The regulatory framework for online gaming and sports betting in the U.S. is complex, as it is regulated primarily at the state level. This has resulted in a patchwork of laws, with each state establishing its own rules and requirements for operators, including media affiliates who provide marketing and referral services to licensed operators.
Media affiliates play an essential role in the online gaming and sports betting ecosystem by promoting gaming sites, directing traffic, and earning commissions through referrals.
However, the legal obligations for media affiliates vary from state to state, with some states requiring affiliates to obtain licenses and others allowing affiliates to operate without formal licensing.
U.S. States That Have Legalized Gaming and Sports Betting
As of 2024, several U.S. states have legalized online gaming and sports betting.
With regards to online sports betting, while most states that have enacted sports betting legalized online sports betting as well, in some states online sports betting may be only conducted from within the premises of licensed locations, while in other jurisdictions sports betting is legal but online sports betting is yet to be introduced and activated.
The US States that enacted laws legalizing sports betting are:
- Arizona
- Arkansas
- Colorado
- Connecticut
- Delaware
- Florida
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- Ohio
- Oregon
- Pennsylvania
- Rhode Island
- South Dakota
- Tennessee
- Vermont
- Virginia
- Washington D.C.
- Washington
- West Virginia
- Wyoming
It is also important to note that while many states have chosen to legalize sports betting, (including, in most cases, online sports betting) only a handful of states have chosen to legalize online gaming in addition to sports betting.
To date, only eight (8) states offer regulated online gaming:
- Connecticut
- Delaware
- Michigan
- Nevada
- New Jersey
- Pennsylvania
- Rhode Island
- West Virginia
Media Affiliate Licensing
Affiliate marketing is a multi-billion dollar industry as of 2024. The basic idea behind it is, that by offering incentives to affiliates that promote their services, companies can in turn reach more customers. Many popular online gaming websites offer affiliate programs to drive customer growth, which in turn lead to a highly competitive landscape.
There are two (2) basic business models for affiliates known as Cost Per Acquisition (“CPA”) and Revenue Sharing (“Rev-Share”). Cost Per Acquisition is a simpler model. Instead of receiving a cut of revenues that the referred user earns the operator, the affiliate is paid a fixed fee for every person it drives to the service. CPA is easier to administer, but the affiliate may find it less lucrative than Revenue Sharing on a long-term basis.
In the US, some of the states which have legalized online sports betting and gaming require affiliate marketers (also referred to as “vendors”) to be licensed in order to provide services to local licensed operators. Some of these states have even designed distinct and specific regulatory requirements for affiliate marketers operating under a CPA model and for those who operate under a Rev-Share model.
Currently, the following US States require media affiliates to be licensed:
- Arizona
- Colorado
- Indiana
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- New Jersey
- Pennsylvania
- Tennessee
- Virginia
- West Virginia
Key Considerations for Media Affiliates seeking to be licensed
- Compliance with State Regulations: Even in states where a license is not required, affiliates must ensure they comply with advertising laws, which may include responsible gaming disclosures, restrictions on targeting minors, and avoiding misleading promotional practices.
- Revenue Models Impact Licensing: States often differentiate between affiliates based on their revenue model. Cost-per-action (CPA) and revenue-sharing models may trigger licensing requirements, while flat-fee advertising may not. In other cases, those who opt to offer services on a revenue sharing basis, will, in many states, face a much more stringent, rigorous and demanding licensing process in comparison to those operating under a CPA model.
- Background Checks and Investigations: In states that require licensing, affiliates should be prepared for rigorous background checks and investigations, similar to the scrutiny faced by gaming operators. In some cases, applicants may be required to submit sets of their fingerprints.
- Incorporation may be outside of the US – it is not mandatory to incorporate in the US in order to apply for affiliate licenses. Yet, it is highly advisable that you incorporate in a top tier reputable onshore jurisdiction. It is not advisable to incorporate in an offshore jurisdiction.
- Registration with state authorities other than the gaming regulators – In some states, licensing with the state gaming regulator is not the only process to undergo, as you will be required to register with other state authorities for corporate and taxation purposes.
- Relationship with a licensed operator – Establishing a contractual relationship with a licensed operator in the state where you apply is not only a legal and commercial obligation, but also a key requirement in the licensing process as state regulators typically expect to be shown a draft agreement or letter of intent stating the intention of the said operator to do business with the applicant media affiliate.
Comparison with other jurisdictions
When it comes to comparing the licensing of media affiliates between jurisdictions, it must be noted that only a handful of jurisdictions have put in place specifically designed licensing frameworks for media affiliates. Except for the US, licensing of media affiliates operating in the online gaming and sports betting sectors may be found mostly in European states such as Romania and Greece.
Unlike most US states where media affiliates are required to be licensed, Romania and Greece do not differentiate between those operating under a CPA model and those operating under a revenue sharing model, as license requirements and licensing process are the same.
The licensing process for media affiliates in Romania and Greece and for media affiliates operating under a CPA model in the US are all lenient and relatively affordable. The licensing process for media affiliates operating under a revenue share model in the US is more demanding and complex in comparison to any other affiliate licensing framework out there. Yet, you must remember that in the case of the US, the benefit is the ability to operate in the most booming online gaming and sports betting industry in the world today.
Conclusion
The regulatory environment for media affiliates in the U.S. online gaming and sports betting sectors is diverse and complex, varying significantly from state to state. While some states impose strict licensing requirements with substantial fees and rigorous application processes, others adopt a more lenient approach, focusing on general business compliance without specific affiliate licensing. Media affiliates must consult with legal experts to navigate the intricate regulatory frameworks effectively. Staying informed about ongoing legislative changes is crucial, as the landscape is constantly evolving in response to the industry’s growth and public policy shifts.
Should you require further details or assistance with setting up your media affiliate venture in the US or alternatively in Romania or Greece, please do not hesitate to contact us.
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