Massachusetts Regulators Relax Sports-Betting Affiliate Restrictions

March 3, 2023
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After three days of discussions, the Massachusetts Gaming Commission has voted to temporarily lift a prohibition on cost-per-acquisition and revenue-share agreements between third-party marketing affiliates and licensed sports-betting operators.

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After three days of discussions, the Massachusetts Gaming Commission (MGC) has voted to temporarily lift a prohibition on cost-per-acquisition (CPA) and revenue-share agreements between third-party marketing affiliates and licensed sports-betting operators.

Affiliates will now be allowed to apply for a waiver to enter into revenue-share and CPA deals through April 14, while the MGC studies the issue and potentially amends the rule permanently.

Prior to approving the amendment to the commission's sports-betting vendors regulation on Thursday (March 2), Massachusetts had proposed banning both revenue-sharing and CPA deals.

The change to the regulation comes before the March 10 launch of mobile sports betting, which accounts for as much as 90 percent or more of the legal wagering in other states.

The five-member commission voted unanimously to approve the waiver for CPA deals between operators and affiliates, but commissioner Eileen O'Brien was the lone holdout when the MGC also approved a waiver for revenue-sharing agreements.

Affiliates work under either CPA agreements, through which they are paid per customer who signs up for an account and places a wager through a sports-betting operator, or revenue-sharing agreements, which entitle the affiliate to receive a portion of the revenue generated by that customer over time.

O'Brien agreed with allowing CPA deals until April 14, but urged her colleagues to keep the ban on revenue-sharing agreements to allow the MGC to implement new safeguards.

“I'm not convinced on revenue share,” O'Brien said. “Looking at other states, like New York, are moving in our direction and we are contemplating moving away. I’m not convinced we should be moving away from that [ban].”

New York regulators have introduced proposed rules with virtually identical language to Massachusetts on affiliate agreements.

Illinois and Connecticut are two states that have approved similar regulations, although rules in those states ban affiliate agreements where compensation is based on the volume or outcome of wagers, not those based on the number of patrons acquired.

“But I absolutely don’t think there is a reason [to lift the ban] in the next five weeks,” O'Brien added.

The MGC began its discussion on potentially amending Regulation 256 on Monday when it hosted a two-hour meeting to hear from affiliate companies and sports-betting operators on how a ban may potentially impact their business in Massachusetts.

No final decision on the regulations was made during a lengthy meeting on Wednesday, leaving it up to commissioners to decide how to proceed on Thursday and looking for operator input on how keeping the ban in place might impact their operations.

MGC executive director Karen Wells said she got some response after reaching out late Wednesday, although two of the operators said they would not be using affiliates regardless, “so it was irrelevant to them.”

“One of them indicated it would be disruptive to do this now,” Wells said. “Another indicated that it would be actually helpful to do the waiver and then a third, although they use affiliates, they only use two and they were neutral. It didn’t make any operational difference to them one way or another.”

Wells declined to identify the operators she spoke with on Wednesday.

“In terms of the information that Karen [Wells] just gave us about the operators' perspective on this and with all due deference to the perspective of the affiliates, my job isn’t to make the affiliates money,” O'Brien said.

“My job is to maximize the profit and minimize the risk in the commonwealth and you got operators who are saying they are not using it or on equal measure saying it's helpful and disruptive. Given that, I’m of the mind that there is no reason to do this in the next five weeks.”

Commissioners Nakisha Skinner and Jordan Maynard argued that waivers for CPA and revenue-share deals should be available through April 14. Skinner expressed her concern that keeping the revenue-share ban in place would hurt smaller affiliates and operators looking to work together from launch on March 10.

The commission on Thursday also revised the wording within its regulation, renaming certain types of affiliates as “revenue-sharing advertisers”, and adding that those affiliate companies seeking to enter into revenue-sharing agreements would need to be licensed and not just registered with the state.

Loretta Lillios, director of the MGC’s Investigations and Enforcement Bureau (IEB), said licensing of affiliates would require a deeper dive into the business, as well as identifying all company executives as well.

In Massachusetts, it costs $5,000 to register a gaming company, while a licensing fee is a $15,000 along with all costs covered by the applicant.

The MGC decided to change the licensing structure for affiliates to try to “disincentivize” affiliates that might not make a long-term commitment to Massachusetts.

O'Brien also brought up the issue of advertising Thursday, crediting the MGC’s director of sports wagering Bruce Band for being responsive when she calls. She also credited FanDuel for being responsible for taking down an ad that wrongly referenced being able to load an account with a credit or debit card in Massachusetts when state law prohibits the former as a deposit method.

“They pulled it down and changed it,” O'Brien said. “I do want that to be brought up at some point.”

O'Brien noted her concern that the new ad mentions a pre-paid FanDuel card, especially as the state is one week away from launching mobile sports betting.

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