Tennessee Lottery Temporarily Suspends Action 24/7’s Sportsbook License

Posted on March 19, 2021

Action 24/7 is, to use a sports betting term, off the board. The site went offline on Thursday evening.

The local sportsbook operator is officially offering no action, at least for now. On Friday, the Tennessee Lottery announced it was suspending the company’s sports betting license.

The decision came after a Tennessee Lottery internal investigator discovered evidence that suggests money laundering and proxy betting were happening on the site.

Even faced with a shocking amount of information that indicates Action 24/7 lacks the basic internal controls necessary to be compliant with regulations, the Lottery Board still took pause before voting to suspend the company. They do not want to deprive Action 24/7 of March Madness betting action. The group also wanted Action to be able to swiftly remedy problems and get back online quickly.

Action 24/7 will need to provide independent verification the necessary controls are in place before the suspension can be lifted. That may or may not include an external review of the company. It is also possible that Action 24/7 seeks an injunction for the sentence and a court could order Tennessee Lottery to allow the website back online.

After the vote, PlayTenn.com’s own lead analyst, Dustin Gouker, had the following to say about the proceedings:

“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. 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 Tennessee Action 24/7 continue. We can only hope that this decision improves the future of sports betting in the state.”

Action 24/7 CEO Tina Hodges did not have kind words for the Tennessee Lottery either, though she has a much different opinon on the issue:

“The Board today indefinitely suspended Action 24/7’s sports betting operator license for suspicious player deposit activity. This suspicious activity was detected quickly by Action staff and Action swiftly suspended the involved player accounts.  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,” she continued. “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.”

Lottery CEO Hargrove confirms license suspension

Tennessee Lottery CEO Rebecca Hargrove briefed the Sports Betting Committee on the situation, noting that internal experts believed Action 24/7 lacks the controls and procedures to not do financial harm to Tennessee sports bettors.

Tennesse Lottery inspector Danny DiRienzo elaborated on the incident, noting he received an email from an Action 24/7 employee. The email included a zip file containing 23 separate incident reports for 23 separate player accounts.

The sheer volume of the data provided means DiRienzo has yet to finish sifting through the material since receiving it on Wednesday. However, just a surface look at the data was enough for DiRienzo to confidently conclude criminal activity was happening.

The accounts DiRienzo reviewed began with a small deposit of $10 that matched the personal information, followed by hundreds of credit card transactions from seven credit cards that did not match the account details. DiRienzo was very clear about his conclusion:

“I only reviewed 3-4 accounts, but transaction volume is high for each account and patterns are similar. Clearly a case of credit fraud. Clearly a case of money laundering. Clearly a case of what could be charged under federal law as aggravated identity theft. Clearly a case of violating the Wire Act.”

Moreover, DiRienzo said it is a clear sign that Action 24/7 misrepresented the internal controls they have in place to the lottery. He emphasized that act by stating, “he did not believe for one second” that the proper controls were in place.

Finally, DiRienzo revealed that despite detecting these suspicious accounts on March 9, they did not forward that information to the Tennessee Lottery until March 17. This is a regulatory violation as well, as sites are supposed to immediately report suspicious activity to the lottery.

Action 24/7 allegedly employed a proxy to circumvent geolocation

DiRienzo also noted a separate incident in which there was substantial evidence that Action 24/7 accounts were being used as proxy accounts to facilitate out-of-state bets. The proxy betting involved 45 player accounts, 40 of which were registered to out-of-state residents. Essentially, someone in Tennessee would log on to these out-of-state accounts and place bets on behalf of the account holder to circumvent the geolocation technology.

If that were not shocking enough, DiRienzo informed the board that the person placing the proxy wagers confessed to both the betting and being on the payroll for Action 24/7. In other words, the sportsbook was bankrolling efforts to get bets placed from non-Tennessee residents.

Action 24/7 blamed outage on maintenance, technical issues

The sports betting app has been offline since Thursday night. Initially, Action 24/7 claimed it was a maintenance period:

Friday morning, the app Tweeted again, saying there were technical problems causing the outage:

Action 24/7 has faced previous issues, bad press

Since launching, Action 24/7 has faced scrutiny and some bad headlines. Some of the issues include:

  • A cease and desist letter from BetMGM for copyright infringement
  • Criticism of allowing customers to deposit at sister company Advance Financial, a payday loan center
  • An allegation that proceeds from sports betting wins were being put towards outstanding loan balances without customer consent
  • A Tennessee Lottery investigation over suspicious betting activity

This suspension marks the first time in the post-PASPA era that a US sportsbook has had its license suspended.

Photo by Phanuwatn | Dreamstime.com
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