The dubious distinction of the first US sportsbook license suspension officially goes to Action 24/7 in Tennessee.
Action 24/7 failed to prevent multiple instances of suspected credit card fraud and money laundering from multiple accounts, according to the Tennessee Education Lottery. The full board voted Friday to uphold and continue the temporary suspension of Action 24/7 handed down Thursday night by Chairwoman Susan Lanigan.
All board members voted for the suspension except for John Crosslin. He had to abstain because the company is a client of one of his business partners.
Action 24/7 can appeal
Action 24/7 already has its lawyers involved and could look to appeal the suspension of its TN sports betting license.
CEO Tina Hodges issued a statement following the meeting:
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.
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.
This comes after an issue before the Super Bowl where Action 24/7 had someone contracted with the company allow proxy betting from more than three dozen player accounts.
Action 24/7 is owned by the same people that own Advance Financial 24/7. The company offers payday and other high-interest loans in multiple US states, including Tennessee.
The suspension leaves five Tennessee sportsbooks available during March Madness.
Action 24/7 failings that led to suspension
Danny DiRienzo, the TEL’s sports gaming investigator, took 13 minutes to detail the various failings of Action 24/7.
DiRienzo received an email from an Action 24/7 employee Wednesday. He didn’t get a chance to open it until Thursday because it contained a .zip file he couldn’t open on his phone. Even though the incidents weren’t reported until March 17, the company knew about them March 9.
The folder contained 23 separate incident reports about 23 Action 24/7 player accounts. He hasn’t even taken a deep dive into everything yet because of how large the transaction volume is. DiRienzo noted it would take “quite a bit of time to analyze all the data.”
The very first account he looked at showed a player that started off with a small deposit using his own information that matched the account information. Then, Action 24/7’s lack of internal controls started to show:
“That was almost immediately followed by 184 attempted deposits from seven different credit cards bearing seven different names,” DiRienzo said. “One hundred and twenty-four of those transactions, those deposits, were successful. We’re talking tens of thousands of dollars. There was very minimal gameplay, meaning betting. And then multiple withdrawals out to an account bearing the player’s name.”
Action 24/7 allowed ‘serious, serious criminal activity’
Each account had similar patterns, DiRienzo said, and called this clearly cases of credit card fraud, money laundering, wire fraud, aggravated identity theft.
“It is serious, serious criminal activity,” DiRienzo said. “Probably in the tens, if not hundreds of thousands of dollars worth of damages done. With multiple real individual and business victims.”
DiRienzo explained that the minimal internal control standards required for sportsbooks are designed to make sure operators, suppliers and vendors are doing everything they can to stop illegal activity from occurring.
“If the minimal internal control standard had been met or implemented by Action 24/7, if they had implemented the internal controls that they represented to the TEL that they had in place prior to launch, this very activity would have been stopped very early on,” DiRienzo said. “And we would have many less victims and far less of a dollar amount in losses.”
The very first withdrawal from an account with minimal gameplay would trigger a fraud alert with those minimum standards in place, he continued.
Also allowed proxy betting before Super Bowl
DiRienzo also noted this wasn’t the first case of “very serious criminal conduct occurring on Action 24/7’s platform within the past two months.”
That issue involved a contracted employee of Action 24/7 opening 45 player accounts, 40 or 41 of which were for out-of-state residents, and placing hundreds of bets before the Super Bowl.
DiRienzo personally offered to help the company at that point with any issues they might have. One employee mentioned they had concerns about information they could get from vendors. DiRienzo cautioned them to take care of their own issues first.
Action 24/7 down for ‘maintenance’ Thursday evening
Action 24/7’s problems publicly began Thursday around 6:30 p.m. Eastern, shortly after the March Madness First Four officially began.
The company’s Twitter page blamed the outage on maintenance:
The company didn’t use maintenance Friday morning, instead opting to blame an “issue”:
Company accused of keeping winnings to pay off loans
Rep. Tim Jernigan began looking into the company when he learned the Tennessee Education Lottery approved the loan shops to act as a cash deposit point for sportsbook accounts. He then found someone prepared to testify that their winnings were kept to pay back debts.
“Some people might say [paying down the debt] is a good thing too, I don’t know,” Jernigan told LSR last month. “But what it encourages is for folks to go in and place a bet to try to knock their loan off.”
The application to take cash deposits was technically for a third company, Advance Financial Money Transmission Company. The request received begrudging approval by the Lottery. It didn’t go against the enabling legislation though some of those voting noted the request “feels a little funny” and “gives some pause.”
Jernigan and Sen. Richard Briggs filed identical legislation that would make it illegal for people to bet and have a loan through the same operation. HB 824 and SB 1029 get their first committee hearings next week.
Will Action 24/7 suspension impact TN betting market?
Action 24/7’s suspension probably won’t be felt by many if market estimates are to be believed.
The company angled itself as a local sportsbook ready to take on the big guys. That doesn’t seem to be what happened.
Channel checks and estimates from Eilers & Krejcik Gaming suggested the sportsbook had just 3% market share over the first three months: