Susan O’Leary, CEO at Alderney Gambling, says Esports betting throws up major regulatory challenges, but the industry needs to take them on to safeguard its future.
Esports has come a long way in a short space of time. From a small number of hardcore enthusiasts duking it out from their parent’s basements to professional teams going head-to-head in front of capacity crowds at the world’s largest entertainment arenas, Esports is now a global institution.
Last year, the Esports sector generated revenues in excess of $890 million according to SuperData Research, with viewership figures smashing the 210 million mark. Those figures are expected to rise to $1.5 billion and 600 million respectively by the end of the decade, according to Newzoo.
Esports’ rapid rise from niche interest to blockbuster franchise has, naturally, seen it intersect with the gambling industry. Like other sporting activities, fans want to bet on their favourite players, teams and the outcomes of contests, allowing them to engage on a higher level while adding additional value to their experience.
The speed at which Esports has arrived on the scene has left the gambling industry gasping for breath, however. Operators have moved quickly to offer their customers markets on all the major contests, but the sector has also created a new type of wager known as skin bets, which account for most Esports gambling revenue.
Skin bets see players stake virtual goods such as swords, shields, costumes, etc from the games. Eilers & Krejcik Gaming estimate the market to have been worth $5.1bn in 2016 while cash betting was a fraction of that at $750m. It’s a big business, and one that looks set to continue growing over the coming months and years.
There is a dark side to Esports wagering – particularly skin betting and to a lesser extent cash bets. The sector has been, and remains, unregulated. This means the whole industry, especially those operating betting businesses, are exposed to major scandals that could have catastrophic long-term consequences.
The most serious of which is underage gambling. It must be remembered that Esports is hugely popular among millennials – those aged between 18 and 32 – and it would be naïve to think those aged 17 and younger are not also playing games and wagering on the outcomes of contest through skin bets.
The sector is crying out for regulation. Not only to protect punters, but also the integrity of professional players, contests, leagues, tournaments and the operators, suppliers and service providers plying their trade in the market.
The sector needs to move fast if it is to safeguard itself from a potential crisis; all stakeholders – from streaming services to bookmakers, governments to internationally recognised regulators – need to come together and thrash out a battle plan that facilitates ongoing industry growth, but that is also secure and sustainable.
Esports presents a number of unique challenges; skin betting is a new phenomenon those providing oversight need to learn more about, the industry is absolutely global and not bound by borders, new and exciting betting platforms are being introduced all the time and currencies are sometimes virtual, sometimes real, and often both.
It requires collaboration; regulators and governments need to listen to tech providers to learn what products they offer, how they work, and where they are exposed to manipulation. Operators and suppliers must understand the need to protect players and be compliant with internationally-recognised gold standards.
While the regulators such as the Alderney Gambling Control Commission will license bookmakers offering odds on Esports, they won’t regulate the industry itself. To do this, the sector needs to establish its own governing body to provide guidelines and oversight.
For bookmakers, it will give them the confidence to offer greater odds and more adventurous markets. It will provide a fairness gauge against which to offset their risk, and ensure match-fixing issues are recognised and handled appropriately.
It is time to bring the dark side of Esports into the light. Lessons should be learned from daily fantasy sports and the DraftKings data leak scandal that kick-started a regulatory revolution. If the Esports industry acts now it can circumvent scandal and lay the foundation for a long and prosperous future.
It is a hugely innovative, massively exciting, technologically ground-breaking industry that should be cheered and celebrated. It also needs to take responsibility to ensure those betting on contests are properly protected, and that the foundations it has built over recent years stand strong in the future.