A policy reversal effort is underway to address a troubling situation that one Tennessee sports betting regulator said “feels a little funny to me from a public policy perspective,” while another remarked, “from a responsible gaming [perspective], it feels a little off, but it complies with statute.”
In January, the Tennessee Education Lottery Corporation’s Board of Directors Sports Wagering Committee voted 2-0-1- to grant approval to the Advance Financial Money Transmission Company, LLC (“AFMTC”) to operate within 100-plus Advance Financial storefront locations. That decision that allows AFMTC to facilitate the deposit and withdrawal of funds into Tennessee Action 24/7 sportsbook accounts, as Sports Handle first reported on Jan. 7. But lawmakers in both the House and Senate are now concerned because Advance Financial, which operates in 13 states, is a lender of high-interest, high-risk loans carrying up to 279.5% annual interest rates.
Tennessee House Rep. Darren Jernigan, who filed HB 824 this week, told Sports Handle on Thursday, “When I learned there was nothing in the law to prevent it, I thought, ‘You’re kidding me.’ The optics right off the bat are horrific.
“Research looked into it and found that yeah, they can do it. But we’re going to go and fix that. Sen. (Richard) Briggs dropped his bill [on Thursday], so both of us are there. He’s a Republican, I’m a Democrat. It’s a bipartisan bill, so we’re going to run it and correct that oversight. It’s got legs, that’s for sure. When I mentioned it to colleagues, their mouths kind of dropped.”
Concern for a whole new class of people
Some of the language in the bill needs work to effect the specific intent, which is to curb the possibility that Tennesseans might use high-risk borrowing for sports gambling. But Jernigan and Briggs had to file the bill by today’s legislative deadline and will massage the language later. The bill was assigned to the Subcommittee on Banking and Consumer Affairs. A hearing date hasn’t been scheduled.
[Disclosure: Better Collective Tennessee, LLC owns the website Sports Handle and is a registered vendor in Tennessee. It is an affiliate marketing company that receives commissions when persons sign up for legal sportsbooks that include, among others, BetMGM, DraftKings, and FanDuel, which are in-state competitors of Action 24/7.]
Meanwhile, on social media, the sportsbook frequently encourages patrons to visit Advance Financial locations to make deposits and withdrawals, and at least in the past, Advance Financial locations have distributed flyers advertising the Action 24/7 sportsbook. Under the “cash locations” tab on the sportsbook’s website, it reads “Action 24/7 has more than 100 partner locations in Tennessee for cash deposits and cash withdrawals.”
Jernigan did not mince words when discussing his impression of the apparent partnership.
“This marriage between flex loans and gambling, they have one company able to loan you money at 279% interest, and another where people have the ability put that into an account to wager money,” Jernigan said. “It is the literal, not hyperbole, the literal definition of loan sharking. Except the next day they don’t break your legs. You just get put into a cycle of debt that you can’t get out of and go bankrupt.
“There’s a whole new class of people that they’re going to put into this cycle to make money off of, because do you think that a gambling addict is going to really care about 279%?”
Separate from this “marriage” between flex loans and gambling, Jernigan is concerned specifically about how the companies may be applying funds. “I want to verify that, if you have a loan there and you win, does it go to [the patron]? Or does it go straight to the loan?
“On one hand, some people may find that, oh, great, that’s going to pay their debt. On the other hand, it’s going to encourage people to go gamble to pay off their debts. Especially if they win one time.”
Tina Hodges, the CEO of Advance Financial and president of the sportsbook Action 24/7, previously declined Sports Handle’s request for an on-the-record interview.
Discomfort, but “yes” votes, anyway
During the TELC’s Jan. 6 Sports Wagering Committee meeting where Advance Financial got approval, there was discussion about whether or not to move forward, and one committee member abstained from voting — committee member John Crosslin also provides accounting services to Advance Financial. But both Will Carver, a partner at the Knoxville law firm Kramer Rayson LLP, and TELC Board Chairperson Susan Lanigan expressed concern.
“It feels a little bit awkward that somebody could so easily use borrowed money to put money into a sports wagering account,” Carver said. “Because of where it’s located, it gets some pause.”
While both were clearly troubled by the connection between Advance Financial and Action 24/7, both voted “yes” on the approval.
Advance Financial and the flex lending/payday loan industry is very active in lobbying and donates substantial amounts of money to the GOP caucus on both the state and federal level to encourage regulations that allow their lending businesses to operate more freely.
Asked if this bill had faced resistance yet, Jernigan said, “Yes, it has. [Advance Financial] has hired two more firms. They have a full-time in-house lobbyist, but I have not spoken with them yet.”