Massachusetts Targets Sportsbook VIP Programs with Investigation

Massachusetts, where sports betting has been legal since 2022, is now looking into curbing VIP programs at betting sites. Through its gambling authority, the Massachusetts Gaming Commission, the state is worried that VIP programs are predatory and that rewards programs target players who often lose.

The research on the topic is minimal, granted, but the research director, Mark Vander Linden, found links tying VIP programs to higher risk gambling behavior. While nothing is decided yet, this could have a major impact on the sports betting experience in America. If Massachusetts goes on to restrict, or even outright ban, these programs, it may just be a matter of time before other states respond in a domino-style chain of reactions. Before speculating about the potential knock-on effects, here’s exactly what we know so far.

Background of the Investigation into VIP Programs

Back in April, the Massachusetts Gaming Commission authorized a request to licensed sports betting operators for information regarding their VIP program practices. Within the form, there were all kinds of questions relating to how these programs work, including:

• Is AI technology used to determine a customer’s wagering limits
• If a customer’s wagering limits have been decreased below baseline, do they have the opportunity to increase it
• Do you use an affordability or means check in deciding to assign customers a VIP host
• What factors are considered in deciding to maintain a customer’s VIP status
• Please describe the types of incentives provided by a host to a VIP

All the way to questions regarding the real life tendencies of VIP customers:

•  What percentage of VIP customers use responsible gaming tools such as cooling off or limit setting
• What is the average age of a VIP customer
• What is the average length of time that a customer remains a VIP

A meeting was held on October 9 to discuss VIP programs, among other topics raised, such as player wagering limits and how they relate to CLV betting. The full meeting details and agenda on VIP programs in sportsbooks can be found on the MGC site. If you open the MGC Oct. 9 Meeting Materials PDF, from page 42 onwards, there is a rough summary of the topics raised.

Findings on VIP Programs

The Director of Research defined loyalty programs as operator marketing strategies, which are designed to promote continued patronage by offering comp points for every dollar a customer spends. These points can then be converted into member benefits, bonus funds, or even expanded to affiliated casino resort benefits. They also typically comprise tiers based on the number of points accumulated. The VIP program is the highest level of that tier, and is offered to players by invitation only. These patrons have to spend more money to stay in the VIP status, and they will also receive larger rewards and exclusive VIP perks.

The gambling research found links to membership and gambling problems, including increased risk of harm and higher risk gambling behavior. Citing a study by Gambling Research Australia, The Role of Loyalty Programs in Gambling, it was suggested that loyalty program members were 2.7 times more likely to engage in moderate risk problem gambling than non members. Another study, by the UKGC, reported that high roller customers who spend more time or money gambling are at a greater risk of gambling related harm. The UK’s gambling watchdog being one of the world’s most respected authorities, it is constantly improving player welfare standards.

The MGC stated that they encourage players to return to gambling to maintain their current loyalty tier or progress to a higher one. It was suggested that VIP programs pressurize users to make more deposits, especially when they are close to qualifying for a higher tier. And, the responsible gambling measures for VIP members are both passive and not thorough enough.

• Few to no operators have VIP affordability checks
• Manual (not AI) used to make decision to assign VIP status
• Some VIP hosts have procedures for when patrons stop responding, but not all

Information Requested from Sportsbook Operators

Also the MGC published some of the details from the online sportsbook investigation. About their VIP programs and the trends in the programs.

• Average age of VIPs: late 30s to early 40s
• 10-35% of VIPs use responsible gambling tools
• VIPs keep their status for an average 10 months

The MGC then went on to make some future potential data or information requests to learn more about how VIP programs work:

• Percentage of revenue that comes from VIPs
• Total handle for individual VIPs
• Communication logs between VIPs and hosts
• Further breakdown of VIPs and their responsible gambling tool use
• Demographic data comparing VIPs to overall player base

Potential Regulatory Framework Proposed

The following statements are by no means set in stone, they are a potential regulatory framework that the board raised and published in the meeting publication. But they reflect the directions and possible interventions that the Massachusetts gaming authority is weighing up for VIP programs.

• Make VIP programs more transparent
• Set minimum age to 25
• Ensure staff and hosts are properly trained
• Limit the bonuses for VIPs in a given timeframe
• Require regular reporting of VIP complaints
• Annual submissions of VIP related policies

And pushing that further

• Conduct affordability/safer gambling/due diligence checks before assigning VIP status
• Make a limit setting and receiving VIP members’ activity reports
• Allow loyalty program members to opt out instead of opt in
• Eliminate time sensitive or risk promoting incentives

Do VIP Programs Really Induce Problem Gambling

This is not a new phenomenon by any means. Last year, prior to March Madness, Connecticut US Senator Richard Blumenthal wrote to 8 sports betting companies regarding their aggressive marketing practices. Among the many marketing strategies and promotional incentives listed, he also picked out VIP hosts and how they are commissioned to entice players to spend more money. He referred as well to a Wall Street Journal study about a psychiatrist who fell victim to similar schemes.

Kavita Fischer, the psychiatrist, attempted to self exclude to mitigate her losses, but she received tens of thousands of dollars in credit to come back, and she kept playing (and losing) until she amassed a six-figure debt. Blumenthal referred to the marketing practices as abusive, and that they don’t factor in player well-being. But rather, target the player’s emotional triggers and leverage the information they have on the player’s gambling habits to find ways to keep them in the loop.

Though there are no prominent longitudinal studies regarding loyalty programs and their effects on bettors or players. Some of the details within the Massachusetts investigation will undoubtedly turn heads. Such as how VIPs rarely use responsible gambling tools, and the protocol for hosts doesn’t really enforce any protective measures to help prevent compulsive betting. Also, there are no affordability checks, and instead of cautioning players, the findings seem to suggest operators encourage them to spend more to get into the VIP program.

Implications for the Future of VIP Programs

The Massachusetts Gaming Commission controls one of America’s biggest markets, and it is the home state of major brand DraftKings. Many other states will watch the developments closely for the conclusion of the findings, as well as see how Massachusetts responds to them. Senator Blumenthal is just one of many figures who have expressed the need for greater regulation on loyalty programs, and for him (and them), this is a major step forward.

Sportsbooks, and most likely online casino operators, will have to rethink the way they manage VIP programs. Perhaps introducing age limits, affordability checks, enhanced responsible gambling tools and curbing some of the advertising will be enough to satisfy all parties. But if Massachusetts determines a clear correlation between loyalty programs and harmful betting behaviors, it may as well be the beginning of the end for these programs. The meetings are ongoing, and it will likely require a longer research time to get enough information for the lawmakers to make any moves, but it will be an intriguing space to watch in the coming months.