Action 24/7 self-reported alleged incidents of credit card fraud and money laundering

Tennessee's online sportsbook license indefinitely suspended; first case in the US

Action 24/7 discovered the activities on March 9, but reported the incidents to the regulatory agency a week later on March 17, according to regulators.
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The Tennessee Education Lottery's Sports Advisory Council confirmed the indefinite suspension Friday. The investigation includes bets allegedly placed on the Super Bowl by a proxy for out-of-state customers. The sportsbook will be offline until it can provide independently-verified proof that sufficient internal controls are in place to prevent future illegal activity.

Tennessee sports betting regulators indefinitely suspended local sportsbook Tennessee Action 24/7's license Thursday after an investigation by the state lottery due to the company's self-reported alleged incidents of credit card fraud, money laundering and illegal proxy betting on its platform for Super Bowl wagers.

The Tennessee Education Lottery's Sports Advisory Council confirmed Action 24/7's indefinite suspension during a special-called meeting Friday afternoon, The Tennessean reports. The sportsbook will be offline until it can provide independently-verified proof that sufficient internal controls are in place to prevent future illegal activity. Action 24/7 has the right to appeal, according to TEL officials.

Action 24/7's Twitter account posted Thursday night that the site was down for maintenance, and on Friday the website showed a notice that it was unavailable. The decision marks the first time an online sportsbook has been suspended in the United States. 

Tina Hodges, Action 24/7's CEO and President, issued a statement later Friday expressing disappointment over the suspension of Action 24/7's license, a decision that came the week of the NCAA men's basketball tournament, one of the most popular betting events in the U.S.

"The Board relied upon unfounded fears of future speculative recurrences of the activity, and took draconian action just as the NCAA Tournament is beginning," the statement read. "Obviously, we are disappointed in the Board's decision, but will continue to work with TEL staff and seek all other avenues of relief to have the suspension lifted quickly so that the people of Tennessee may continue to enjoy wagering on the Action 24/7 sportsbook."

Tennessee Lottery inspector Danny DiRienzo said he received an email from an Action 24/7 employee on Wednesday containing 23 incident reports for separate player accounts. After reviewing three to four accounts, DiRienzo said he had seen enough to identify between tens to hundreds of dollars funneled through the site in alleged criminal activity.

One account showed hundreds of credit card transactions from credit card numbers that did not match the information provided when the account was created. Another 45 accounts showed evidence of alleged proxy betting. Tennessee statute requires bettors to be physically located in Tennessee to place a bet. Of the 45 accounts, 40 were registered to out-of-state residents. A person in Tennessee allegedly logged into those accounts on behalf of the out-of-state residents to place bets. An individual who said they worked for Action 24/7 admitted to placing those bets, DiRienzo said Friday. The individual was not identified during the meeting.

Action 24/7 discovered these activities on March 9, regulators said, but reported the incidents to the regulatory agency a week later on March 17.

According to DiRienzo, the evidence uncovered in his brief initial review of the incidents showed the accounts contained patterns that were "clearly a case of credit card fraud, clearly a case of money laundering, clearly a case of what could be charged under federal law as aggravated identity theft (and) clearly a case of violating the Wire Act."

Hodges stated in a declaration submitted to the board that Action 24/7 has put additional internal controls in place following the incidents, but state lottery officials were hesitant to accept this statement as concrete proof of any substantial change. "I don't believe for a second that even the improvements that they've made since yesterday, which are a step in the right direction, that they will be able to stop criminal activity from happening tomorrow," DiRienzo said.

The sportsbook's platform will now limit the number of deposits made to any one account using a credit or debit card to two per hour. "That is also a very basic internal control that should have been in place at launch, and it should extend further than that," DiRienzo said. "It should not be limited to credit cards or debit cards, it should be across any funding platform."

Regulators also indicated this is not the first incident of illegal activity on Action 24/7's platform, though they did not specify the type or scale of previous incidents. Lottery officials said they temporarily suspended the account Thursday while an investigation into the incidents proceeds in part "due to the events that have now occurred twice."

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