Tennessee sports betting regulators indefinitely suspended local sportsbook Tennessee Action 24/7’s license Thursday after the company self-reported alleged incidents of credit card fraud, money laundering and illegal proxy betting on its platform.
The Tennessee Education Lottery’s Sports Advisory Council confirmed Action 24/7’s indefinite suspension during a special-called meeting Friday afternoon. The sportsbook will be offline until it can provide independently-verified proof that sufficient internal controls are in place to prevent future illegal activity.
The decision marks the first time an online sportsbook has been suspended in the United States.
Dustin Gouker, lead analyst for sports betting publication PlayUSA.com (the parent company of PlayTenn.com), said Friday this marks “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,” Gouker said in a statement. “If all these allegations are true, Tennessee regulators can’t let the status quo at Action 24/7 continue.”
Action 24/7’s website displayed a message that its services are “unavailable at the moment,” as of 4 p.m. Friday. A tweet from Action 24/7’s account Thursday states that the site is “temporarily down for maintenance.”
The suspension was first reported by SportsHandle.com, another sports betting industry publication.
“”The internal controls, in my opinion, based on the facts, are not in place right now to prevent future criminal activity from occurring on this website.””
Tennessee Lottery inspector Danny DiRienzo
Investigator reports ‘clear’ evidence of fraud, money laundering, proxy bets
Tennessee Lottery inspector Danny DiRienzo said he received an email from an Action 24/7 employee on Wednesday containing 23 incident reports for separate player accounts. After reviewing three to four accounts, DiRienzo said he had seen enough to identify between tens to hundreds of dollars funneled through the site in alleged criminal activity.
One account showed hundreds of credit card transactions from credit card numbers that did not match the information provided when the account was created.
Another 45 accounts showed evidence of alleged proxy betting. Tennessee statute requires bettors to be physically located in Tennessee to place a bet. Of the 45 accounts, 40 were registered to out-of-state residents. A person in Tennessee allegedly logged into those accounts on behalf of the out-of-state residents to place bets.
An individual who said they worked for Action 24/7 admitted to placing those bets, DiRienzo said Friday. The individual was not identified during the meeting.
Action 24/7 discovered these activities on March 9, regulators said, but reported the incidents to the regulatory agency a week later on March 17.
Action 24/7 President and CEO Tina Hodges issued a statement Friday afternoon after the board’s decision.
“The Board today indefinitely suspended Action 24/7’s sports betting operator license for suspicious player deposit activity,” Hodges wrote. “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.”
A spokesman for the Tennessee Education Lottery did not immediately respond to requests for additional information on the alleged violations.
According to DiRienzo, the evidence uncovered in his brief initial review of the incidents showed the accounts contained patterns that were “clearly a case of credit card fraud, clearly a case of money laundering, clearly a case of what could be charged under federal law as aggravated identity theft (and) clearly a case of violating the Wire Act.”
Regulators: Alleged illegal activity occurred on Action 24/7’s site before
Local sportsbook Action 24/7’s sports gambling license was “indefinitely” suspended Thursday, March 18 after reports of alleged illegal activity on its platform. (Photo: Action 24/7)
Hodges stated in a declaration submitted to the board that Action 24/7 has put additional internal controls in place following the incidents, but state lottery officials were hesitant to accept this statement as concrete proof of any substantial change.
“I don’t believe for a second that even the improvements that they’ve made since yesterday, which are a step in the right direction, that they will be able to stop criminal activity from happening tomorrow,” DiRienzo said.
The sportsbook’s platform will now limit the number of deposits made to any one account using a credit or debit card to two per hour.
“That is also a very basic internal control that should have been in place at launch, and it should extend further than that,” DiRienzo said. “It should not be limited to credit cards or debit cards, it should be across any funding platform.”
Regulators also indicated this is not the first incident of illegal activity on Action 24/7’s platform, though they did not specify the type or scale of previous incidents.
Lottery officials said they temporarily suspended the account Thursday while an investigation into the incidents proceeds in part “due to the events that have now occurred twice.”
During Friday’s meeting, officials said the timing of the incidents “could not be worse.” Action 24/7’s license was suspended the day before the start of the 2021 NCAA tournament.
“I tried to snipe solutions with them last time,” DiRienzo said. “We didn’t take a holistic approach and maybe we should have. If we don’t take a holistic approach this time, Lord knows what the next round is going to entail. I can’t predict it. All I can tell you is that the internal controls, in my opinion, based on the facts, are not in place right now to prevent future criminal activity from occurring on this website.”
Cassandra Stephenson covers business at The Tennessean, part of the USA Today Network — Tennessee. Reach Cassandra at email@example.com or at (731) 694-7261. Follow Cassandra on Twitter at @CStephenson731.
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