Affiliates Love Regulation, But Can't Quite Quit Grey Markets

November 11, 2021
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Major affiliates say they love the stability of regulation and the protection it gives them from being short-changed by operators, but some are still happy to do significant grey market business.

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Major affiliates say they love the stability of regulation and the protection it gives them from being short-changed by operators, but some are still happy to do significant grey market business.

A panel of affiliates at yesterday’s Betting on Sport Europe conference in London insisted that they are they are attracted to regulated markets and would welcome more countries directly licensing affiliates.

Only a handful of jurisdictions, including Romania, Greece and various US states such as New Jersey, require affiliates to be registered with a gambling regulator. In the UK and elsewhere, an operator bears the ultimate responsibility for keeping marketing partners compliant.

“I would lobby for regulation if I could,” said Marcos Oliveira, of Clever Advertising. “[Regulation means] I have a clear framework for what I can do and what I can’t do. And it gives me protection for my business.”

“When you’re an affiliate you are in a position of the least strength against the operator. In a regulated market you have the government to protect you. You can defend against an operator that doesn’t want to pay you, or whatever happens,” he said.

Oliveira's comments echo the position of trade group Responsible Affiliates in Gambling, which has lobbied as part of the UK Gambling Act review to introduce dedicated licenses for affiliates.

“We tend to thrive in regulated markets,” said Catena Media chief executive Michael Daly.

He cited the dawn of online gambling regulation in Italy, which was considered likely to crush gambling revenue at the time, but “turned out to be a very good market”, said Daly.

“With the regulation came stability,” he said.

Despite an appreciation for regulated gambling, both affiliates admitted to still doing significant business in grey markets.

Oliveira said that Clever Advertising is roughly 50/50 on its revenue split from regulated and unregulated markets, with the latter having grown significantly in recent months thanks to an explosion of interest in Brazil.

Brazil has passed legislation to allow for fixed-odds sports betting, but has dragged its heels on implementing secondary legislation and starting a licensing process. With the Qatar World Cup 2022 looming next year, officials have said they are pushing for progress in the next few months.

Daly made reference to Catena Media activity in Japan, a market where offering online gambling is strictly speaking illegal, but the law is almost entirely unenforced.

Daly said that Catena does “upwards of 80 percent” of its business in regulated markets.

Panellists made repeated reference to these and other markets without licensing frameworks as “pre-regulated”, an attempt to coin a softer term than the traditional denomination of a grey or black market.

But the turn of phrase did also represent a consensus view that every country is moving towards the regulation of internet gambling in the long term.

“It seems an inevitability at this point, with the number of large countries that have moved to regulation,” said Daly.

Affiliates also say they seek the stability of national frameworks because they now face the reality of “soft regulation” by powerful tech companies.

Mostly recently, Amazon-owned streaming platform Twitch banned gambling affiliate links from its platform, after partnerships with streaming stars to showcase new online casino content had become a powerful player acquisition channel during the pandemic.

“We got screwed,” said Oliveira.

Jonathan Edelshaim, general manager of Israel-based affiliate Natural Intelligence, said his company only does business in regulated countries and even then cannot enter some markets because Google does not allow gambling ads on its platform in that nation.

Daly, however, is optimistic that the likes of Twitch will make a more concerted return to gambling in the future.

The Catena boss likened the current resistance to the trajectory of US land-based casinos, which after years of lobbying against online gambling have largely embraced mobile sports betting and increasingly internet gaming on their own terms.

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