With the US market beginning to open its doors to operators and affiliates alike, it cannot be stressed just how important it is for newcomers to be aware of the intricacies of entering a newly regulated market.

AffiliateINSIDER reached out to Jeremy Kleiman from Saiber, who offers expert legal advice to those who are entering, or are considering the US market. He gave his insight into the key things that affiliates must be aware of when it comes to the US.

AffiliateINSIDER: Many US punters and affiliates may be new to the online side of gambling – how important is it to ensure that they are educated on the intricacies of the market? Especially considering compliance, due diligence etc.

Punters that are new to online gambling should educate themselves on the basic requirements – only register and play on site that can be verified as holding a proper license.  Punters should check with their gambling regulator in their state of residence.

Affiliates that are new to the industry should educate themselves by engaging competent legal representation with experience in licensing and compliance.

AffiliateINSIDER: A vast number of operators have jumped at the opportunity to dip their toes into the US market – why should affiliates utilise this chance now rather than later? And how can having a legal representative help affiliates get their foot in the door?

It is always important to be a first mover. Affiliates that enter the market alongside operators have the best chance to drive traffic as market share is being created. Waiting until the market stabilizes only means affiliates will be joining a crowded field of affiliates will established relationships and brand recognition, and will be left to steal market share rather than creating it organically.

The US affiliate market is quite different from other jurisdictions, in that registration or licensing may be required depending on the revenue model. Engaging experienced counsel can help save time and expense later by helping affiliates navigate the various regulatory requirements and advise on the implications of various revenue models. For example, the due diligence requirements may be different for a CPA arrangement vs. a revenue share structure.

Moreover, US regulators take a dim view of affiliates historically promoting illegal, offshore sites taking play from US residents. Good legal counsel can advise on whether particular commercial relationships are problematic or fatal. 

Finally, affiliates will need to enter into contracts with US operators. Aside from regulatory and licensing concerns, there will be a number of contractual and corporate issues that will need to be addressed and negotiated. 

These include things such as corporate structuring and whether to from a new US entity, considerations of which form of legal entity to use, how to limit personal liability, negotiating choice of law and forum selection clauses, agreeing on indemnities, etc. Legal representation will be crucial to a successful contract.

AffiliateINSIDER: Can you provide some information on the process in place when it comes to applying for a vendor’s licence / ancillary licence? And what are the key things affiliates should know about this?

New Jersey is the most mature and robust US market for affiliates at the moment, so it serves as a good example. Vendor Registration is required for affiliates that are paid a fixed CPA. The CPA can be based on new player registration, account funding, placement of first wager, or any other action that is not tied to a share of gaming revenue.  

Vendor Registration involves submission of a simple 1-page form, and then a supplemental disclosure form of 5 or 6 pages containing basic information such as the affiliates business address and identity of the UBO’s. The information is kept on file by the regulator and the affiliate will immediately be added to the Active Vendor List. Operators are then free to do business with the affiliates.

If an affiliate enters into an arrangement with an operator whereby the affiliate is paid either on a revenue share (percentage of amount wagered, percentage of win) or a variable CPA (percentage of deposit, etc.), the affiliate will be required to obtain an Ancillary Casino Service Industry Enterprise License.  This process involves submission of fairly detailed information on behalf of the affiliate company, as well as detailed personal/financial information by the key management and owners.

Once a completed application is filed, the affiliate may begin doing business with operators while the application is pending. The regulator will then conduct a background investigation and vet the applicants before issuing a license.

AffiliateINSIDER: How important is it to ensure that compliance measures are adhered to in a newly regulated market such as the US from the get go?

Compliance is critical. Unfortunately, there is a perception among US regulators that the affiliate industry in other jurisdictions is not the most compliant. In particular, there are concerns about associations with unlicensed, unregulated gambling operators. 

It is important that affiliates entering the US dispel that perception. This starts with terminating relationships with operators that take play from a US resident, and implementing procedures such as inserting termination rights into agreements with operators for compliance reasons.

AffiliateINSIDER: And finally, do you have any predictions as to which states might legalize next? 

It is hard to predict which states will authorize online gambling in the coming months.  With all legislation, politics are unpredictable. A number of states have legalized new forms of gambling in the last 2 or 3 months – Tennessee, Indiana, Iowa, and Illinois.  Conventional thinking is that others will soon follow, including Michigan, New York and Massachusetts.