WATCH: Offshore affiliates and compliance – do affiliates need to be incentivized to become compliant?

Since PASPA’s repeal in the United States, a wealth of opportunities for operators, suppliers, data companies and affiliates have arisen. But alongside the opportunities, a heavier stress has been placed upon affiliate and operator compliance within the US market.

New Jersey, in particular, has implemented regulations that has forced affiliates to decide between operating in a regulated online gambling market, or whether to operate on offshore sites serving the US markets.

Tom Galanis, Founder of TAG Media who spoke at last year’s SBC Betting on Sports event, discussed the impact that offshore gambling has on the newly liberalised American market.

The panel discussion focused upon the barriers to affiliates becoming compliant and the incentives needed for affiliates to operate in the onshore, more regulated market.

Galanis emphasised the growing power of the offshore market: “That industry is underpinned by 95% of the players come to those offshore bookmakers and casinos through the affiliate channel.”

Affiliates may choose to operate in the offshore market to take advantage of the more relaxed regulations and lower tax rates. But in recent months, incentives have been made towards affiliates to transfer operations from the offshore markets to a more regulated market.

“For me it’s a very simple case,” Galanis added, “engage with these affiliates to offer them incentives to come and promote regulated businesses in New Jersey, Nevada and Delaware, etc.

“Whether that be to corporate tax breaks and setting up a company in New Jersey, personal tax, whatever incentives you might throw on a provision that they ditch the idea of promoting offshore bookmakers and casinos.”

The offering of incentives to affiliates has had its opposition, however. Richard Gale, UK General Manager at Catena Media, argued that offering incentives was not necessary: “they’re making a tonne of cash, breaking the law, not breaking the law, doesn’t matter, they’re making a tonne of cash.

“I guarantee you say right you’re going to have to play thousands of dollars in every state, you can have all this compliance, you can have all this regulation, they’re going to go it’s OK, we’ll just stay over here and carry on doing our thing.”

With more states legalizing sports betting, it has been suggested that more European affiliates and  operators will capitalise on the opportunity to expand into the US market.

Gale added: “I think what’s going to happen is we’re going to see a lot of the European affiliate companies move into the States because they’re used to working in regulated markets.

“I think we will probably see some startups within the States who grow within the regulated market, but I don’t see a massive change from the offshore affiliates to suddenly deciding that they want to put all that regulation on top of themselves.”

Some contention has come about in recent months, with some operators such as Charles Gillespie CEO of group, questioning whether the two groups of affiliates should be compared.

At the Betting on Sports event, Gillespie stated: “So my perspective of this is for the last fifteen years I’ve been running a super clean lily white performance marketing business, fundamentally in Europe across various European markets.  We’re the good guys, we’re super clean, right.

“As we move into the US, if you compare us with somebody who’s been taking a tonne of money out of the US over the past fifteen years through unregulated sports betting, I don’t think they should be treated the same way that I should.

“I have left a tonne of money on the table over the last fifteen years to be clean and to be able to go in to sit with David Rebuck on Monday and say David I’m as clean as it gets.”

Gillespie pointed out that an operator cannot operate on the black market while being a legitimate business that focuses itself on the regulator market.

“It’s crystal clear that you cannot do both.  So the DGE use the offshore stuff as toxic and radioactive.  The only question is if you stop, or how long ago would you have needed to stop in order for them to accept you now.  

“But there is absolutely no doubt that it is enormously problematic.”

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