Why Pennsylvania would benefit from regulating online gambling affiliates

Words by Chris Grove, consultant to Catena Media

Now that Pennsylvania has become the fourth state to legalize online poker or casino games, regulators will face a number of decisions regarding the shape and direction of the market. While the bill that legalized online play provides the broad strokes, many of the operational specifics will be left in the hands of the Pennsylvania Gaming Control Board (PGCB).

Among those decisions: How to treat marketing affiliates. Affiliates have historically played a significant role in the global online gambling market, driving as much as a third of total acquisition activity. Affiliates have also been a controversial force in the industry, thanks primarily to their largely unchecked, unregulated nature.

I believe that dynamic – potential mixed with risk – merits close attention from the PGCB when it comes to the role of online gambling affiliates in Pennsylvania’s regulated market.

Drawing a line between regulated and illegal markets

The primary benefit of regulating affiliates? It draws an unmistakable line between legal and illegal markets. Without regulation, many affiliates would promote legal sites in Pennsylvania while continuing to promote illegal sites in other states – or worse, promote legal and illegal sites side-by-side in Pennsylvania.

That situation fuels the already-significant consumer confusion regarding what’s legal and what’s not. It also creates an unacceptable situation whereby revenue from the regulated market actually ends up supporting the illegal market.

Forcing affiliates to make a choice between the two worlds cuts off oxygen for illegal operators and bolsters the regulated market. That’s a win-win for Pennsylvania.

Avoiding the problems of the European market

Operators in the European online gambling market have recently come under heavy fire from the media and regulators for the actions of affiliates. False or misleading claims, advertising on dodgy sites, and failing to comply with the standards regulators set for operators are just a few of the areas where affiliates have run their partners into trouble.

Regulation of affiliates provides an easy antidote to those issues. By requiring affiliates to be registered and licensed, the PGCB can create a clear chain of accountability – and a clear mechanism for enforcement – that will bring all parties in line with the goal of promoting Pennsylvania’s regulated online gambling market in a responsible fashion.

New Jersey’s approach has worked

New Jersey’s experience offers answers for other states regarding virtually every aspect of online gambling regulation, and the question of how to handle affiliates is no exception to that rule. The state requires all affiliates to be registered, and, as a condition of registration, to certify that they are not promoting illegal sites to any state in the US – not just New Jersey.

The vetting is thorough, as it should be – especially if affiliates are sharing in the revenue generated by customers. But that vetting has not discouraged a number of affiliates from entering the market, creating a vibrant competitive dynamic that benefits operators and the state.

Further, it has made clear to regulators in New Jersey which affiliates are interested in participating fully in a regulated market, and which continued to serve the illegal market, an important brightline that Pennsylvania should carefully consider when reviewing the applications of affiliates interested in the commonwealth’s market.

Chris Grove has worked in the affiliate space since 2002 and is a consultant to Catena Media, which operates leading affiliate sites in the regulated markets, including PlayNJ.com and PlayPennsylvania.com.