Since the US Supreme Court overturned the Professional and Amateur Sports Protection Act, effectively launching what has become a massive legal sports betting industry, Americans have legally wagered over $220 billion on sports, generating over $17 billion in revenue for sportsbooks and $3 billion in state and local taxes. The situation is much the same north of the border. In Canada’s most populated province, Ontario’s internet-gaming regulator disclosed total wagers of more than $11.5-billion for the fiscal quarter ending 2022, an astounding 91 per cent increase over the previous quarter. This translated into total internet-gaming net revenue for Ontario of more than $450-million, a jump of 71 per cent from the previous quarter.
Despite the burgeoning tax revenues from legal sports betting on both sides of the border, several jurisdictions are expressing concerns over advertising abuses, prompting numerous regulatory reactions:
Chief among the concerns being raised is the worrisome trend of online sport betting operators targeting underage bettors in their advertising and/or promotional activities. One tactic in particular is garnering the attention of enforcement staff—the prevalence of on-campus campaigns directly targeting university students.
To date, at least eight universities have become partners with online sports-betting companies or sportsbooks. In the case of the University of Colorado, Boulder, the university accepted $1.6 million to promote sports gambling on campus, with an additional $30 incentive every time someone downloaded the company’s app and used a promotional code to place a bet.
To curtail these aggressive tactics, numerous jurisdictions have facilitated regulatory responses, as follows:
One tactic reported on university campuses but not restricted to these spaces is the ubiquitous practice of online sports betting operators offering ‘affiliate marketing’ commission incentives and/or cash enticements to individuals, marketing firms, or website operators in exchange for new customer signups.
In most jurisdictions, affiliate marketing is subject to the same regulations as traditional marketing channels. This includes guidelines on content, targeting, and incentives. Compliance with regulations is crucial for both affiliates and the businesses they promote. Non-compliance can result in fines, legal action, and damage to brand reputation. In some cases, non-compliance can lead to the suspension or termination of affiliate partnerships.
Massachusetts First Assistant Attorney General Pat Moore stated the practice of sports betting companies paying “experts” to encourage certain bets “would become even more problematic should the Mass. Gaming Commission back away from its current (and very sound) prohibition on commission-based payments to third-party marketing vendors.”
One of the primary complaints associated with affiliate marketing tactics in the online sports betting sphere is the common usage of deceptive language such as “free bets” and “risk free bets.” To help monitor and report misleading advertising, the major sports leagues in North America have formed the Coalition for Responsible Sports Betting Advertising, a voluntary association of sports leagues and media entities committed to help ensure a responsible approach to sports betting advertising. The coalition has committed to implement and maintain consumer protection policies consistent with the following six principles:
In a similar vein, the American Gaming Association announced revisions to its responsible marketing code endorsing the ban on the term “risk free bets” while, in January 2023, the Ohio Casino Control Commission fined DraftKings, Caesars and BetMGM $150,000 each for advertising promotions or bonuses as “free” or “risk-free” when, in fact, users were required to lose money or risk their own money to obtain the promotion.
Finally, regulators in both Ontario, Canada, and the United Kingdom have proposed and/or enacted bans on athletes and celebrities appearing in ads to promote online gambling brands, citing concerns that “potential harmful impact on the most vulnerable population, underage persons, remains high.”
Similar legislation is deemed unlikely in the United States where reactions to perceived restrictions on freedom of speech rights carry more potential for litigation. Further, such forms of oversight in the US are predominantly a federal responsibility with Industry leaders claiming there’s no need for federal regulators to intervene. “We do have the Federal Trade Commission, which is responsible for investigating advertising and certainly could take action if they saw something as fraudulent or misleading,” said John Holden, an assistant professor at Oklahoma State University and an expert in sports betting and gambling regulation. “But it’s not clear at the moment that they have their sights set on gambling advertisements.” (Source)
Given the sheer size of the online sports betting marketplace and the scope of the advertising issues that have arisen in a relatively short period of time, sports betting regulators across North America are increasingly arriving at the conclusion that historic inspection and enforcement techniques require significant adaptation and augmentation for today’s online operators. Case management infrastructure designed to ensure the regulatory compliance of bricks-and-mortar operators is proving ineffective against the moving targets of aggressive operators targeting bettors simultaneously with grass roots and affiliate marketing schemes.
To ensure online operators are meeting their full licensing requirements, a modern Gaming Control Software Solution like POSSE GCS is required to equip licensing authorities to manage, track, and investigate potential infractions across multiple enforcement scenarios in real-time. Leveraging leading edge workflow automation, inspection workflows can be used to perform follow-ups on specific activities so that compliance exists, with documented deficiencies resulting in actions being taken to resolve the matter. Moreover, hearing workflows provides the ability to schedule, hold and identify results as part of matters held before a decision-making body or appointed individual.
The rapidly evolving sports-betting environment also reinforces the need for a software solution capable of supporting a risk-based regulatory approach. By focusing additional resources on those operators with a higher risk profile and/or previous compliance issues, risk-based licensing and enforcement processes equip today’s modern gaming agencies to facilitate automated triggers when a new assessment is required and/or when an existing one requires review. Software systems like POSSE GCS also support an increased emphasis on education and training for external stakeholders as a means of fostering a compliance-focused culture within the regulated industries, by helping licensees to better understand their regulatory framework and how best to comply within it.
To learn more about POSSE GCS, our streamlined regulatory and compliance solution for the government gaming enterprise, visit our POSSE Gaming Control Software page for more information OR contact us today to schedule a no-obligation demo.
