The Intertwined Businesses of Advance Financial and Action 247

Michael and Tina Hodges, the owners of Advance Financial, a major player in Tennessee’s payday loan market, faced a critical juncture in March 2021. Their newly launched sports betting venture, Action 247, was under investigation by state regulators. This wasn’t a coincidence. The Hodges had previously sought Sexton’s assistance in 2014 to establish “Flex Loans,” a type of high-interest loan that has since generated hundreds of millions of dollars for Advance Financial, often at the expense of the state’s most financially vulnerable citizens. As ProPublica previously reported, Advance Financial has filed suit against over 110,000 Tennesseans.

What made the situation particularly unusual was the legal landscape in Tennessee. Unlike many states that actively separate lending and betting operations, Tennessee law permitted the same owners to operate both types of businesses, even from the same storefronts. From November 2020 to January 2021, customers could walk into an Advance Financial location, borrow up to $4,000 at an annual interest rate of 279.5%, and immediately deposit those funds into an Action 247 account to place a bet.

This practice alarmed members of the Tennessee Education Lottery Corporation, which initially oversaw sports gambling in the state. Concerns centered on the potential for predatory lending practices and the exploitation of individuals struggling with financial hardship. However, the agency’s legal counsel initially advised that there was no explicit legal prohibition against the arrangement. Despite this, the Lottery Corporation attempted to suspend Action 247’s license in March 2021 due to violations of state gambling laws, but a court temporarily lifted the suspension, allowing the investigation to continue.

Sexton’s Intervention and Legislative Changes

It was at this point that Speaker Sexton became directly involved. The Hodges and Advance Financial are significant donors to Sexton and his political action committee, contributing approximately $105,000 over the past decade. Following the license suspension, Sexton met with two members of the Lottery Corporation board, reportedly expressing his dissatisfaction with the decision. Susan Lanigan, the board chair at the time, stated that Sexton “made it clear he was not happy” with the suspension.

Subsequently, Sexton spearheaded legislation to remove the Lottery Corporation’s control over sports betting, replacing it with a new regulatory body more directly accountable to the legislature. This move effectively ended the investigation into Action 247. The new agency, according to Brianne Doura-Schawohl, former legislative director for the National Council on Problem Gambling, is unique in the nation and grants lawmakers greater control over the sports betting landscape.

The legislation also benefited investors with political connections. John “Chip” Saltsman, Sexton’s senior campaign advisor, and Ward Baker, a campaign advisor for Tennessee’s U.S. senators, had both invested in Action 247, though some of their initial investments were later returned. Sexton, in a statement, maintained that his decisions were focused on the best interests of the state and its citizens.

The Closure of Action 247 and Lingering Concerns

Despite surviving the regulatory challenges, Action 247 ultimately shut down in January 2021, citing an “unviable and unprofitable” market. However, the episode has left a lasting impact on Tennessee’s regulatory environment and raised serious questions about the influence of money in politics. While no payday lender is currently directly tied to a gambling company, the legal framework remains in place, allowing for such arrangements in the future.

Experts warn that the combination of high-interest lending and gambling is particularly dangerous, as individuals with gambling addictions are more likely to struggle with financial decisions and take on unsustainable debt. The National Council on Problem Gambling has long advocated for stricter regulations to protect vulnerable populations.

Did You Know?

What safeguards should be in place to prevent similar conflicts of interest in the future? And how can states effectively regulate the intersection of high-risk financial products and the rapidly expanding gambling industry?

Frequently Asked Questions About Tennessee’s Sports Betting Controversy

• What is the connection between Advance Financial and Action 247? Both companies were majority-owned by Michael and Tina Hodges, allowing for a unique business model where customers could borrow money and immediately gamble it.
• What role did Cameron Sexton play in the Action 247 investigation? Speaker Sexton met with Lottery Corporation board members and subsequently sponsored legislation to remove the Lottery Corporation’s oversight of sports betting.
• Why was the arrangement between Advance Financial and Action 247 controversial? Experts expressed concern that it facilitated predatory lending practices and exploited individuals vulnerable to gambling addiction.
• What changes were made to Tennessee’s sports betting regulations? The Lottery Corporation lost its regulatory authority, replaced by a new agency with greater legislative control.
• Is it still legal for payday lenders to be involved in sports betting in Tennessee? While no lender is currently directly involved, the legal framework still permits such arrangements.