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Massachusetts Lessens Licensing Burden on Marketing Affiliates… For Now

Massachusetts Lessens Licensing Burden on Marketing Affiliates… For Now

December 1, 2022

Massachusetts Lessens Licensing Burden on Marketing Affiliates… For Now

By: Sara Dalsheim

On December 1, 2022, the Massachusetts Gaming Commission (“MGC”) held an Open Meeting to discuss a number of items ahead of the upcoming launch of retail sports wagering and later launch of online sports wagering. Of particular note was a topic brought up by the Director of the Investigations and Enforcement Bureau, Loretta Lillios, requesting that the MGC, at least temporarily, lessen the licensing requirements for marketing affiliates.

Originally, MGC considered marketing affiliates to fall under the state’s definition of a “sports wagering vendor”. This characterization meant that the MGC put marketing affiliates in a category for any entity deemed to be providing services directly related to the operations of sports wagering, like platform service providers and geo-location service providers. For all sports wagering vendors, including marketing affiliates, the MGC appeared to seek to apply a licensing procedure similar to that which the MGC currently requires of slot machine manufacturers. The sports wagering vendor licensing requires in-depth business and personal disclosures of key personnel, owners, and certain officers.

In Director Lillios’ preparation for the launch and licensing of all sports wagering vendors, she asked the operators to provide a list of all their current vendors, including marketing affiliates. She was shocked to see that operators listed hundreds of marketing affiliate partners. Director Lillios noted to the Commission that licensing all of the affiliates, as currently contemplated, would be too heavy of a burden for her department to handle in a reasonable timeframe and not all of the vendor licensing procedures are necessarily pertinent to marketing affiliates. [1]

Director Lillios and the Commissioners discussed a number of suggestions for how marketing affiliates’ licensing/registration could be handled. However, throughout the discussion, it was evident that the MGC is in dire need of a better understanding of the marketing affiliate industry and key players, what they do, and how they contract with sports betting operators. Commissioners themselves admitted a lack of a full understanding of how marketing affiliates operate. The Commissioners discussed potential changes to the currently contemplated definition. They also requested a precise list of marketing affiliates proposing to provide services in the Commonwealth. Commissioner Mark Linden noted that in his research he found that his initial assumptions of who marketing affiliates are, their role, and form of payment were incorrect; and he noted that their form of payment and the durations of their contracts should be potential key factors in licensing distinctions. The regulations on advertising and marketing are scheduled for MGC discussion later this month. The Commissioners mentioned numerous times that the marketing affiliate definition and licensing obligations would be better determined at that time.

However, Director Lillios needed answers on how to treat marketing affiliates now since those involved in the upcoming launch of retail sports wagering will be pursuing licensure very soon. At the close of the Open Meeting, in connection only with the retail launch, marketing affiliates will be registered, as opposed to licensed, with the possibility that “heavy hitters” will be elevated to higher scrutiny; and MGC will work later this month on amendments to the regulations in conjunction with their discussion during this meeting. [2] It was noted that this only authorizes a lower level of registration for the initial retail launch and MGC was very clear that it is not giving up its original decision to license marketing affiliates as a vendor or stating that registration would remain. Therefore, the holding today is subject to be completely reworked when MGC has its meeting on the advertising and marketing regulations. 

Interestingly, it was never mentioned how other states treat marketing affiliates in terms of licensing. A quick review of how any currently live online sports betting state treats marketing affiliates would be enlightening for the MGC. No similarly situated states require affiliates with traditional cost per acquisition contracts to succumb to such a heightened licensing burden, and many require no licensing or registration at all. [3] Further, there was no mention of consulting with industry experts or players. It is also concerning that, while no mobile sports wagering regulations are final, the MGC has drafted regulations with implications on entities and sectors of the sports wagering industry that the MGC is still studying to understand how these entities operate. Hopefully, the discussion illustrated to MGC Commissioners that it should do a fulsome analysis before burdening mobile sports wagering vendors and affiliates with licensing requirements more burdensome than any other similarly situated state.

It has been confirmed via phone call on January 26, 2023 with the Massachusetts Gaming Commission’s Director of Licensing that marketing affiliates will only be required to obtain a Vendor Registration, not license, to operate in Massachusetts. Although, the Director will be revisiting the marketing affiliate requirements later in February or in March of 2023. 

 

[1] Director Lillios also noted her discovery of the large amount of turnover amongst the operator-marketing affiliate relationship, and there is a valid concern that investigations may last longer than the length of the relationship.

[2] There was limited to no mention of what a “heavy hitter” marketing affiliate is or would be considered; however, the term was utilized numerous times by Commissioners. Are these the most prominent marketing affiliate brands? Marketing affiliates with revenue share based payments? The answer remains to be seen.

[3] Notably, states such as Colorado, Michigan, New Jersey, and Pennsylvania do require similarly heightened licensure levels from marketing affiliates which obtain revenue share-based payments.

Sara Dalsheim

Sara Dalsheim

Sara Dalsheim’s life-long passion for sports and the law fuels her commitment to assisting all players in the sports betting industry, whether in navigating the ever-evolving regulatory and licensing issues inherent in this burgeoning industry or negotiating operations and sponsorship agreements. Sara advises clients throughout the sports betting and gaming ecosystem on how to structure business partnerships that minimize liability and maximize revenues.

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