Online Gambling Serial Blog – Online Esports Betting (Blog Post 6 of 7)

Since online gambling in the United States has caused many legal uncertainties, including how individual states have dealt with various online gambling issues and how the advancements in internet-based technologies have created uncertainty enforcing online gambling issues, it is necessary for there to be more clear rules and regulations regarding legal issues relating to online gambling in the United States. This blog will discuss various online gambling issues in a seven-part serial blog. The sixth blog post deals with the growth of online esports betting.

Over the past decade, major esports leagues such as those for popular games like League of Legends, Overwatch, and Counter-Strike: Global Offensive continue to rise in value at a meteoric pace, projecting to be worth $906 million in 2018 — a figure that includes sponsorships, advertising, media rights, game publisher fees, merchandise and tickets.  [1] It would represent 38% annual growth from 2017, according to market research firm Newzoo. [1] The gambling market that has been created from esports has exploded in recent years. Even with sports betting illegal in the vast majority of the United States, global wagering on esports was projected at $6.7 billion for 2018 in a report by software analytics company Narus and research firm Eilers & Krejcik Gaming. [1] That same report expected the total to approach $13 billion by 2020. [1] By comparison, a 2013 report by the BBC estimated global soccer betting at between $49 billion and $70 billion, which, like the esports report, included both legal and illegal wagers. [1]

In a recent tournament for the League of Legends 2017 Season World Championship, there was a prize pool of $4,596,591. [2] For the 2018 Call of Duty World League Championships, the prize will be $1.5 million. [2] A tournement for Dota 2 broke the record for the largest prize pool in eSports history at $24,787,916. [2] Numerous betting sites have popped up that allow spectators to bet on eSports events and tournaments in the same way they would a football, basketball, baseball, or hockey game. Gamblers can view odds and place bets through bookies on CS:GODota 2League of Legends, and other matches. [2]

A vast majority of cash bets are placed online and are wagered on the outcomes of games and tournaments, much like the traditional sports betting found in Las Vegas. [1] Some other wagers involve fantasy teams or head-to-head matchups in which the bettor is playing, similar to a poker match or a drag race, in which players bet on themselves to win. [1]

Unikrn, as well as companies such as Betway, Pinnacle, William Hill, Ladbrokes, and GG.bet, offers a sports book and odds via its website, taking bets on the outcomes of esports league and tournament games. [1] Unikrn accepts bets using cash and later this month will accept them using a proprietary cryptocurrency called UnikoinGold — similar to bitcoin — that raised $31.4 million in its Initial Coin Offering (ICO). [1]

Advocates of esports betting believe legalized sports betting will have a significant impact on the esports gambling market, noting that with more sports books taking legal bets in more states, those books inevitably will adopt esports into their betting offerings, given the rapid growth of competitive gaming. [1]

Just as traditional sports have encountered instances of fixed games, so too has the fledgling esports scene. [1] Twenty-one players accused of fixing competitive matches for the game Counter-Strike: Global Offensive were banned from future professional events for orchestrating the outcomes of matches in 2015. [1] In March, two men, one who ran an illegal gambling site and the other a pro player, were arrested for fixing a StarCraft tournament match. [1] Recently, James Watson, head of esports at Sportradar, stepped down from his role as after it emerged that he was betting on professional esports matches. [3] Sportradar said Watson had placed the wagers via licensed esports betting website Unikrn, thus violating company policy. [3] Sportradar provides data streams for various professional sports to bookmakers and uses this data to work alongside a host of organizations to ensure integrity in matches. [3] However, while Sportradar acknowledged Watson had been betting on matches, after conducting an internal review on the matter, the company also said that its integrity services for esports were not impacted in any way by the incident. [3] As Yegor Zubarets, the founder of CyberBet.Ninja, an esports betting site put it best, “[t]the main trouble is the maturity of eSports audience and big amount of fraud from the site of the eSports betting sites that lead to great disappointment and lack of trust from the gamers worldwide.” [4]

Like the United States, many countries have vague or intolerant gambling laws that leave esports betting and online betting in ambiguity. However, residents of the following countries may legally bet on esports: The United Kingdom, New Zealand (at overseas websites), Australia, Spain, Taiwan, Macau, Korea, and Japan. [5] While rules and regulations are in place for traditional sports and traditional sports betting, the same isn’t true for esports and online betting. This means that there is no legal support in the case of cheating, bet manipulation, or failures to pay out. [5]

In Nevada sports books, esports betting falls outside of the state’s sports betting structure. Instead, esports are listed under “other events,” as are bets on the NBA draft or the Heisman Trophy winner, for example. [1] Questions thus remain on whether esports will be regulated similar to regular online sports betting or will be considered a different type of online betting such as in Nevada.

