Affiliates Hit Bumpy Road with Massachusetts Sports Betting

With Massachusetts set to launch online sports betting on March 10, the state’s Gaming Commission (MGC) initially put forth a regulation prohibiting marketing affiliate revenue-share or cost-per-acquisition (CPA) deals. Following industry input and a vote, the regulation has been temporarily waived until April. Affiliates will now be allowed to operate revenue-share and CPA deals, while the MGC studies the issue and potentially amends the regulation permanently.

The concern around affiliate marketing remains in the U.S. with many states implementing restrictions around it. We spoke to Compliable’s Justin Stempeck, former regulator in Massachusetts, about the affiliate landscape in the U.S. as regulation continues to progress.

Several states have expressed concerns around affiliate marketing, why do you think that is?

“The concerns centred around affiliate marketing are really concerns over the way gambling is advertised. While there are a number of jurisdictions that regulate the companies conducting affiliate marketing as well as the content of those advertisements, the past several months have seen a renewed interest in scrutinizing advertising verbiage as well as ensuring that the actors that do not follow the rules are penalized.

“Regulators have tremendous power over their licensees and the recent penalties enforced in Ohio and the lengthy discussion in Massachusetts show that certain jurisdictions are more comfortable pushing back on the industry.”

How important are affiliates to the ecosystem of online betting and gaming in the U.S.?

“Affiliates are crucial to the industry. Since 2018, the U.S. has seen a rush to grab as much customer share as possible with each new jurisdiction that has legalized online sports wagering and online gaming. Operators have spent tremendous sums on marketing affiliates to fuel this growth.

“The growing sentiment from investors over the past two years has been that this practice is unsustainable, but it remains a critical driver of customer acquisition. From the roundtable discussions with the regulators in Massachusetts, we heard that 30% of online registrations are via affiliate marketing websites.”

What impact could the restriction on affiliates have on the regulated market?

“Many states already require that marketing affiliates hold licenses or registrations with a regulator. The fact that Massachusetts requires that CPA affiliates register with the Commonwealth will not have a serious impact on the market. Similarly, there was significant discussion by the Massachusetts Gaming Commission concerning revenue share affiliates, which is such a small component of the overall marketing affiliate industry in the U.S. it will not cause significant issues.

“If complete prohibitions were to be implemented, however, it could have an impact on the regulated market as affiliates help consumers find legal sports books, keeping them away from illegal offers and ensuring stronger player protection. New York has now suggested almost identical wording to Massachusetts in its proposed marketing rules, so it will be interesting to see the outcome of that public comment period.”

Massachusetts will become the 26th state to regulate online sports betting. Sport is super popular with many iconic teams in the state. As a former regulator of the state, how do you imagine the market will develop?

“I believe Massachusetts will be a robust and tightly regulated sports betting market. Given our fervent fan base, I expect online sports betting to be extremely popular here. That being said, the MGC is extremely thorough and will be closely monitoring the industry to provide ongoing responsible gaming protections for citizens of the Commonwealth and to proactively grow with the industry as it continues to innovate in the future.”

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