During its meeting in May, the Tennessee Sports Wagering Council issued a fine to Zen Sports for not carrying enough funds in its reserve account to cover its sports betting operation.
Pay to Play
It’s not often we see sports betting operators get caught without enough cash to cover outstanding wagers. It’s a rule that even a neophyte understands because if you can’t pay, your customers won’t play.
On a grander scale, that is what happened to ZenSports when the governing body of sports betting in the Volunteer State, the Tennessee Sports Wagering Council (SWC), found their reserve accounts to be inadequately funded on three occasions in December 2023.
The day of reckoning came in a May 10th meeting when SWC’s board meted out punishment to the tune of a $60,000 fine for not having their reserve accounts above the required balance. An SWC spokesperson commented on the issue.
“Licensees also shall maintain a reserve in the form of cash, cash equivalents, irrevocable letter of credit, in addition to the above-referenced Bond, of not less than the amount necessary to ensure the ability to cover the outstanding liability related to the Patron accounts. The outstanding liability shall be the sum of the following amounts: 1. Amounts held by the Licensee for Sports Gaming Patron Accounts; 2. Aggregate amounts accepted by the Licensee as Wagers on Sporting Events with outcomes that have not been determined; and 3. Amounts owed but unpaid by the Licensee on winning Wagers.”
It should be noted that since December, ZenSports has maintained a proper reserve account balance.
Faulty Code
The SWC did not limit their punishment to only one sportsbook in that May 10th meeting as a more well-known brand, Fanatics, was also subject to a fine. However, in this case, the transgression was self-reported when Fanatics discovered that it had allowed six of eight accounts that were on its own 20-state self-exclusion list had been allowed to place bets despite those same accounts being dropped off the state’s self-inclusion list which Fanatics inherited when they took over operations for PointsBet in Tennessee.
Despite only six accounts placing bets, Fanatics reported that two others that had not placed wagers would have been allowed to but did not. The SWC mandated that any losses would be returned to those accounts and levied eight Level 2 fines of $6,250. Fanatics notified the SWC that the error was due to bad code that was written into its protocol and the issue has subsequently been fixed.
Prior Instances of Regulatory Action
This is not the first time a Tennessee sports betting governing authority has adjudicated punishment for violations by its sportsbook operators. In March 2021, only five months after mobile sports betting launched, it was the Tennessee Education Lottery (TEL) that had domain over the industry before being supplanted by the SWC.
During that time, TEL suspended Action 24/7 because of allegations of not preventing credit card fraud and money laundering through its platform that went unreported for days after the alleged events.
However, a Davison County Chancery Court ruled that holding a hearing would violate the court’s temporary injunction and the TEL did not follow proper procedure which would do “immediate and irreparable harm” to the sportsbook. Action 24/7 continues to operate in Tennessee as one of the state’s 12 online sportsbooks.
