ZenSports Conditionally Approved in Tennessee Despite Fine for Maintaining Inadequate Funds
Tennessee’s sports gaming regulator, the Sports Wagering Council, recently gave conditional approval to renew ZenSports’ operator permit while handing the company a $60,000 fine for having inadequate funds in its reserve account to cover bets placed in December.
ZenSports Chief Commercial Officer Eddie Ponce insisted at the time this was simply a “calculation error”. The regulator apparently believed the sportsbook was now adequately funded. One large-scale bettor tells the Tennessee Star there are too many red flags associated with this company.
Sports bettor Felix Baum wanted to take advantage of a promotion being offered at the sports book while visiting Tennessee from his home state of Indiana. Anyone can join and place wagers just as long as they are physically located in Tennessee. He claims the registration process did not work and the company required his full social security number.
Two weeks later, he received a call from ZenSports and an offer he decided to take. If he wired either $20,000 or $50,000 to the company, ZenSports would start his account and comp a room for him at the Nashville Omni Hotel.
Baum said he knew that the combined 11 percent in incentives the company was offering him far outweighed the mathematical risk of the normal 4 percent hold sportsbooks earn on a straight bet.
Needless-to-say, Baum made out pretty good and attempted to withdraw some of his winnings.
Baum said that Zen Sports’ chief operating officer called and asked him to reconsider the full withdrawal and offered more incentive to keep most of his funds in his account.
Baum then decided to look into the company's financial report.
The company's quarterly financial filing shows ZenSports declared it had nearly $1.4 million in player balance liabilities on December 31 and just $245,405 in cash reserved for users and just shy of $30,000 cash on hand.
“The more you look at the financials, the more one should get worried,” Baum told the Tennessee Star. “When it’s too good to be true, it probably is.”
And like so many winning gamblers, Baum soon found his limits reduced to an amount where it was no longer worthwhile to continue playing there.
Baum is an adjunct professor in finance at the University of Indianapolis who now teaches his students how not to run a business, using Zen Sports as an example.
The conditional license approval requires a full audit, completed by Sept. 14 and submitted to the council by Nov. 14.
Currently the sportsbook offers what it terms a "No Danger First Wager Up To $100".
Interestingly enough, some Redditors have vouched for the sportsbook's lucrative welcome bonus, noting that their "risk free $1000 first bet" was indeed returned with 100 percent cash value.
"Their initial offer wasn't bad at all, it was literally the best sign up bonus I've ever seen for a sportsbook, but yes they are a legit book," one person wrote.
KeyStar Corp.(OTC: KEYR) acquired ZenSports in 2022 with the intent to launch the brand both stateside and internationally.
KeyStar said at the time it was "leveraging ZenSports' proven proprietary cryptocurrency payments API and trading exchange technology to create white-label fintech solutions for enterprise customers"
Then KeyStar CEO John Linss said at the time, "We're excited to be able to offer enterprises a next-generation fintech solution that should encompass all the best that cryptocurrencies and decentralized finance have to offer."
ZenSports co-founder Mark Thomas is now listed as KeyStar CEO.
"The day is finally here where ZenSports is operating in the United States, and specifically in the great State of Tennessee," Thomas said at the time his sportsbook obtained a license in the Volunteer State 13 months ago. "The Tennessee sports betting market is one of the top 10 in the country, and we have a simple-to-use platform, 24/7 customer support team, instant processing of withdrawals, and robust loyalty program that will be great for customers here. We expect ZenSports to grow and flourish in Tennessee for many years to come."
ZenSports claims to have obtained a Nevada gaming license in August of 2021 but does not currently service that state.
Tennessee, we would note, is no stranger to issues involving relatively unknown sports betting brands.
The owners of an online lending company launched a "home grown Tennessee sportsbook", Action 24/7, and landed in some hot water for suspicion of engaging in credit card fraud. They denied the allegations and, considering the book is still operating in the state, there's reason to believe they likely were not.
The financial solutions business appears to have been incorporated into Action 24/7's sportsbook operation in an effort to get a leg up on the competition as sports books in the state are required to withhold 10% of all winnings.
Though initially denying the two entities were connected, customers at the payday lender’s more than 100 Tennessee locations were able to deposit funds directly into their betting accounts.
Erik Schelzig at the Tennessee Journal reported at the time Action 24/7 was under investigator that players would sign up for an account, then deposits would be made from multiple credit card numbers, then the balance on the account would be withdrawn abruptly with little gambling action.
Another website claimed that an employee of Action 247 was assisting in getting players from other states wagering with the site, a violation of the Tennessee regulatory process.
Today, that site proudly proclaims "Ditch the card, bet with cash" and points to a number of locations where one can do just that across Tennessee. One such location in Kingport is indeed an Advance Financial location.
We say "brilliant business model" and perhaps regulators here think the same. Why else would they allow Action 24/7 to continue operating?
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