.
Since that investigation is still ongoing, the TEL has not fined the operator.
When asked about the TEL’s willingness to work with Action 24/7 going forward, TEL Communications Director Dave Smith said:
“We will continue to work with Action 24/7 to implement appropriate minimum internal control standards that protect the public interest and minimize risk to the integrity of sports gaming in Tennessee.”
It should be noted, the decision to reinstate Action 24/7’s license was made due to an error the TEL made when carrying out the suspension. This injunction is by no means a reflection on the operator’s culpability in the matter.
Although this ruling may get the sportsbook back on the dancefloor, they’re not out of the woods just yet. The operator is still under investigation for multiple issues involving money laundering, proxy betting, and credit card fraud.
You can view the court documents here.
