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Tennessee Judge: Action 24/7 Hearing On Fraud Failings Cannot Happen

The Tennessee Education Lottery continues to get an education of its own after its short-lived suspension of Action 24/7.

The TEL Board of Directors cannot hold a hearing concerning the multiple incidents of fraud that took place on Action 24/7 and went unreported for days, the Davison County Chancery Court ruled. The Tennessee Star first reported the news.

Holding a hearing on the matter would violate the court’s temporary injunction handed down last month. The court ruled in favor of Action 24/7 at that time as the sportsbook faced “immediate and irreparable harm.” The TEL also did not follow the correct procedures leading up to the suspension.

Since the Board of Directors ruled its vote to uphold a temporary suspension on Action’s TN sportsbook license was a “final action” in the matter, the board lacks jurisdiction based on its own rules to hold another hearing, the court found.

The TEL did not respond to a request for comment.

A recap of Action 24/7 suspension

It was just under a month ago that the TEL handed the first US sportsbook license suspension to Action 24/7.

The trouble began much earlier, however:

  • Action 24/7 had its first instance of debit card fraud on March 9. Multiple other instances continued over the next week until the sportsbook sent 23 reports of suspected fraud to the TEL on March 17. It wasn’t until the final instance on March 16 that Action began monitoring for fraud at all times.
  • The TEL took swift action on the March 18 when the reports were received. Chair Susan Lanigan suspended Action’s license immediately. The full Board of Directors then met by phone on March 19 to uphold Lanigan’s actions.
  • Action 24/7 sued quickly, seeking a temporary injunction to get its license reinstated. Lanigan’s suspension came the first night of the March Madness tournament and Action’s counsel warned of “catastrophic effects” on the business if the suspension continued.
  • Action 24/7, while suspended and pending a hearing, sent at least one marketing email to its customer database.
  • Action attorney E. Steele Clayton told the court …”our business is being destroyed. Literally, not dramatically, truthfully. Without question.” The TEL’s representative from the state attorney general’s office said an additional hearing would be futile as the board had considered the necessary evidence.
  • Eight days after Lanigan handed down the suspension, Action 24/7 won its request for a temporary injunction.

TEL tried to hold meeting once injunction was granted

TEL General Counsel Alonda McCutcheon reached out to Action the same day the temporary injunction was granted.

McCutcheon told the sportsbook and its attorneys the TEL’s Sports Wagering Committee would hold a meeting April 7 to “consider suspension of Action 24/7’s license for failure to maintain adequate internal controls sufficient to detect and to prevent unusual, suspicious or illegal wagering activity.”

Action would have had the chance to speak at that meeting. It requested the chance to talk during the last meeting when the license suspension was upheld.

Action’s counsel pushed back, which prompted an email from James Urban of the attorney general’s office. Urban noted the court’s ruling said the injunction “does not enjoin Defendants from their ongoing duties to regulate and supervise Action 24/7.”

Action’s counsel said it continued its objection to the hearing and would seek clarification from the court.

Action CEO Tina Hodges submitted a declaration to the court April 5. She stated there had been no additional cases of fraud since the incidents that were reported March 17.

What happens now Action now?

The TEL might have botched its ability to properly punish a sportsbook despite Action’s surprising lack of internal controls.

There are still some outstanding issues that need to be addressed, however.

The TEL hasn’t addressed the issue of Action marketing to its customers with a suspended account. It also hasn’t taken any action against the sportsbook for a serious issue of proxy betting that occurred right before the Super Bowl.

A contracted employee of Action 24/7 created more than 40 accounts for out-of-state bettors. Those accounts then placed hundreds of bets.

“[The issue] was immediately turned over to law enforcement, and any action on our part is pending the outcome of that investigation,” the TEL told LSR.

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