The Massachusetts Gaming Commission voted Thursday to temporarily waive a ban on affiliate marketing in the state ahead of the March 10 digital sports betting launch date. The waiver will be in effect until April 14 as the commission studies the issue in advance of potentially revamping the rule.
The vote came three days after the MGC heard from affiliate marketers — including a representative from Better Collective, the parent company of Sports Handle — and operators, who said that affiliate marketing helps to tamp down the black market, is a way for stakeholders to get responsible gaming messaging out to consumers, and focuses marketing on those interested in wagering vs. mass marketing to all consumers.
The move comes as most states are tightening their advertising rules, but ahead of the digital launch. Massachusetts regulators have already created the most stringent advertising and marketing guidelines in the country.
NY tightening up ad rules, too
On the same day that the MGC hosted its roundtable to discuss affiliate marketing, the New York State Gaming Commission clamped down on advertising, unanimously approving a regulation that will prohibit operators from marketing to underage consumers. A similar regulation already exists in Massachusetts.
From the text of New York’s new rule: “A casino sports wagering licensee or sports pool vendor shall not allow, conduct, or participate in any advertising, marketing, or branding for sports wagering that is aimed at persons under the minimum age.”
Stakeholders in sports betting field say federal elimination of their advertising would be a misguided and costly over-reaction.https://t.co/WjnERz8gHM
— Sports Handle (@sports_handle) February 21, 2023
The new rule must go through a 60-day public comment period before it goes into effect.
Last month, U.S. Rep. Paul Tonko of New York proposed a federal ban on advertising by sports betting operators. Stakeholders aligned in speaking out against the idea, saying that it would severely limit the ability of the industry to get out responsible gaming messages and would benefit the black market.
In the first quarter of 2023, it’s become clear that the newest entrants in sports betting — Ohio, Maine, and Massachusetts — are changing the advertising and marketing landscape. In the first month of live wagering, Ohio regulators announced violations by at least three operators for breaking advertising rules, while Massachusetts has fined all three retail sportsbooks for violating state guidelines by allowing wagering on local college sports teams. Retail betting went live in Massachusetts Jan. 31.
And in Maine, the proposed rules also include prohibitions around affiliate marketing. In Connecticut, operators cannot partner with affiliates in Cost Per Action (CPA) deals, and in Illinois operators cannot partner with affiliates using revenue-share models. But so far, no state has outright banned affiliate relationships.
Guarding against ‘fly-by-night’ operations
The Massachusetts waiver will allow operators and affiliates for now to make both CPA and revenue-sharing agreements. A CPA deal means that the operator pays the affiliate a predetermined amount for every customer it sends to the operator.
The MGC further defined several issues around the revenue-sharing model, naming affiliates “revenue-sharing advertisers” and adding details about the level of license that would be awarded for those using the revenue-share model. The commission has discussed changing the licensing structure for affiliates to try to “disincentivize” operators or affiliates that might not want to make a long-term commitment to the state.
— Richard Slawsky (@rslawsky) March 2, 2023
Going forward, the commission will continue to refine what it wants long-term regulations to look like, but the current situation means that affiliates can be active in the state at least until April 14. At that point, the waiver will expire, and the prohibition will be back in force unless the MGC passes a revised regulation.
Ahead of Thursday’s vote on the revenue-sharing rule, the MGC discussed how the different kinds of affiliate marketers are used by operators. Through conversation all week, it’s become clear that smaller operators potentially can’t afford the CPA model and favor the revenue-share model. Commissioners are equally concerned about shutting out smaller companies and allowing “fly-by-night” companies to enter the state.
Discussion: What’s the middle ground?
On Wednesday, the commissioners took some time to discuss their thoughts on allowing affiliate relationships.
At the start of the conversation, Commissioner Eileen O’Brien said, “What we wanted to do was stop saturation and protect the vulnerable, while allowing [operators] to market. But it seems the language we put in may have the opposite effect. We might be incentivizing operators to then do a mass inundation of the market, which is going to increase saturation, which is not what we want.
“What I did not take away from that meeting was that we should just eliminate the restrictions that we put out there on CPA and revenue share without other controls.”