Online sports betting sites have yet to legally launch in Massachusetts, but Bay State regulators are hearing their currently proposed marketing rules could have unintended consequences that weaken the wagering market.
Among other things, Massachusetts sports betting regulations currently propose a prohibition on sportsbook operators from entering into agreements with third parties to advertise on their behalf or for their benefit if the marketer's compensation is tied to the number of customers, wagers placed, or the outcome of wagers.
The ban would deal a blow to marketing affiliates paid for referring bettors to bookmakers. And this, the Massachusetts Gaming Commission (MGC) heard on Monday, could cause problems, as affiliates drive a considerable amount of business to legal sportsbooks.
If marketing affiliates are denied cost-per-action or revenue-share contracts, they may abandon the Massachusetts market, which could lead to more mass advertising in the state and potentially allow illegal offshore sportsbooks to position themselves atop the website search rankings.
“What these media affiliates are doing is investing money to make sure that when a Massachusetts consumer wants to know where a legal sportsbook is, he or she can find that sportsbook quickly,” said Jeff Ifrah, of Ifrah Law, on behalf of three marketing affiliates. “The common goal is really to protect consumers, generate taxes and keep out the bad actors.”
Mobile launch drawing near
The Massachusetts model is already starting to weigh on the decision-making of sportsbook operators, who have less than two weeks before the scheduled start of mobile sports betting in the state on March 10. For instance, Caesars Sportsbook has already indicated it will not work with affiliates on any revenue model under Massachusetts' current rules.
Legal sports betting began in Massachusetts on January 31 at three casinos. However, the bulk of wagering is expected to happen online when mobile bookmakers are authorized to launch next month.
Almost no other state with legal sports betting is currently doing what Massachusetts is proposing either, the MGC heard.
“If the affiliates are not encouraged to stay in Massachusetts, and they leave, the result will be that you'll be back to giving Massachusetts consumers organic search results which drive them offshore, which don't protect them, and obviously don't generate taxes for Massachusetts,” Ifrah added.
A balancing act
Ifrah and the affiliates are asking the MGC for a “more relaxed approach” that lines up with what most other states are doing. That was echoed by representatives of sportsbook operators, who use affiliates such as Covers to acquire customers and educate consumers about the legal market, industry, and wagering in general.
“We've spoken often about these gray market, illegal operators and how an unassuming patron or someone who's never wagered on a platform and another jurisdiction may not fully be aware of who is a licensed operator and who is not,” said Sarah Brennan, senior director of compliance for BetMGM. “And affiliate marketing helps to legitimize those of us who have gone through this process with you all.”
The MGC will meet later this week to consider its marketing affiliate rules. Some comments from commissioners suggested the regulatory body could be open to tweaking its standards.
“I will echo my fellow commissioners and say that part of what we do here is try to strike a balance,” Commissioner Jordan Maynard said during Monday’s meeting. “And we're always reevaluating where we are on that spectrum on striking that balance.”
