Affiliates under regulatory pressure in the US

[The Buzz]

Today's Compliance + More newsletter points out that regulators in several key states are coming down hard on revenue share and CPA deals.

From the article:

Collateral damage: Affiliates are the latest target in the ongoing war to rein in sports-betting marketing in the US.
Being an affiliate in the legal US market has always been a mixed bag. An affiliate can set up shop in some states with little effort.
In other states, there are hefty fees and mountains of paperwork.

And in states with structural monopolies, operators have informed affiliates their services aren’t required.

Wall of worry: The latest regulatory trend is the most worrying. It’s also unlikely to subside, given the scrutiny of advertising. Regulators in several key states have begun dictating how the operator-affiliate business relationship is structured, with Massachusetts regulators recently voting to prohibit revenue-sharing agreements.


Far from being a terrible outcome, the decision by the MGC is a massive win for the affiliate industry because, initially, Massachusetts prohibited both rev share and CPA deals.

New York has borrowed (but not officially adopted) the original language used in Massachusetts that prohibited rev share and CPA deals. The expected outcome is a ban on rev share.

Other states that are unfriendly to gambling affiliates are Connecticut and Illinois, with the former prohibiting CPA deals and the latter rev share.

Read the article here: https://complianceandmore.substack.c...m_medium=email

[bpmee]

What eventually happens in CA, TX, and FL is what will matter most.

I disagree that CPA is a big win for affiliates. Anyone with customers from MA will have to pony up $5,000 to get licensed.

Assuming an average CPA of $200, you need to acquire 25 customers to break even on the license. Some affiliates will do that in a month or less. Small operators will not.

The small shops will also inevitably give away higher value players for cheap. Imagine a $5k-$10K depositor going for $200?

In the end, this really benefits operators. They'll LOWER CPAs to discourage smaller affiliates while cutting exclusive deals with the corporate affiliates. There's no incentive to compensate affiliates and it will be a race to the bottom.

Additionally, some big name providers have performance requirements. They're not impossible for small shops, but still exponentially easier to meet if you're a corporate operation. We all consider quotas predatory; unfortunately the various regulatory agencies do not. Good luck getting them to reply to a new business application or email. Most will not talk unless you have a social connection or know someone who golfs with the affiliate manager.

Affiliates who send low value customers will have their contracts discontinued. Sorry, I don't see an operator paying $200 CPA indefinitely for customers with LTV less than $200. That doesn't make sense.

Finally, New York CPAs are laughable. I've heard legal operators offer anywhere from $50-$150! If RS disappears, the market will be a joke for affiliates. Yes -- this is due to the high tax rate (51%), but those CPAs are depressing.

One could honestly make more selling drones on Amazon.

The patchwork of regulations and licensing makes this market increasingly difficult to approach. For those that skip MA, operators essentially get free advertising for anyone that visits from the wealthy city of Boston and its suburbs.

[dannyx]

What eventually happens in CA, TX, and FL is what will matter most.

I disagree that CPA is a big win for affiliates. Anyone with customers from MA will have to pony up $5,000 to get licensed.

Assuming an average CPA of $200, you need to acquire 25 customers to break even on the license. Some affiliates will do that in a month or less. Small operators will not.

The small shops will also inevitably give away higher value players for cheap. Imagine a $5k-$10K depositor going for $200?

In the end, this really benefits operators. They'll LOWER CPAs to discourage smaller affiliates while cutting exclusive deals with the corporate affiliates. There's no incentive to compensate affiliates and it will be a race to the bottom.

Additionally, some big name providers have performance requirements. They're not impossible for small shops, but still exponentially easier to meet if you're a corporate operation. We all consider quotas predatory; unfortunately the various regulatory agencies do not. Good luck getting them to reply to a new business application or email. Most will not talk unless you have a social connection or know someone who golfs with the affiliate manager.

Affiliates who send low value customers will have their contracts discontinued. Sorry, I don't see an operator paying $200 CPA indefinitely for customers with LTV less than $200. That doesn't make sense.

Finally, New York CPAs are laughable. I've heard legal operators offer anywhere from $50-$150! If RS disappears, the market will be a joke for affiliates. Yes -- this is due to the high tax rate (51%), but those CPAs are depressing.

One could honestly make more selling drones on Amazon.

The patchwork of regulations and licensing makes this market increasingly difficult to approach. For those that skip MA, operators essentially get free advertising for anyone that visits from the wealthy city of Boston and its suburbs.

Betonline, Bovada, GTbets, Jazzsports, Loselines and other offshore bookie sites are responding to regulatory concerns.
It is a better solution for players and affiliates.

[bpmee]

Are they loosening up on player quotas and increasing RS deals?

How long until they face a crackdown or other legal threat that causes them to stop paying affiliates or go out of business?

I think the USA market eventually goes fully legal long term and promoting offshores becomes a big risk. Those focusing on the US market exclusively will have to be extremely wary. I give the offshores another 2-3 years tops before things get shaky.

On the other hand, if you're just monetizing US traffic on a global site, and you're based outside the USA, promoting the offshores could be viable until CA, TX, and FL come online.

[dannyx]

To me, it's hard to imagine what it will be like in the future. It seems to me that the solid offshore brands will continue to operate. It seems that better players will look for higher odds and those offshore bookmakers certainly have(But here I'm not sure, I don't promote anything in the US market). On the other hand, the legendary 5dimes no longer operates in the US, anything is possible. Perhaps purely cryptocurrency sites will be left alone, without even lousy Curaco-type licenses and without KYC/AML.


Perhaps offshore operators will start to operate similarly to mainland China. That is, a heavy emphasis on communicators and direct player recruitment.

For a US person, promoting offshore brands can be risky, as you say. I myself don't promote anything in the country I live in.
However, it all depends on how it is enforced. For example, countries like France, Denmark, Poland, Russia are quick to block offshore affiliate witties. I myself was interested in translating the site into Russian because the keywords I have on the site are popular in Russia, but I know that the site would certainly be blocked quickly.
If the U.S. does not block offshore affiliate sites then a person from outside the U.S. will be able to operate in this market to some degree, especially as the three largest states are in play.