Vendors often assume that gaming regulatory requirements apply only to casino operators, gaming manufacturers, and other companies directly involved in wagering activity. However, it’s important for vendors to understand that gaming regulators are charged with protecting the integrity of the gaming industry and, as a result, regulatory oversight often reaches beyond the casino floor and extends into the casino’s supply chain.
As such, state gaming regulators often require vendors and service providers that do business with licensed gaming operators to obtain some form of registration, licensing, or suitability approval before providing goods or services. In fact, many states require licensing or registration for providers of non-gaming goods and services, particularly where the vendor maintains an ongoing commercial relationship with a gaming licensee or exceeds certain revenue thresholds.
Scope of Vendors Often Impacted
Depending on the jurisdiction, vendors that may be subject to regulatory review often include:
- Information technology and cybersecurity providers
- Payment processors and financial service providers
- Marketing and advertising agencies
- Software and cloud service vendors
- Security contractors
- Consultants and professional service firms
- Construction and maintenance contractors
Moreover, in some states, even vendors with no direct participation in gaming activity may be required to register or obtain regulatory approval before conducting business with a licensed gaming operator. This includes, for example, suppliers of hospitality, food, beverage, and facility-related products. Often the trigger for registration in such situations is monetary thresholds/contract values for the proposed products and/or services.
Requirements Vary Significantly by State
One of the primary challenges of compliance is that gaming vendor requirements are not uniform. Each state gaming authority establishes its own registration and licensing framework. While some jurisdictions may require formal licensing, others may only impose registration, certification, or suitability review requirements. Moreover, states are also not uniform in what triggers vendor obligations. In one state it may be based on the type of service provided, but other states use annual contract or revenue thresholds.
For example, in many jurisdictions, regulators often categorize vendors into two groups: those providing services necessary for the operator to conduct its gaming business (such as payment processing, odds setting, or KYC verification) and those providing services that, while valuable, are not operationally necessary (such as branding agencies, public relations firms, content creators, or other marketing providers). In some jurisdictions, vendor regulation extends well beyond gaming-related services. For example, New Jersey has historically required registration of vendors supplying ordinary goods and services (such as linen services) to casinos. Thus, regardless of the service being offered, a vendor may be required to register with a gaming regulatory body depending on the jurisdiction, the nature of the commercial relationship, and how the vendor is compensated.
Even where states regulate similar categories of vendors, some states have thresholds that trigger registration or licensing obligations that can vary. By way of example, in Maryland, a vendor providing nongaming-related goods or services with a combined annual value of $50,000 or more to a sports wagering licensee must register with the Maryland Lottery and Gaming Control Agency. As a result, a vendor that may be subject to registration or licensing requirements in another jurisdiction based on the nature of its services may not be required to register in Maryland if the value of its services falls below the $50,000 threshold.
Impact of Non-Compliance is Potentially Severe
Failure to identify and satisfy vendor registration obligations can create significant issues for both the vendor and the gaming licensee. Potential consequences may include, at a minimum, delays in contract implementation but also much more severe costs such as:
- Suspension or termination of vendor relationships
- Regulatory investigations
- Monetary penalties
- Disqualification from future gaming opportunities
- Negative findings during suitability reviews
Practical Considerations for Vendors
Vendors looking to provide goods or services to casinos, sportsbooks, iGaming operators, tribal gaming enterprises, or other gaming licensees should take precautions before entering into a commercial relationship. This includes, but is not limited to, undertaking due diligence to determine whether the applicable jurisdiction requires vendor registration, licensing, or suitability approval and, if so, what are the triggers. Not only does this include consideration of the service categories that may trigger regulatory oversight but also the impact monetary thresholds and/or contract values may have on such commercial relationships.
Once a determination is made, vendors should also assess who in the company may be subject to investigation. For example, whether owners, officers, directors, or key employees would be required to undergo a background investigation. The scope of the investigation and corresponding costs could impact viability of the proposed relationship.
Other key considerations often overlooked include building sufficient time into contract negotiations to complete any required regulatory approval process and understanding ongoing reporting and renewal obligations after approval is obtained. The latter point is critical as a vendor’s obligations likely do not end after the initial approval is obtained.
Takeaway for Vendors
Vendors that serve the gaming industry should not assume that being an “ancillary” vendor places them outside the reach of gaming regulation. State gaming authorities frequently require registrations, licenses, or suitability determinations for a broad range of suppliers and service providers, including those whose services are only indirectly connected to gaming operations. Those considering entering the gaming sector should evaluate their regulatory obligations early to avoid delays, unexpected compliance costs, and potential enforcement risk as the failure to do so could prove costly, not only in terms of monetary but also future gaming opportunities.
Should you have any questions regarding the vendor registration process, please do not hesitate to contact the authors of this alert.
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This article is for informational purposes only and does not constitute legal advice. Because lottery and gaming laws vary significantly by jurisdiction, companies should consult qualified counsel before providing services to gaming companies.
