Massachusetts Gaming Commission Approves Sports-Betting Vendor, Tax Regulations

December 2, 2022
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As the Massachusetts Gaming Commission prepares to host a public hearing Monday on the state's three casino retail sports-betting licenses, commissioners agreed to set aside some time in an upcoming meeting for a policy briefing on promotional play credits and free bets.

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As the Massachusetts Gaming Commission (MGC) prepares to host a public hearing Monday (December 5) on the state's three casino retail sports-betting license applicants, commissioners agreed to set aside some time in an upcoming meeting for a policy briefing on promotional play credits and free bets.

The five-member commission will take up the issue following written comments submitted to the agency from MGM Springfield, DraftKings and Fanatics Betting and Gaming.

On Thursday (December 1), the MGC unanimously approved a proposed regulation that taxes sports betting and fantasy sports but does not allow for companies to offer tax-deductible free bets as an enticement to sign up for a retail or mobile wagering account.

The regulation now goes to the secretary of state’s office for final consideration.

Commissioners will discuss free bets on December 12 and can come back with any needed amendments to the regulations that govern sports betting taxes.

An MGC spokesman confirmed Thursday that the state law authorizing sports betting does not prohibit promotional play, leaving the decision up to the gaming commission.

An original bill approved by the Massachusetts House of Representatives would have allowed operators to exclude free play credits from their taxable revenue, but a final bill did not, and instead directed the MGC to promulgate regulations to ban “advertising, marketing and branding through certain identified promotional items … which may include giveaways or promotional gaming credits. “

Brandt Iden, vice president of government affairs with Fanatics Betting and Gaming, which has applied for a mobile license, urged the commission to allow the use of promotional credits and exclude them from any tax liability.

In a letter to MGC chair Cathy Judd-Stein dated November 22, Iden said promotional credits were particularly important to Fanatics as a “second mover in the market with intentions on capitalizing on our unique consumer base.”

“While other online sports wagering operators attract players from their existing daily fantasy sports or casino userbase, (Fanatics) brings the ability to tap into our over two million Massachusetts consumers within our existing consumer space.”

To achieve this full potential for both Fanatics and the state, Iden said, the company would “need to be able to operate equitably with other national operators who have had years to build brand recognition and familiarize consumers with their platforms.”

DraftKings and MGM Springfield sent similar letters and, like Fanatics, urged the commission to exclude promotional or free play credits from their taxable revenue.

Commissioners are expected to amend the regulation in January to add new language clarifying the amount of fantasy sports revenue subject to taxation in Massachusetts from national contests.

Derek Lennon, chief financial officer with the MGC, suggested the state follow the location-based percentage for taxing national fantasy contests, which is consistent with other states, including New York, New Jersey and Pennsylvania.

During the three-hour meeting Thursday, the commission also granted final approval on an amended set of sports betting definitions that are used throughout the regulations, requirements that must be met to apply for a sports wagering operator license, and regulations governing the licensing of sports betting vendors.

In regulating sports betting vendors, the MGC has initially determined to treat marketing affiliates, or those who provide content to consumers in exchange for a commission for each visit or signup directed to sportsbook operators, as vendors.

That higher level of licensing mirrors what investigators do for gaming vendors, such as slot machine manufacturers and companies that provide products and services directly related to gaming.

Prior to unanimously approving the vendor regulations, commissioners agreed to consider at a meeting next month amending the regulations to allow marketing affiliates to instead merely register and not be licensed by the Massachusetts Gaming Commission's Investigations and Enforcement Bureau (IEB).

Loretta Lillios, IEB’s director, noted there are hundreds of marketing affiliates, and the bureau is simply not set up to perform the type of investigation that it would need to do under the existing regulations for that category of licensure.

“These are fairly deep-dive investigations, and the marketing affiliates are not directly related to the operations of sports wagering,” Lillios said. “The commission determined to elevate the marketing affiliates because of the particular concerns around the protection of minors.”

She reminded commissioners that as they learn more about this area, they can tailor the level of review and regulatory burden precisely to the specific concerns in this area.

“We can register all of them,” Lillios added. “It is not a very burdensome process. But there is a provision in there that we can come back and want something more.”

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