Should esports betting be classified as sports betting for regulatory purposes? With a lack of information on some esports league, how can esports leagues create a better environment to ensure that the integrity of the games is guaranteed and no match-fixing takes place? Should there be an “integrity” fee added to sports betting sites if they allow esports betting in the future? This is a new online gambling field and I look forward to seeing how the esports betting industry continues to grow into the future.

[1] https://www.washingtonpost.com/sports/esports-bookmaking-globally-its-already-a-billion-dollar-gambling-industry/2018/04/06/be89c282-2b99-11e8-8688-e053ba58f1e4_story.html?utm_term=.94eef5a30ce3

[2] http://www.businessinsider.com/the-rise-of-esports-betting-and-gambling-2018-1

[3] http://www.igamingbusiness.com/news/sportradar-esports-chief-exits-after-betting-breach

[4] https://www.e-sportsbetting.org/blog/is-esports-betting-legal/

[5] https://www.gamblingsites.com/blog/legally-bet-esports-44399/

 

 

 

 

 

 

 

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~ by zachg0963 on April 7, 2018.

10 Responses to “Online Gambling Serial Blog – Online Esports Betting (Blog Post 6 of 7)”

  1. It will definitely be interesting to see how the field of esports betting evolves. One thing I was wondering while reading the post was how esports betting would fit into traditional sports betting due to the differences between traditional sports and esports. I’m not sure if there are certain aspects (i.e. the physical exertion, the sport itself, the specific athletes) about traditional sports that make them so popular in the gambling arena, or if people just enjoy betting on sports so much because its a crossroads between sports and gambling, both of which are very popular. I am also unsure of if esports betting is becoming increasinly popular for the same specific reasons listed above, or for the simple fact that many people love video games and gambling.

    I think its very important for there to be some sort of integrity fee and/or monitoring system for esports. Due to the virtual nature of esports, I feel as though it would be a lot easier to cheat or manipulate the game in some way. That being said, it may also be easier for game developers and competitions to regulate the game because it all exists virtually.

  2. Esports should probably be classified as sports betting for regulation purposes, since it seems to operate in similar ways to online sports gambling. According to the blog post, esports gambling is already a huge industry, which likely opens the platform up to abuse, so regulation is probably necessary to protect participants, sponsors, etc. To do so, though, there’d probably need to be some specific parameters distinguishing esports from regular sports gambling and, within esports, fantasy team wagers or head-to-head matchups, as described in the blog post. This process of definition could be difficult, as with most online issues (like with ransom ware, even), but would be necessary in order to establish strong regulations that also permit the esports participants to enjoy the process.

  3. I do think there should be an integrity fee and monitoring system for sports betting. I think esport betting could be operated under the same rules as betting on physical sporting events. It seems similar to betting in a game only watched on tv.

  4. I see no reason not to classify esports as sports betting for regulatory purposes. As far as ensuring the integrity of the games, I think that one area where esports differ from traditional sports is in that these games often have active developers releasing updates and patches. I’m sure these developers appreciate the publicity that esports betting provides, and as such have it in their interest to patch exploits as they arise. That may not get rid of fixed matches or failure to pay out, but to me that’s a problem to be dealt with in the market.

    I would expect that there are/would be some more known/respected sites that add an integrity fee to support moderators or the development of programs to monitor for cheating, and some lesser known/respected sites that are cheaper, but do not. Which site a gambler decides to go to for their betting is their preference, much like whether a gambler chooses to do their gambling at a bar or a casino.

  5. Esports betting should not be clasified as sports betting, because they are two rather different activities. Esports is completely fictional as players are betting on fictional games in which they may control the outcome. While sports betting is different because players are betting on actual games in which they cannot control the outcome. Additionally, esports betting takes place completely online, while there is some physical aspect to traditional sports betting.

  6. Should esports betting be classified as sports betting for regulatory purposes?

    I think the traditional framework would be adequate to prevent match-fixing and the like and therefore I do think it should qualify as sports betting for regulatory purposes. With that being said, I think the sports betting regulatory framework needs to be revisited because there are many examples of this framework allowing for loopholes to sidestep regulation. Daily Fantasy Sports are one example of this.

