Action 24/7 Files Suit to Lift Tennessee Education Lottery’s ‘Hasty’ License Suspension During March Madness

 

Officials with the Tennessee-based Action 24/7 on Monday filed a lawsuit seeking a temporary injunction that would require members of the Tennessee Education Lottery (TEL) to reinstate the company’s sports gaming operator license.

The suit lays out the TEL’s mishandling of one of its first attempts at disciplinary action failing to follow its own established guidelines and denying Action 24/7 due process.

TEL suspended Action 24/7’s license late last week due to a self-reported incident of card fraud which the company found and stopped and has seen no recurring incidences since, says the suit.

Action 24/7 officials filed the suit in the 20th Judicial District Chancery Court in Nashville. Company officials, in the suit, called the TEL’s indefinite suspension “unlawful.”

And during the National Collegiate Athletic Association’s “March Madness” basketball tournament, the TEL’s actions “will have catastrophic effects on Action’s ability to continue as a business,” the lawsuit said.

The lawsuit said that TEL members acted after Action 24/7 reported suspicious activity had been identified and stopped earlier this month. Action officials said they detected the suspiciou activity, involving a limited number of players, mostly occurring during overnight hours.

“In response, Action took immediate countermeasures, including: suspending the accounts at issue and blocking their ability to deposit or withdraw funds or place wagers; committing to twenty-four-hour, seven-days-a-week monitoring to catch any overnight activity faster; and requesting that Action’s third-party vendors implement added safety measures to prevent future recurrence, some of which have already been implemented,” according to the suit, which said the suspicious activities stopped.

Action officials said they notified the TEL Sports Gaming Investigator, intending to work with the TEL and the Tennessee Bureau of Investigation on prosecution of the perpetrators. Instead of the collaboration it was seeking, Action was handed a suspension.

“Rather than contacting Action to discuss, the Investigator, by his own admission, on March 18 reviewed only three or four of the incident reports. Then, based on what he has called a ‘guess’ about the total scope and magnitude of the suspicious activity, the Investigator leapt to the conclusion that the suspicious activity was much broader in scope than it really was, and informed TEL’s General Counsel, CEO , and Chair of TEL’s board of directors (the ‘Board’) of that hasty conclusion,” according to Action’s lawsuit.

“Later that same day (March 18), the Chair of TEL’s Board, based on the knee-jerk conclusions of the Investigator, informed Action that its license was suspended immediately without notice or the opportunity for a hearing. Even though under TEL’s own statute and regulations a suspension can be made only by the Board or the Board’s Sports Wagering Committee, the Chair made this decision alone without convening the Board or the Sports Wagering Committee. Even worse, this suspension occurred late in the afternoon on the first day of the single largest sports betting event of the year – the National Collegiate Athletic Association’s (“NCAA”) ‘March Madness’ basketball tournament.’”

The lawsuit went on to say that Action officials contacted the TEL’s general counsel last Friday and said the suspension violated the agency’s own procedures and denied them due process afforded in the Sports Gaming Act and subsequent Rules.

“Several hours later, the Board convened a hastily arranged and haphazard special meeting to ‘ratify’ this improper suspension, during which members of the Board were driving in their cars, unclear on what they were voting on, and had not received or reviewed materials that Action had submitted. At the end of this meeting, the Board arrived at what its General Counsel stated was a ‘final decision’ of the Board to indefinitely suspend Action’s license until Action demonstrates compliance with unspecified standards. Action and its outside counsel listened to the meeting and, prior to the meeting, had asked TEL’s General Counsel for permission to speak, but—despite requests by some Board members to hear from Action—the Board did not allow Action to present the actual facts,” according to the suit.