Massachusetts Adopts Permanent Ban on Sports Betting Affiliate Revenue Share Agreements

Massachusetts sports betting operators will still be allowed to use third-party marketing affiliate websites to recruit bettors under a revised advertising regulation approved by state gaming regulators on Monday. But revenue share agreements with those affiliates will be prohibited.

Revenue share agreements allow affiliates to be paid a percentage of net revenue wagered by bettors directed to an operator by a site. Cost-per-acquisition, or CPA, agreements allow affiliates to be paid when a bettor referred to an operator creates an account or makes a deposit.

According to testimony from sports betting affiliates before the Massachusetts Gaming Commission in February, at least 90 percent of their revenue comes from CPA agreements that refer bettors to sportsbooks. Revenue sharing for most of those affiliates is 10 percent or less of their income.

The revised language approved unanimously on Monday by the commission is part of a permanent state regulation on sports betting advertising in the Commonwealth. Massachusetts is currently operating under an emergency regulation that bans both CPA and revenue-sharing agreements, although that ban is waived by the commission through April 14.

The waiver, granted by the MGC on March 2, was intended to support the development of the commonwealth’s mobile sports betting market that launched on March 10.

The regulation as revised and approved today now goes to the Secretary of State for formal filing. The waiver language on CPA and revenue share agreements will stay in effect until April 14, when the new regulatory language will take its place.

Gaming Today is part of Catena Media, a global gambling affiliate network that has relations in Massachusetts and most other legal gambling states in the US.

New Language Approved

The language adopted by the MGC on Monday for permanent regulation reads:

“No Sports Wagering Operator may enter into an agreement with a third party to conduct advertising, marketing, or branding on behalf of, or to the benefit of, the licensee, in exchange for a percentage of net sports wagering revenue earned from users that the third party directs or causes to be directed  to the Operator.”

The ban on CPA and revenue share agreements waived by the MGC on March 2 is part of a 90-day emergency regulation adopted by the MGC in late 2022. That regulation — which will be replaced on April 14 — reads:

“No Sports Wagering Operator may enter into an agreement with a third party to conduct advertising, marketing, or branding on behalf of, or to the benefit of, the licensee when compensation is dependent on, or related to, the volume of patrons or wagers placed, or the outcome of wagers.”

The New York State Gaming Commission has adopted a nearly identical regulation banning compensation agreements in recent months. Two other states — Connecticut and Illinois — ban sports betting and gaming marketing affiliates altogether.

Split Opinions

Not all commissioners were initially in favor of keeping CPA agreements while proceeding with the revenue share ban. Commissioner Eileen O’Brien — who ended up voting in favor of the revision as approved — said early in Monday’s meeting that she wanted to keep the ban as written before the waiver. “My preference is still the original language,” she said.

Also in favor of keeping the original ban is the Massachusetts Attorney General’s Office (AGO), which provided written comments on proposed regulatory changes to the advertising regulation in 205 CMR 256. M. Patrick Moore Jr. with the AGO stated what he called “the fact that certain third-party marketing vendors present themselves to the public as tip sheets, providing advice on prospective wagers” as a reason for retaining the original language.

The sports betting industry, however, provided written comments stating that keeping CPA agreements (at least) helps them compete with unregulated sportsbooks operating in Massachusetts. Unregulated sportsbooks do not ensure that winnings will be paid and do not pay taxes on adjusted revenue.

“By prohibiting revenue share and CPA, the likely results will be that those that have a true interest in being educated and placing a wager in the legal market will not be able to effectively do so as takes place in other regulated jurisdictions,” stated Jeff Ifrah with iDEA (iDevelopment and Economic Association), an advocacy organization for the online gaming and sports betting industry.

“Additionally … offshore sportsbooks will be more likely to continue prospering and the market is likely to become consolidated and anti-competitive,” wrote Ifrah.

Massachusetts Tougher Than New Jersey on Affiliates Issue

MGC Chair Cathy Judd-Stein pointed out that the regulation adopted today is stricter than in New Jersey, which does allow revenue share — although New Jersey requires enhanced licensure from vendors who engage in it.

The MGC in early March tweaked its vendor regulations to require enhanced licensure of affiliates engaged in revenue-share agreements. That licensure language is now apparently moot.

Judd-Stein seemed specifically sympathetic on Monday to small businesses that may want to enter the Massachusetts sports betting market on a revenue-share basis. “I think I might be in the minority but I still am thinking of our roundtable (in February) and the plea from folks who are a very small group who are saying we won’t be able to enter this space if CPA is the only option.”

But interest from small affiliates has apparently waned. MGC staff said at Monday’s meeting that small affiliates have not expressed much interest in the market as of late.

“Anecdotally, we’ve heard from a couple of marketing affiliates that indicated they had been interested in doing marketing in the commonwealth but the value of their contracts with operators would not make it worthwhile in a business sense,” said MGC Licensing Chief Kara O’Brien.

Other revisions to  205 CMR 256 adopted by the commission today prevent operators and their affiliates from advising or encouraging specific types or amounts of bets. The restriction does not prohibit general promotions, such as telling a bettor that they need to place a specific wager or amount of wager to receive “a promotional benefit.”

About the Author
Rebecca Hanchett

Rebecca Hanchett

Legislative Writer
Based in Kentucky's Bluegrass region, Rebecca Hanchett is a political writer who covers legislative developments at Gaming Today. She worked as a public affairs specialist for 23 years at the Kentucky State Capitol. A University of Kentucky grad, Hanchett has been known to watch UK. basketball from time to time.

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