    With a lack of information on some esports league, how can esports leagues create a better environment to ensure that the integrity of the games is guaranteed and no match-fixing takes place?

    I think that match-fixing falls under the purview of fraud regulations, specifically wire fraud. I therefore think that this needs to be enforced because strong enforcement will prevent this from occurring. There is no way to “guarantee” the integrity of any athletic event, particularly when it rides on the shoulders of a single individual which is more often the case in esports, and therefore by signaling strong enforcement to the community it will disincentivize some of the nefarious actors.

    Should there be an “integrity” fee added to sports betting sites if they allow esports betting in the future?

    I think this sounds like a good idea but it also begs the question of how it would be used. Simply enacting a integrity fee would be insufficient without some type of regulation as to what the fee would be used for. Specifically, none of this fee should ever be distributed to shareholders and further the account which holds this fee should not be able to be used as collateral for financing purposes.

  7. Esports betting should be treated the same as regular betting, the individuals are participating in games of skill where real money is being wagered. I see an issue with the implementation of integrity fees because most of the tournaments are officiated by the publishers of the games who have no incentive to take away from the popularity of their games. I would argue that there should be an overseeing body for all of the games independent of the publisher to avoid improprieties that might pop up when the company in charge of monitoring is the same putting on the tournaments. It would be like allowing the NFL to do the same work that Fanduel and Draftkings do, the potential problems far outweigh any benefit
    .

  8. As an avid, League of Legends and DOTA player this topic hits close to home. eSports is growing and has encountered many integrity issues over the past couple of years. As you mentioned gambling has also been a problem.

    To answer your first question I think that eSports should undoubtedly be considered a sport for the definitions of sports betting. The performance determinative nature of gaming is very comparable to live action sports. Because players can affect the outcome of the result and bets are made in team and individual performances it would only make sense to require the same regulatory safeguards for eSports.

    I’m not personally a fan of the integrity fee. A $6 billion dollar industry can find measures to self-regulate the imtegrity of their sports. All of this is made worse by the fact that the watchdogs (Sportsradar) have been caught violating the very activity they are protecting. It shouldn’t be the financial responsibility of state legislatures , sports books, and individual bettors to ensure integrity. If integrity fees are a must to gain the political support, I think their should be oversight to ensure that every penny is being spent on oversight of sports gambling.

  9. Should esports betting be classified as sports betting for regulatory purposes?
    1. I think esports betting should be regulated above that of sports betting, due to one critical difference between esports and physical sports: esports games are regularly updated by the developers, and so the creators have incentives to manipulate the metagame of their esport for their own gain. Many current esports have internal policies to prevent this (e.g. League of Legends freezes the patch number for professional players, such that all the changes the programmers make over the course of a year don’t affect the “season”), but if esports betting is to be regulated, the risk of collusion between the creators and the betting agencies needs to be considered. This risk seldom exists for physical sports, which have had generally fixed rules for decades.

    With a lack of information on some esports league, how can esports leagues create a better environment to ensure that the integrity of the games is guaranteed and no match-fixing takes place?
    2. I think that if esports betting became more commonplace, these sorts of safeguards would naturally arise as businesses would want to avoid the dangers of match-fixing. However, match-fixing in esports is an interpersonal problem moreso than a technological one, just like in physical sports. Only complete fools would try to arrange a fixed match from within the game’s client – enforcement by leagues could easily be done in the same fashion as however physical leagues manage players. In fact, because the game developers generally keep logs of inputs and other statistics from games, catching outright cheating should be easier in at least some respects online than in a physical sport.

  10. You don’t have to be a psychic to predict that esports are heading for some kind of huge fraud. And I agree, given the toxic nature of the player pool, it is just a matter of time. The fact that esports slips between the cracks of regulation is disturbing. The prize pool will continue to grow and some of these teams have significant corporate sponsorship. Of course, after whatever debacle is coming, then there will be attempts to regulate. It would be nice if for once, regulation was thought about beforehand, but I guess that’s asking too much.

    I saw a tweet that Watson resigned but I had no idea it was later revealed he was betting! If that isn’t a huge warning signal that some attention needs to be paid to esports then I don’t know what a warning sign would be. However, in another context, it wasn’t until the FanDuel people got caught betting with their own proprietary information that states woke up to the fact that daily fantasy sports might need regulation. Regulation will happen. It is not a question of whether, but when?

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