A Nashville judge granted an injunction to Action 24/7 to reinstate its TN sports betting license pending the outcome of its regulatory issues with the Tennessee Education Lottery (TEL.)
The board ratified and upheld that suspension in a special meeting March 19.
Action CEO Tina Hodges celebrated on Twitter after the announcement:
“We will continue to work with Action 247 to implement appropriate minimum internal control standards that protect the public interest and minimize risk to the integrity of sports gaming in Tennessee,” TEL said in a statement.
Action 24/7 would face ‘suffer immediate and irreparable harm’
The Davison County Chancery Court ruled Action 24/7 would face irreparable harm from its indefinite suspension:
“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 and irreparable losses of its customers, good will, and reputation by having its license suspended indefinitely and all wagering operations stopped.”
The balance of relative harm was even between Action’s monetary losses and the TEL’s responsibility to protect public safety, the Court found.
TEL didn’t follow procedures
It appears the ruling would have gone differently had TEL followed the correct procedures:
“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 asked to be heard at the March 19 meeting when the Board decided to continue its indefinite suspension, but the Board did not bring Action on to testify.
Background on Action 24/7 suspension
The trouble started for Action 24/7 more than two weeks ago when 23 instances of suspected fraud and money laundering began the evening of March 8, the sportsbook’s counsel Steele Clayton said at Tuesday‘s hearing.
The majority of the incidents ran through March 12 with the final attempt March 16. According to TEL sports betting investigator Danny DiRienzo, the initial cases he reviewed should have been flagged for review quickly based on deposit attempts from multiple cards or withdrawals with limited betting activity.
Action 24/7 couldn’t do that, though. The company wasn’t live monitoring activity on its platform meaning these instances weren’t found until employees got to the office in the morning. It wasn’t until after the 23rd and final reported instance on March 16, more than a week after the first issues were found, that Action 24/7 CEO Tina Hodges decided the monitoring should be 24/7 as well.
On March 17, Action 24/7 self-reported the incidents to the TEL – though that wasn’t its immediate intention.
Action ‘didn’t know’ it had to report suspected fraud
A .zip file of the incidents was sent to DiRienzo on the 17th but wasn’t opened until the next day when he returned to the office. The information was sent to find out whether Action should take the information to the Tennessee Bureau of Investigations or if that was the TEL’s job, Clayton said when asked about the delay in notifying the regulator:
“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?’
Lindsay Sisco of the Tennessee Attorney General‘s office said there should have been no confusion over what should be reported. In her opinion of the evidence it seems that Action 24/7 didn’t want to admit there was another issue, she told the court.
Action 24/7 contractor involved in proxy betting
DiRienzo shared one of those operators was Action. An employee contracted by the company reportedly set up 45 accounts for the purposes of proxy betting, DiRienzo said.
Clayton mentioned the sportsbook hadn’t been fined for that issue. That’s because the investigation isn’t finished, TEL explained Thursday:
“It was immediately turned over to law enforcement, and any action on our part is pending the outcome of that investigation.”