This is the last in the series covering my experiences as a youngish affiliate navigating the complex landscape of the US sports betting and igaming space. As ever, I will give a forthright, honest opinion about the roadblocks we have come up against and offer advice on how a new startup can best avoid some common pitfalls.
My previous entries have included some nuggets of advice that will no doubt make life easier for our future competitors. The first four parts in the series revealed some rabbit holes which I have gone down where others would do well not to follow. The tone of this article is rather different given the area in which it focuses. Rather than make the same mistakes we did with BestOdds in our first couple of years of operation when it comes to the subject of regulation, state laws and taxes, take a deep breath! As a certain sports brand likes to say, “Just do it!”
A bureaucratic minefield
There is simply no escaping the fact that any new entrant to the US sports betting and igaming affiliate space will have to prepare themselves for endless days of form filling with mind-numbingly boring and at times perplexing questions!
“You better suck it up, buttercup! There ain’t no avoiding this!” would be my advice for going down this journey.
In the two years since we incorporated BestOdds, we have met a whole host of entities that could be serious competitors. Yet, they simply don’t have the bandwidth, patience, cash, wherewithal or desire to go through the frankly nightmarish steps to set themselves up as an affiliate in the US.
One of the first phrases you come across at business school is “barrier to entry”. Well, the rigmarole of attaining and maintaining regulated status in every US state for CPA deals sure is a major barrier to entry for any aspiring affiliate in our sphere. And if you think CPA deals are tough to obtain, hold your horses for the revenue share model!
Quite how Better Collective’s legal and management teams managed to pull off that coup in recent months, I’ll never know. They deserve some very serious respect and plaudits for doing so. Anyway, more on the revenue share minefield later.
Readers of a certain age will recall the Gallic troublemakers, Asterix and Obelix. In one of my favourite comic books, the two protagonists are required to accomplish 12 labours. One of them is having a simple Roman tablet signed and stamped by a French bureaucrat. The pair spend hours being sent from one nondescript office to the next on different floors of the same massive building. They go stir crazy during this task. There are shades of this sentiment of frustrated helplessness in the much-feted film Everything Everywhere All At Once.
Well, at times, I have felt great empathy with and sympathy for Asterix and Obelix – and for Michelle Yeoh’s character in the Hollywood multiverse movie.
This journey is fraught with difficulties, from achieving and conserving gambling regulatory compliance, correct licensure, state-by-state annual reports to not forgetting the federal and local tax returns. Plus, you also must manage oft-changing instructions and requirements.
It pays to employ an expert
For those affiliates brave enough to take the plunge despite my words of caution, I think the best place to start would be to seek out the experts in these fields. In the same way I advise founders to recruit those more talented than themselves, in this case it is worth pulling out the chequebook.
There are firms that will take some of the heavy lifting from you when it comes to sending in your applications to the various state gaming commissions, lotteries or police forces which manage the licensure for sports betting and igaming affiliates. We used a firm called Ifrah Law, out of Washington DC. They made our lives much easier and acted as a conduit to many of the investigators responsible for licensing BestOdds. Applicants will still have to do certain aspects themselves during the process, such as countless notarisations and occasional fingerprinting, but I would recommend this kind of outsourcing at the application phase.
Firms like Ifrah Law are on the case when it comes to individual states suddenly shifting the goalposts. Believe me, it would not be an exaggeration to say that at least half the states in which we are now licensed for CPA affiliate deals have changed either rules, requirements, forms, obligations or fees charged in the past 18 months! And I don’t count one particular state within this cohort which rejected our initial application as my fingerprints were made in blue ink rather than black. Yes, genuinely, this caused a three-month delay in us gaining our CPA licence there. You have been warned!
With nearly half of US states now permitting sports betting, the other seriously onerous task for lean affiliates is keeping track of all the local state obligations. Any affiliate should have sought permission from the local secretary of state to conduct business in his or her specific state. Generally, this first step is not too stress-inducing or particularly expensive. However, keeping track of annual report submissions, renewing Certificates of Good Standing and filing other quirky, random documents which only exist in the US is an art in itself as well as being rather costly.
There is seemingly no rhyme or reason for what the states charge for such form filling. Some cost barely more than a coffee, while others charge you thousands of dollars for the privilege of doing business in a given state. Again, outsourcing the hassle to a firm will lower your stress levels.
My concluding advice for any would-be competitor of BestOdds is do your homework and outsource the administrative burden from the outset. Be prepared also for a few bumps in the road along the way!