Last month saw a House of Lords Select Committee meet on the Social and Economic Impact of the Gambling Industry. Covered in this meeting were the usual topics around how to protect the underage public from aggressive gambling advertising, keeping strict standards around how gambling is advertised in general and the presence of gambling in professional sport.
In addition, there was much discussion about affiliates - specifically how operators feel about the regulation of their affiliates, and the impact of these affiliates on customers.
With so much ongoing debate around this topic right now, speculation has been rife that iGaming affiliates can expect stricter regulations in the months ahead.
Current iGaming Affiliate Restrictions
The spotlight on iGaming affiliates in the UK is not entirely new. Approximately three years ago, there was a similar conversation resulting in the UK government putting restrictions in place that making operators liable for the actions of their affiliates partners, in an effort to curb misleading information.
In effect, this levelled the burden of compliance with the operators rather than the affiliates as fines were handed down to the wagering firms being promoted rather than to the affiliates. Indeed since this legislation was enacted there have been several cases of operators being fined for affiliate action.
As stated by the Advertising Standards Authority (ASA):
"When it comes to non-broadcast affiliate marketing for gambling products, the primary responsibility for observing the CAP Code remains with the gambling operator."
This has meant that marketing materials utilised by affiliates need to stick to the advertising rules. Otherwise, gambling operators risk being held either wholly or jointly responsible if they are found to be in breach. The rules cover what is considered misleading advertising, as well as specific database practice requirements, which include demonstrating explicit consent for any person on an affiliate’s email marketing list.
These regulations were essentially a UK government attempt to control gambling messaging, making operators liable for misinformation and targeting of minors. As a direct result of the new rules, Sky Bet closed their affiliate program altogether, whilst all other major operators had a cull of their inefficient and un-trustworthy affiliates. This was also a contributing factor to the spike in mergers and acquisitions in the wagering space in 2018/19.
Speculating on the Future for Affiliates
Given the focus on affiliates within parliament at the moment, it seems that perhaps the government's stance against operators has not worked to control this space as they would have hoped. With operators standing up in support of forcing affiliates to comply with the same requirements, it looks likely that we could see the UK government move to regulate the affiliates directly. This could follow a similar model to the US, where sports betting affiliates are required to register or license their operations before deals can be made to promote legal sportsbooks in most regulated states.
Here, we look at how regulation could impact the affiliate industry:
Regulation Costs
There is a possibility that costs could be introduced in order to enact regulation. This could become a barrier to entry for new, small affiliates, and would likely damage the profitability of the smaller affiliates currently in the market.
Legal Requirements
Ensuring regulatory compliance could require in-house legal skills or the finances to pay for external legal support. This, again, would have a significant impact on smaller affiliates without the resources to comply.
Affiliate regulation may also have a direct cost for affiliates if responsibility for marketing rule compliance is placed on both affiliates and operators. Last month, GVC brands in Australia were hit with a fine over advertising breaches in New South Wales. Ladbrokes and Neds were both ordered to pay a combined total fine of $207,500 for offering illegal gambling inducements to players in the state.
More Acquisitions
Just as the previous changes spurred on a number of acquisitions, new regulatory changes will likely have the same impact. With greater operational costs incurred, large affiliates would likely start buying up smaller affiliates who wouldn’t otherwise be able to survive.
Also under scrutiny is the industry practice of revenue share affiliate schemes where there are some obvious concerns around motivations for players to lose money. Clamping down on this model would likely cause mixed responses, with operators tied into legacy schemes costing them significant sums of cash potentially comfortable with an across the board ban and switching to a flat fee model if competitors are subject to the same restrictions.
While it's not certain what will unfold as affiliate regulations remain under the spotlight, Digital Fuel Marketing will be watching this space closely and bringing you up to date information as the debate rages on.
Digital Fuel Marketing offers affiliate management services for operators and acquisition consultancy for affiliates. Get in touch with us today to discuss how we can help you navigate the current affiliate landscape.