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‘This Has Gone Bad,’ Lawmaker Says Of Tennessee Sports Betting Regulation

Bills would ban flex-loan lenders and sportsbooks from coexisting in same physical location

Jill R. Dorson by Jill R. Dorson
March 23, 2021
in Regulation
Richard-Briggs-TN-Hearing

(Courtesy of Tennessee Senate)

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The decision about whether or not to allow short-term, high-interest lenders and sportsbooks to co-exist in the same retail space in Tennessee will have to wait at least another week. Days after the Tennessee Education Lottery Corporation suspended Tennessee Action 24/7’s sportsbook license for a wide-ranging list of violations including numerous cases of credit card fraud and money laundering on its platform, committees in both the Senate and House decided to press pause on legislation that could also affect the company, which is partnered with lender Advance Financial.

A Senate hearing in the State and Local Government Committee was cut short Tuesday after SB 1029 was introduced and an expert witness explained how dangerous pairing a high-interest lender with a sportsbook can be. A House hearing planned by the Departments and Agencies Subcommittee on the same issue was postponed before it even began.

The bills were filed last month in the wake of the TELC’s sports wagering committee voting to award Advance Financial Money Transmission Company LLC (Advance Financial) a sports wagering vendor’s license. The 2-0-1 vote in January allowed Advance Financial locations to process cash deposits and withdrawals for TN Action 24/7 sportsbook accounts.

The committee was tentative in its decision, with at least one board member expressing concern about the proximity of high-interest loans and gambling. But neither of the two committee members voting — the third has a business relationship with Advance Financial and abstained — could find a legal reason not to allow it.

“It feels a little bit awkward that somebody could so easily use borrowed money to put money into a sports wagering account,” board and committee member Will Carver, a partner at the law firm Kramer Rayson LLP in Knoxville, said at the time. “Because of where it’s located, it gets some pause.”

What’s in the bills

In Tennessee, bill now under discussion to stop high-risk lenders (such as Advance Financial) from processing withdrawals/deposits at its storefronts — for accounts such as at recently-suspended sportsbook @TNAction247.

(@BrianneDoura testifying now)https://t.co/AQi4XKX8Vf pic.twitter.com/pp1yLhzBBQ

— Sports Handle (@sports_handle) March 23, 2021

Weeks later, lawmakers began preparing to close an apparent loophole in the law with a pair of bills. HB 824 and SB 1029 would prohibit a sports betting operator from offering “flexible” loans to bettors in the same building, and they further bar the operator from requiring that any winnings be credited toward the balance of a flex loan, which can carry annual interest rates of up to 279.5%. The bills would require the TELC board to notify the Department of Financial Institutions about any violations, and that department would levy penalties.

Brianne Doura-Schawohl, the vice president of U.S. Policy and Strategic Development for Epic Risk Management, testified about the myriad reasons the two kinds of businesses should not be operating side by side. Among other things, Doura-Schawohl called the pairing a “dangerous concoction,” and she criticized the state of Tennessee in general as being irresponsible when it comes to funding programs to prevent or treat gambling addiction.

“Any insinuation that gambling is a way to pay back a loan, make money, or solve financial problems is predatory. It is never advisable to be gambling on borrowed money. This act of gambling with lent funds is not only a red flag by experts but remains one of the nine criteria listed for gambling addiction in the DSM V.”

TN Action 24/7 CEO Tina Hodges, who is also CEO of Advance Financial, in February denied in correspondence with the Tennessean that Advance Financial had offered a loan to any sportsbook patron.

“It is policy and practice of Advance Financial to not offer loans to customers who visit retail stores for sports gaming deposit or withdrawal transactions,” Hodges stated. “To date, we have no records of this policy being violated at any location in Tennessee.”

Delay will allow opponents to testify

Immediately after Doura-Schawohl’s testimony, Sen. Ken Yager asked that the committee table discussions and a possible vote on the bill until next week in order to allow testimony by opponents, whom he said weren’t present. Bill sponsor Richard Briggs was amendable to the delay, and he made made a point of saying that he’s not certain that Tennessee Action 24/7 is responsible for the current situation — “This may be criminal elements outside of this company.” But he is still very much in favor of moving his bill forward and changing existing law.

“This is the first sports betting organization in the U.S. that has had their license suspended,” Briggs said. “Really, it’s something that has turned very bad. We need to put tighter controls in. … We’ve got to get better guardrails on this whole process, because it has led to something that isn’t good.

“I consider [the delay] a friendly suggestion. … Our goal is not to do something to hurt sports betting in Tennessee. It’s a legitimate activity that millions of Tennesseans are enjoying, and I don’t want to hurt any Tennessee company … but this has gone bad.”

The committees in both chambers were also scheduled to hear a second set of bills related to sports betting. HB 1267 and SB 588  would require that the Sports Wagering Advisory Council meet jointly with the TELC Board to make rules and hold hearings, and would allow for the council and the board to call for special meetings rather than just the board, as is currently the law.

Both committees deferred those bills to March 30, as well.

An item included in Tennessee Action 24/7’s lawsuit: someone during the TN Lottery’s meeting said “I think it’s time to go get drunk.” pic.twitter.com/I8PEavw9Ep

— Jonathan Mattise (@JonathanMattise) March 23, 2021

Since the bills were filed and the TELC issued its open-ended suspension last week, Tennessee Action 24/7 has taken action of its own, filing for a temporary restraining order in Nashville Chancery Court. The company will get a hearing Wednesday afternoon, in hopes of being able to begin taking bets again.

The suspension was issued on March 18, the first day of one of the most popular sporting events on the betting calendar, March Madness. The timing could potentially have been different — during a meeting last week to discuss the suspension, TELC investigaor Danny DiRienzo told board members that the violations began as early as March 8, but Tennessee Action 24/7 waited until March 17 to self report the infractions to the TELC.

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Jill R. Dorson

Jill R. Dorson

Jill has covered everything from steeplechase to the NFL and then some during a more than 30-year career in sports journalism. The highlight of her career was covering Oakland Raiders during the Charles Woodson/Jon Gruden era, including the infamous “Snow Bowl” and the Raiders’ 2003 trip to Super Bowl XXXVII. Her specialty these days is covering sports betting legislation across the country. You can reach Jill at jill@bettercollective.com

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