As you might have heard, “March Madness” has taken on a slightly different meaning for Tennessee sportsbooks over recent days.
That’s because last Friday — just as the NCAA tournament‘s first-round games were tipping off — the Tennessee Education Lottery (TEL) suspended the sports betting license of Action 24/7, the lone Tennessee-based operator in the state.
The TEL made its decision after investigating alleged money laundering, credit card fraud, and proxy betting that had occurred on the site.
The action marks the first instance of regulators suspending a US online sportsbook license since the Supreme Court lifted the federal prohibition on states legalizing sports betting in 2018.
TEL investigator catalogs a variety of illegal activities
The TEL announced its decision at an emergency meeting of the Sports Wagering Committee on Friday afternoon.
At the meeting, TEL CEO Rebecca Hargrove explained how experts examining the situation believed Action 24/7 lacked internal controls and procedures needed to prevent further violations.
TEL investigator Danny DiRienzo also spoke, sharing with the committee a number of troubling incidents.
DiRienzo reported he had received an email from an Action 24/7 employee with a report of 23 separate incidents involving 23 different player accounts. After reviewing a sample of the reports, DiRienzo concluded money laundering, identity theft, and violations of the Wire Act had likely occurred.
DiRienzo described one account that a user opened with a $10 deposit. Immediately after making that initial deposit, the user attempted 184 more deposits. The user used seven different credit or debit cards when doing so, each with different names. According to DiRienzo, 124 of those deposits went through.
The sums involved totaled “tens of thousands of dollars,” according to DiRienzo. He said the user made multiple withdrawals while engaging in very little wagering. For DiRienzo, the evidence resembled what often happens in credit card fraud cases. He also opined that Action 24/7’s “internal controls… are not in place to prevent future criminal conduct” on the site.
According to DiRienzo, Action 24/7 became aware of the activity on March 9 but did not inform the TEL until March 17, the day before the emergency meeting was called. That delay in reporting also constitutes a violation of state regulations.
DiRienzo additionally provided evidence of proxy betting occurring. He showed how accounts were used to facilitate wagering on the site by out-of-state bettors. Even worse, DiRienzo provided evidence that one person facilitating such wagers was under contract with Action 24/7.
Suspension confirmed following committee discussion
The committee discussed the findings at length. Despite the severity of the revelations, the committee debated whether or not to force Action 24/7 to the sideline just as March Madness was to begin.
In fact, Action 24/7 first went offline Thursday evening, citing technical issues to the site’s Twitter followers. It became clear in retrospect, however, that service had been halted until the TEL could meet.
At the meeting, the TEL confirmed the suspension would continue. Action 24/7 will need to provide regulators independent verification that controls are in place to prevent such fraudulent activity going forward. The site may also be subject to an external review before it can begin accepting wagers again.
On Friday, Action 24/7 President and CEO Tina Hodges issued a statement criticizing the TEL’s action.
According to Hodges, the TEL acted according to “unfounded fears of future speculative recurrences of the activity.” Hodges decried the decision, accusing regulators of taking “draconian action just as the NCAA tournament is beginning.”
Action 24/7 files lawsuit against regulators
On Monday it became clear exactly how Action 24/7 would respond when the company filed a lawsuit against the TEL, its Board of Directors, and CEO Hargrove.
According to the lawsuit, Action 24/7 claims the TEL violated regulatory procedures when it suspended the sportsbook’s license. At issue is the fact that there was no vote among members of the TEL Board or Sports Wagering Committee regarding the case until after the suspension occurred.
Action 24/7 also alleges the TEL met and acted without allowing the company’s lawyers to speak regarding the accusations. In additional objecting on procedural grounds, Action 24/7 also questioned the accuracy of DiRienzo’s claims.
The suspension follows other issues among TN sportsbooks
While the suspension of Action 24/7 marked a milestone, it wasn’t the first instance of suspicious activity at Tennessee online sportsbooks since they first launched in November 2020.
At the TEL’s February meeting, members discussed the closure of 74 player accounts at two different TN sportsbooks due to “significant anomalies” surrounding Super Bowl betting. Members did not identify the two sportsbooks involved.
DiRienzo appeared at that meeting as well. He detailed violations involving a single bettor using multiple accounts. Some of the suspicious Super Bowl wagers were canceled, but others were not.
With Action 24/7 currently out of action, Tennessee currently has five online sportsbooks up and running:
- William Hill