Attorney David Gzesh

The American online gambling market is changing rapidly and no one is really sure where affiliates will fit in the new landscape.

To get a little perspective on these changes, and what the future of online gambling in American is going to look like, we recently sat down with Nevada gaming lawyer David Gzesh. Gzesh specializes in Internet gambling law and has a unique perspective on the industry.

Here’s what he had to say.

Gambling Affiliates in the US

Q: Is there a place for gambling affiliates in the US online market?

A: The issue is one of multiple markets, not a single market. Acceptance and the appetite for affiliate services in emerging market may turn on (a) revshare versus other compensation and (b) how traditional gaming marketing channels in that market perform or are permitted to be paid.

Also, as the legalization effort evolves form “poker only” to broad online casinos, affiliate revenue prospects should broaden as well. On the bright side, lottery ticket vendors have traditionally worked on commission for performance.

Q: Will affiliate marketing partners and operators need to be licensed in Nevada and other states?

A: Nevada clearly requires licenses for affiliates. Whether or not New Jersey will require a license for advertisers with a non-rev share deal seems open to me, although others say, “absolutely yes.” (This was debated at last week’s London Affiliate Conference. I have a bet riding on the outcome with Jon Friedberg.)

Possible licensing triggers in emerging markets may be rev-share v. other compensation and how traditional gaming marketing channels are permitted to be paid.

Legalization in America

Q: What’s behind the willingness of state governments to legalize online gambling? After all, the recession’s already been going for over four years.

A: Revenue, revenue, revenue, revenue. Out Nevada, New Jersey, California and, perhaps, Mississippi, the move to legalize online gaming seems driven by the Lottery industry. Lotteries present a traditional revenue stream in 43+ states.

The casino-backed Federal Solution that was proposed in 2009-2012 would have cut those lottery entities out of the online gaming revenue stream.

The apparent demise of Federal legislation efforts, plus the Lotteries’ obtaining their own earlier 2011 DOJ Wire Act reversal for online sales efforts, gave States and the lottery industry an impetus to act now, to protect and expand traditional gaming revenues.

Q: Will online gambling spread the same lotteries and casino gambling did?

A: Yes, and it will not likely be limited to poker only. Small state can support online casino gaming, even if they would struggle to support intrastate online poker.

There will be a struggle to accommodate the needs and demands of intrastate existing casino/racino operators, but reaching an accommodation is not insurmountable. The Powerball learning curve has provided a template for multi-state prize pooling by states with no casino presence, while allowing for instate products as well.

To some extent, there is already pooling of casino jackpots among state. So, you may see online casinos limited to intrastate operators, except for agreed prize pooling compacts.

(Look for more insights on legalization and affiliate in Part 2 of our interview with David Gzesh.)

David Gzesh is a gaming attorney, with uniquely practical experience in the online gaming industry. He speaks frequently on affiliate marketing, counsels both US-facing and ROW affiliates and entities, and is interested in advising parties looking at the emerging US market(s). Contact him at David@Gzeshlaw.com.


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