Having operated BettingUSA.com as a sports betting affiliate for the past few years, I can attest that the legal US sports betting market comes with unique challenges – especially for small affiliates and those new to the business.
Those challenges begin with licensing and continue well into the future because affiliates operate in a complicated regulatory framework that varies by state.
The complexity of acquiring a sports betting affiliate license depends on a few key choices you make during the process, the size of your company, and the commission model you pursue. Once licensed, the next challenge is to build a business that can succeed in a market governed by varying state laws.
Below, I discuss some of the most significant challenges affiliates face and provide a few tips to overcome those challenges. My perspective in this discussion comes from that of a small and independent affiliate rather than that of a large media or marketing company.
Licensing: Cost Per Acquisition vs. Revenue Share
Sports betting affiliate marketers must make one critical choice before pursuing a license in any state. Will you earn commission on a cost per acquisition (CPA) or revenue share basis?
The licensing process for CPA is much easier and far more economical. While tempting to choose revenue share, it is a difficult business model to scale and comes with a much more complex application process. At BettingUSA.com, we operate under the CPA model for two primary reasons.
- Simple application process: in most states, the process of registering as a vendor and promoting sportsbooks and online casinos for a fixed fee per depositing player is straight forward and not cost-prohibitive.
- The CPA model provides predictable and scalable revenue.
The process of applying for a revenue share license is relatively similar to getting a license as an operator. Most companies with this level of licensing have spent tens of thousands of dollars to acquire the license in a process that often takes months to complete.
Additionally, most operators are not very interested in working with you on the revenue share model unless you’re able to send thousands of new depositing customers per month.
CPA Licensing is A Simple Process in Most States
As long as you operate within the law, follow regulations, and remain compliant, getting licensed as an iGaming affiliate is a fairly straight forward process. Every licensing agency will require a background check, financial disclosures and prior tax history, and an extensive criminal background check. Pennsylvania goes as far as requiring vendors to be fingerprinted.
As intimidating as it may sound to go through the process, I’ve found the regulators in each state helpful and happy to assist in the process. If you are reputable and honest in your approach, they want you to be successfully licensed.
In most states, licensing as a CPA affiliate requires filling out a relatively simple form and then jumping through a few hoops, such as registering your company to do business in the state. In states that require local business registration, we have successfully used registered agents to do this on our behalf.
Licensing Fees Vary by State
It is free to register as a vendor affiliate in New Jersey, but most states charge a fee ranging from a couple hundred to thousands of dollars. In all states but New Jersey, licenses must be renewed periodically. Below are the costs and length of licensing terms for each US state that licenses vendors, suppliers, and affiliates.
- New Jersey: $0
- Pennsylvania: $2,500
- West Virginia: $1,000
- Tennessee: $500
- Virginia: $500
- Michigan: $200 for sports betting; $200 for casino/poker
- Colorado: $500
- Indiana: $500
All Major Share Holders Must Be Licensed
Media companies and large affiliate companies must license key stakeholders. In most states, the threshold for having to license key stakeholders is 10% ownership of the company. If pursuing revenue share licensing, this can be an expensive and time-consuming process, easily costing tens of thousands of dollars.
Limited Reach: Alternative Markets in Non-Legal States
Legal sports betting and online gambling are growing, but market reach is still limited at this stage. Additionally, the biggest states population-wise have not yet legalized online betting or gambling.
However, there are still opportunities in states that lack a regulated iGaming industry. Daily fantasy sports sites and online horse racing betting are legal in most US states. Affiliates can effectively promote DFS as an alternative to sports betting in some of the biggest untapped US markets: California, Florida, New York, and Texas.
No License Needed for Horse Racing Betting, DFS, and Lotteries
Licensing is currently not required to promote horse racing betting and daily fantasy sports sites in any US state.
Online lottery is another avenue affiliates can promote as more states adopt the model. Interestingly enough, both MI and PA license gambling affiliates but do not require licensing to promote their online lottery apps.
Fractured Market and Geotargeting
Geotargeting traffic on the state level to relevant offers is a crucial component of conversion strategy.
Thankfully, geotargeting is not difficult to implement, but it does come with challenges depending on how granular you want to get. For example, I might suggest geotargeting New Jersey sportsbook offers to traffic originating from New York City, which is a massive giant market just across the bridge. At the same time, you may want to show DFS offers as an alternative to the rest of the state.
The lesson here is geotargeting to “border cities” of legal states makes sense and will help boost your profits.
Licensing Is Worth the Effort
Applying for online gambling affiliate licenses is an unavoidable part of doing business in the US, but it is worth the cost and effort for reasons beyond satisfying state law.
Licensing builds the relationship between affiliates and operators to build trust and improve collaboration. In most cases, you will find affiliate managers are happy to assist with licensing questions, legal updates, and promotional efforts.
Licensing also helps protect the industry from overregulation. As the more mature UK gambling industry demonstrates, lawmakers are prone to reassess the impacts of legal online gambling and pass restrictive new laws.
Maintaining close relationships with operators helps affiliates stay up to date on the latest compliance policies and significantly increases convenience at the individual level. From a broader perspective, improved self-regulation also lessens the likelihood that lawmakers step in with drastic policy updates detrimental to the industry.
Mike Murphy, CEO, BettingUSA.com