The Massachusetts Gaming Commission (MGC) is scheduled to vote on Wednesday on amendments to its operative rule prohibiting marketing affiliate revenue-share or cost-per-acquisition (CPA) deals, following public input from affiliate representatives and sports-betting operators.
No final decisions on the regulations were made during a two-hour meeting on Monday (February 27), but the five-member commission seemed to be more willing to allow CPA agreements with affiliates, while several commissioners still had concerns on revenue-sharing deals.
“We learned that our regulation might be raising issues that we weren’t aware of and whenever we learn there might be either unexpected consequences or at least questions, we want to hear from the stakeholders who can best explain it to us,” said MGC chairwoman Cathy Judd-Stein.
Judd-Stein told attendees, including WynnBet, BetMGM and Penn Entertainment, that at a later time the regulator would “look at the regulations and decide if we want to make any changes,” but Monday’s meeting was about allowing the industry to explain the issues.
Massachusetts’ adopted sports-betting advertising regulations to prohibit all operators from entering into agreements with third parties when the amount paid depends on the volume of clients, wagers, or the outcome of specific bets.
Although regulation does not ban affiliates from operating in Massachusetts, if they are denied CPA or revenue share contracts they may decide against doing business in the state, leading to more advertising and online marketing by illegal sportsbooks.
“What these media affiliates are doing is investing money to make sure when a Massachusetts consumer wants to know where a legal sportsbook is, he or she can find that sportsbook quickly,” Jeff Ifrah, founding partner of Ifrah Law in Washington, D.C., told the commission.
“This is a really key thing to grow the business in Massachusetts,” said Ifrah, who represents leading affiliate companies Gambling.com Group, Catena Media, and Better Collective USA.
Ifrah said the common goal with these agreements is “really to protect consumers, generate taxes and keep out bad actors.”
Among the common challenges, he said, are the illegal industry’s huge head start online, their lying about being illegal, and how easy they are to find on the internet, Ifrah said.
Legal retail sports betting launched in Massachusetts on January 31 at three casinos, while mobile wagering in Massachusetts is set to launch on March 10.
Ifrah said a typical sports-betting site, such as BetMGM or WynnBet, would see around 30 percent of their consumers have arrived as a result of the work affiliates do.
Almost no other state with legal wagering on sports is currently doing what Massachusetts is proposing, Ifrah told the gaming commission. However, New York regulators have introduced proposed rules with virtually identical language 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.
“If the affiliates are not encouraged to stay in Massachusetts, and they leave, the results will be that you will be back to giving Massachusetts consumers organic search results that drive them offshore, which don’t protect them and obviously don’t generate taxes for Massachusetts,” Ifrah added.
Ifrah and executives with affiliate companies urged the MGC to take a more relaxed approach to their regulations because of their business before mobile sports betting has even launched.
“This is already starting to happen because the affiliates on the call today are being discouraged from investing in Massachusetts,” Ifrah said. “Operators like Caesars have told them they are not going to be paid for the work that they do on any basis.”
Ifrah added that Massachusetts cannot afford to alienate the affiliates, “who are responsible for driving 30 percent of consumers to operators.” He reminded commissioners that these consumers are going to be the ones that generate the taxes Massachusetts needs to take away market share from illegal offshore sites.
Sarah Brennan, senior director of compliance for BetMGM, said “affiliate marketing helps to legitimize those of us who have gone through the process with you all.”
Brennan added that these arrangements “legitimise the market.”
The MGC is scheduled to meet again on Tuesday (February 28) to finalize the temporary licensing process for Betway, as well as approve regulations concerning sports-betting account management, internal controls, and uniform standards on sports wagering.
“We’ve have had a very robust discussion that is going to inform our decision making,” Judd-Stein said following the two-hour meeting on affiliates. “There are five of us … so we don’t know exactly which direction we are going to go in.”
Judd-Stein reminded attendees that all of the commissioners pushed for this, and at the end of the day there maybe guardrails put up for third-party operators but “we hold operators responsible for content and conduct for any and all advertising, marketing or branding done on its behalf.”