Local sportsbook Tennessee Action 24/7 made its arguments in state chancery court Wednesday attempting to gain a temporary injunction of its license suspension handed down by the Tennessee Education Lottery Corporation.
Counsel E. Steele Clayton IV presented Tennessee Action 24/7’s claims to Chancellor Patricia Head Moskal, stating the March 18 suspension of its gaming license after self-reported violations to the board came “without notice and opportunity to be heard.”
Clayton further claimed that the TELC can only suspend a license by mandate of the board or by delegating the action to the Sports Wagering Committee. That was not done in either instance, according to Clayton, because the suspension was initially handed down by TELC CEO Rebecca Hargrove and its general counsel, as recommended by investigator Danny DiRienzo, who most recently served for 22 years as a special agent with the United States Secret Service.
On March 19, TELC called an emergency meeting during which Tennessee Action 24/7’s license was suspended indefinitely until such time that the sportsbook could demonstrate it had implemented proper internal controls to prevent credit card (debit card) fraud and money laundering that was detected on its platform. The sportsbook concedes that the fraudulent transactions discovered and reported resulted in $22,661 of damages based on at least $37,362 deposited into suspicious accounts.
In the short period sports betting has been legal in Tennessee — it launched the nation’s first mobile-only wagering platform Nov. 1 — Nashville-based Action 24/7 has had multiple issues with internal controls, including 23 instances earlier this month that contributed to the suspension. Most of those incidents occurred from March 9 through March 12, but it did not initially report those problems until March 17.
State argues TELC had right to suspend Action 24/7
Tennessee Assistant Attorney General Lindsay Sisco, representing TELC as well as Hargrove and its board members acting in their official capacity, countered the regulatory body acted within board rules and legally suspended Action 24/7. She said that a licensee “may be suspended upon exigent circumstances without prior notice pending any prosecution, hearing, or investigation, whether that is by a third party, the CEO of the Tennessee Education Lottery or any officer designee.”
Sisco said the seven days from the first incident to Action 24/7’s self-reporting was “way too long in letting the oversight committee know about the problem.” She argued Action 24/7 was heard in the March 18 case “in writing,” adding, “They were not afforded an opportunity [to speak] because it was not a contested case hearing and not purported to be one. It was not purported to be a pre-deprivation hearing because of the exigent circumstances.”
DiRienzo laid out the multiple violations Action 24/7 had committed in January in a declaration for the court, claiming his evidence of illegal proxy betting identified that “eleven (11) different Action 24/7 user accounts had been accessed from the same electronic device in the prior three (3) days. Expanding that timeframe to the past ninety (90) days, I uncovered with minimal effort that forty-five (45) unique user accounts on the Action 24/7 gaming platform had been accessed from the same electronic device in question.”
In his signed declaration dated March 24, DiRienzo indicated that federal law enforcement is also now investigating the proxy betting matter:
On February 3, 2021, I notified Action 24/7 in a call with Tina Hodges, President of Action 24/7, and Andrew Jacks, that the TEL was conducting an investigation into illegal proxy betting that had occurred on the Action 24/7 gaming platform. Action 24/7 did not detect this illegal activity or notify the TEL of this illegal activity. This investigation has been referred to Federal law enforcement for further investigation and possible criminal prosecution.
The license suspension has come at the most inopportune time for Action 24/7 as it was not allowed to take bets during the first two rounds of March Madness, the NCAA basketball tournament that is one of the two biggest events on the U.S. sporting calendar with the Super Bowl. The tournament is set to resume Saturday with the regional semifinals, but Moskal offered no timeline on whether she would deny or uphold the injunction prior to those games being played.