Tennessee sportsbook Action 24/7 is suing the Tennessee Lottery, claiming it overstepped its authority by suspending the company’s license last week. The company seeks a preliminary injunction to restart its operations.
The lottery, which oversees the state’s new sports betting regime, pulled the license on Thursday because of concerns about fraud and money laundering. The timing was brutal for Action24/7. The same day, March Madness, one of the biggest betting events on the calendar, got underway.
It’s the first time an online betting operator has had its licensed suspended in the US. The sportsbook’s operations were still on hold at the time of publication.
‘Serious Criminal Activity’
The lottery accuses Action 24/7’s internal anti-money laundering controls of being inadequate. It cites several instances but highlights one on March 9 when a player made $10 deposit followed almost immediately by 184 attempted deposits from seven cards with seven names. Of these, 124 were successful.
The user then placed a few small bets before making multiple withdrawals into an account with the user’s name.
“It is serious, serious criminal activity, probably in the tens if not hundreds of thousands of dollars’ worth of damages done with multiple real individuals and business victims,” said Danny DiRienzo, an investigator for the Tennessee Lottery said Friday. He was speaking during a meeting of the lottery’s board, as reported by the Associated Press.
But according to the lawsuit, the total amount of fraudulent deposits was $37,362, of which the company has recovered $14,701. Moreover, the operator self-reported the suspicious activity to the lottery, by which time it had already frozen the accounts in question.
The suit argues the lottery should not have taken the decision to suspend the license last Thursday, prior to a vote by the lottery board the next day. During the meeting, officials refused to listen to Action 24/7’s position, it claims.
The lottery counters that the company waited until March 17 to report suspicious transactions that had occurred more than a week earlier. It says the sports book should have acted quicker in shutting down the accounts and notifying it of the situation.
Side Order of Predatory Loans
Action 24/7 is one of six licensees in the Tennessee sports betting market. But it is controversial because it’s part of the same group as local payday lender Advance Financial 24/7. That means gamblers can fund their Action 24/7 accounts in the same physical space that they can apply for high-interest loans.
State Rep. Darren Jernigan (D-60th) has filed a bill that would make this illegal.
Legal Sports Report noted Tuesday that Action 24/7 was still offering free bets in its marketing material despite the suspension of its license.
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