A Primer on Gambling Advertising Laws

USA (May 24, 2023) — Currently, six states of the Union have sanctioned online casino gaming within their borders. Twenty-four states and the District of Columbia now allow online sports betting. With the massive tax revenue that online gambling generates (roughly $24mm per month over the past year in New Jersey alone), more states are sure to follow. Given the foregoing, it can be quite lucrative for companies to run gambling advertising for casino operators and licensees. Before proceeding, it is important that these companies familiarize themselves with the necessary licensure requirements to do so, and the respective license application processes.

Every jurisdiction has its own gaming authority and statutes; however, general rules pertaining to gambling advertising apply across state lines 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.

Gambling Advertising on a Flat Rate Basis

Companies contracted to advertise for a casino 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.

Gambling Advertising on a Bounty Basis

Many companies that advertise for casino operators or licensees choose to do so on an equity or “bounty” basis. These companies are paid based on a user’s signing up for an account and/or an additional variable, such as the amount the user deposits or bets. Terminology for companies that advertise on a “bounty” basis includes, among other descriptors, affiliate marketers and online gaming service providers, depending on the 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 little to no 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 will undergo an extensive background check. Please note that the initial application fee may be just the tip of the iceberg. Some gaming commissions bill hourly for their time in reviewing and processing affiliate marketer applications. Similar to a legal retainer arrangement, additional deposits must be made as application fees are exhausted. This lengthy and costly process is understandable considering the history of the gambling industry in the United States; the gaming commissions want to ensure that the “take” goes into the pockets of legitimate enterprises.

How Should Your Company Approach Gambling Advertising?

Understandably, each state’s gaming commission has a significant interest in policing its gambling operators. 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 correctly. State bureaucracies are not keen on handholding, and any missteps can result in extensive delays and/or application denial.

Because each state’s gaming laws are nuanced and unique, it is important that companies interested in gambling advertising get acquainted with the governing regulations. The attorneys at Klein Moynihan Turco are experienced with shepherding companies through the gaming advertising licensure process, whether on a flat rate or equity license basis.

About Klein Moynihan Turco LLP 

Klein Moynihan Turco maintains an extensive practice in the fields of Internet and mobile marketing law, consumer data privacy law, sweepstakes and promotions law, fantasy sports and gaming law, intellectual property and general corporate law. If we can be of assistance, please visit https://kleinmoynihan.com or call us at (212) 246-0900.

By: David O. Klein

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SOURCES: Klein Moynihan Turco LLP – Lexology.