In late August, DraftKings was fined $94,440 in Maryland for allegedly advertising to underage fantasy sports players. A little over one month later, PointsBet was fined $25,000 in New Jersey for undisclosed gambling advertising violations. It is admittedly difficult for gambling advertising companies to manage compliance with numerous and differing regulations across state lines. However, it is crucial that they do. The consistent rate at which state authorities are dolling out fines makes clear that they intend to vigilantly enforce compliance with their advertising regulations.
The Growth of Online Gambling
Currently, six states of the Union have sanctioned online casino gaming within their borders. Twenty-four states and the District of Columbia have legalized online sports betting. Quite astonishingly, it took Massachusetts residents only seven months following legalization for their total accrued wager amounts to exceed $3 billion dollars! Of course, massive sports gambling income translates to massive state tax revenue (roughly $24mm per month over the past year in New Jersey alone). Accordingly, we expect that more states will continue to legalize online gambling.
Getting Licensed for Gambling Advertising
With the proliferation of online sports betting across the United States, it can be quite lucrative for companies to advertise for casino and sports gambling operators and licensees. Before proceeding, however, it is important that marketing companies familiarize themselves with the necessary licensure requirements to do so.
Every jurisdiction has its own gaming authority and statutes. It is important to point out, however, that general rules pertaining to gambling advertising apply across state lines on a federal basis as well. As a threshold matter, companies applying for state gambling advertising licensure must have a letter of intent ("LOI") or executed contract with a gaming operator or licensee authorized to do business in the applicable jurisdiction. In some states, marketers will not be allowed to even begin the licensure process without first submitting this LOI or contract.
Companies contracted to advertise for a casino, sports betting operator, or licensee on a flat rate basis (such as Cost Per Click ("CPC"), Cost Per Impression ("CPM"), etc.) face a relatively easy path to licensure. There are lower fees and fewer forms that need to be submitted for what is typically known as a "vendor" license. In some jurisdictions, a company that is already licensed as a vendor in another state, merely has to pay a fee of a few hundred dollars to become licensed.
Many companies that conduct gambling advertising for casino operators or licensees choose to do so on an equity or "bounty" basis. These companies are paid based upon a user's signing up for an account and/or an additional variable, such as the amount that customers deposit or bet. Terminology for companies that advertise on a "bounty" basis includes, among other descriptors, affiliate marketers and online gaming service providers, depending on jurisdiction. Contracting on an equity basis may be more lucrative, but with it comes a lengthier and more costly application process. As opposed to the few pages and nominal fees that accompany vendor licensure, affiliate marketer applicants can expect to deal with hundreds of pages of paperwork, voluminous document production, and an initial application fee that often exceeds $2,000. Companies contracted to conduct gambling advertising on a "bounty" basis can expect to disclose their entire corporate structure, litigation history, and finances. In addition, company officials must undergo extensive background checks.
How Should Your Company Approach Gambling Advertising?
As can be seen from regular news breaks, each state's gaming commission maintains a significant interest in policing its gambling operators and advertisers. The first step for any company interested in conducting gambling advertising is to consult with experienced legal counsel. Applicants must be very clear about which type of license they are applying for and proceed through the process carefully. Note that, after attaining licensure, gambling advertisers must ensure continued compliance with ever-changing regulations.
The attorneys at Klein Moynihan Turco diligently monitor evolving gambling marketing regulations so that clients remain compliant with applicable state and federal laws.
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