The road towards affiliate self-regulation

It is often said that how people act in a time of crisis is an indicator of the true character of the person. The same can be said of an industry in crisis. At this moment, the online gaming industry is in trouble. It is what we do now, collectively, that will affect how we move forward – and how others view us.

At BOSCON 2017, Sky Betting & Gaming CEO Richard Flint asked the question on everybody’s lips: “How can the system carry on?” with many pointing toward licensing in response. However, I believe this to be a knee-jerk response that fails to explore another possibility which could work far better for the industry: self-regulation.

There is no denying that the industry is currently embattled, with regulatory screws tightening around the world as governments start to crack down on an apparently laissez-faire attitude to operator affiliate programmes.

The lurid and damaging headlines paint a vivid picture of an irresponsible industry taking advantage of potential consumers by using misleading bonuses and offers, or simply by outright lying. For an industry which already suffers a poor reputation due to moral and ethical concerns related to gambling, the shattering revelations have proved a huge blow as government regulatory bodies have started clamping down – most recently in Denmark, but primarily in the UK.

The result has been an increase of fines by 4,440% alone in 2016. Operators such as Sky Betting & Gaming abruptly closed its affiliate programme, citing “growing regulatory concerns”, or simply instituting a “one strike and out” policy to deter potentially free-wheeling affiliates from using misleading content to encourage people to sign up. In other words, full compliance is the new game in town.

As regulatory compliance becomes the new industry buzzword, operators are finding themselves on the hook for the mistakes and transgressions that their affiliates commit. This herculean task demands a strong sense of accountability, coordination, and constant improvement – but the manpower required for this task is simply not there.

Under scrutiny

The issue is clear: there are simply too many affiliates for the limited number of operators to reasonably monitor effectively per regulatory mandate. However, should an affiliate overstep the bounds of the terms and conditions of their agreement, it is the operator who faces regulatory scrutiny and a potential media backlash.

The immediate calls for licensing make sense at first. The natural expense and complications of obtaining a licence will immediately reduce the number of affiliates, particularly those who had no intention of playing by the rules. At the time of publication, only New Jersey requires affiliates to have a licence for promoting online casinos under its jurisdictions. While New Jersey’s licensing requirements are low, they create another issue. This issue – among others – is why I believe the benefits of licensing stop for the industry.

Many people simply do not want the additional regulatory burden that licensing brings – which means a smaller pool of affiliates, and consequentially reduced advertising, conversions, revenues, and profits for the industry. The clearest winner in that scenario would be the government regulatory bodies overseeing the licensing, who would pocket the licensing fees. For operators and affiliates, the benefit is primarily “doing something” while making life a lot more complicated with no real reward. A classic regulatory dilemma.

Self-regulation

So, what is the answer? I believe it lies in self-regulation combined with the latest technology to enforce it effectively – and I am not alone in thinking this. Only last month, the Industry Group for Responsible Gambling (IGRG) launched Responsible Gambling Week – a clear move to stem the tide of criticism while offering a step forward. On the same day, William Hill appointed Mark Brooker as the new chair of its Corporate Responsibility Committee.

Self-regulation is an answer that has proven successful in other industries, and it is a model that can work well in the gaming industry. Industry self-regulation can take many guises depen-ding on the industry, but typically they implement moral, ethical, and legal frameworks as best practice.

Self-regulation is not an uncommon practice; in the United States, the Securities and Exchange Commission (SEC) operates as a self-regulatory organisation for the financial industry. In 2006, the Italian fashion industry banned ultra-skinny models from Milan catwalks as well as underage models in an effort to promote a healthier image in response to media pressure.

Self-regulation is voluntary but it offers regulatory bodies and critical media some evidence that issues are being taken seriously. While it would be easy for critics to throw around charges of “marking your own homework,” this is a clear step in the right direction and an act of good faith.

These are just two examples: around the world, many industries and professions voluntarily self-regulate through various other means. Our legal professions, our media outlets, our advertising giants, our manufacturers, and even our food industry all practice self-regulation. These industries thereby protect themselves from the threat of government regulation. We can do the same.

One of the biggest issues – and the one which has caused this crisis in the first place – is the lack of accountability due to a mismatch in manpower between operators and affiliates. Affiliate managers can only manage so much – and more resources are needed to help them effectively do their job.

Expert advice

On the flip side of the coin, affiliates also need to show some goodwill. This is already underway as leading affiliates and legal experts have begun the process of setting up a new trade body, the International Gaming Affiliate Association (iGAA), to aid its members to do just that.

The iGAA works with affiliates to improve compliance in local and international law, starting with the United Kingdom, where much of this new industry upheaval has taken place.

In turn, this will raise industry standards across the board, while also implementing a new code of conduct (currently being written) to ensure that affiliates are operating within the limits set by government regulatory bodies. In short, iGAA’s focus is safeguarding consumers and educating affiliates to best practice, while protecting operators.

While joining could be voluntary, operators insisting membership as a primary qualification prior to joining their affiliate network, along with using technology to monitor infringements of policy – accidental or otherwise – is a powerful step for both operators and affiliates to take in. It would show the gaming industry is serious about taking control of its own responsibilities, with or without regulatory scrutiny.

The gaming industry is in a state of flux right now. The way in which operators and affiliates react at this challenging time determines the future of this industry. There will always be some who flaunt the rules – self-regulated, licensed or not. At this critical time, it is time to show the world that this is a sober industry that takes its commitments seriously while using technology to ease the burden of that commitment.

There is no doubt that these are troubled times for our industry. But just as with any crisis, it is also a time of opportunity for those who can find a solution. The solution must be as useful as it is practical, and it must address the issues that have caused us to be here in the first place.

Licensing is not a panacea to our ills, and it will not solve the issues which have caused this situation. Instead, actively working to address these issues and show the public that we are taking complaints seriously and working to create a regulated and safe environment for everyone involved is the best response.

We have the technology, we have the people, and we have the will. Self-regulation offers us more opportunity and a better answer. To my mind, it is the only answer if our industry is to thrive – and not just survive.

Roo Wright is the founder and CEO of Wag.io and a leading gaming industry professional. As a super-affiliate and operator of white-label gambling sites, Wright has a unique perspective on the challenges facing the online gaming industry from both sides of the fence.