US casinos and bookmakers entering esports betting market with caution

In the past few weeks, the Nevada Gaming Control Board (GCB) approved wagers on four different esports series, adding to the slowly growing betting options for competitive gaming. Adding wagering options is now critically important to casinos given their gambling halls have been closed due to the coronavirus pandemic, which has also forced the major sporting events shutdown across the world. Esports, with a steadily growing audience, particularly in the age 18-34 demographic, offers an appealing alternative, but casinos are proceeding with caution.

Recent research from global consumer research agency 2CV and market researcher ProdegeMR has revealed that esports gambling revenue is set to double from $7 billion in 2019 to $14 billion worldwide in 2020 as gamblers seek new alternatives for betting during the sporting events shutdown due to the COVID-19 crisis.

The recent esports betting exemptions issued by the Nevada regulators include League of Legends, Dota 2, eNASCAR, Overwatch, Call of Duty League and different Counter-Strike: Global Offensive competitions.

“In terms of what sports are left, there’s Russian table tennis and Japanese sumo wrestling,” said Joe Asher, the CEO of William Hill, as reported by the Washington Post in a recent analysis on the sector. “We were talking about Nicaraguan baseball, there’s some soccer in Belarus.”

The slow growth for esports betting interest in Vegas has to do both with the approval process for adding offerings to sportsbooks and the uncertainty from casinos and oddsmakers around what is still an incipient field, where machines necessarily filter the actions of players before results play out on screen.

“Each state has to approve an esports wager,” said Seth Schorr, CEO of Fifth Street Gaming and Chairman of the Downtown Grand Hotel and Casino in Las Vegas. “Nobody can just approve all esports. There would be cheating, there would be no integrity. Right now you have to get approval for each match, which is pretty cumbersome, so the next phase in esports betting will be regulators getting comfortable.”

Schorr has been pushing esports betting forward in Vegas for five years. He worked with Asher to get William Hill into ESL’s Counter Strike: Global Offensive (CS:GO) back in 2017, but esports were never a primary focus of the sportsbook. Now, William Hill is looking into esports more — even if it remains hesitant to take big bets.

“The amount we will allow people to bet on esports is much smaller [than traditional sports],” Asher said. “We wouldn’t think anything of someone betting a million bucks on the Super Bowl. For esports, we won’t go anywhere close to that. We take smaller stakes to help guard against any issues with the integrity of the event. When one individual sitting at home can determine the outcome of the event, that does limit the amount of money sportsbooks are willing to accept.”

For an example on how stringent those caps could be, Asher said the maximum amount William Hill would accept on a bet for the winner of the ESL Pro League: North America in CS:GO would be “a few thousand dollars.”

However, some oddsmakers believe even that relatively small amount could expose casinos to significant liability. Someone who knows how the esports system works can still stretch betting limit restrictions into a decent payday, according to Billy “Krackman” Krakomberger, a professional sports handicapper and founder of Krackwins. “Hypothetically, I could bet $1,000, and then I come back and bet another $1,000,” Krakomberger claimed. “If I were to know the outcome, or if I know someone is dumping, I can get down five or six grand on one event just at one sportsbook.”

A recent scandal has also brought attention back to match-fixing. In China, Wang “WeiYan” Xiang, a player for the Rogue Warriors in the League of Legends (LoL) Pro League, was exposed for match fixing. Images leaked of Xiang talking about match fixing in two March matches in which Xiang’s team won one and lost the other. A few days after the second match, Riot Games, the developer of League of Legends and operator of its esports leagues, suspended Xiang for two years and fined his team 3 million RMB ($425,000).

“Match fixing is definitely an issue [in China],” said Rahul Sood, the CEO and founder of Unikrn, an esports betting company backed by Dallas Mavericks owner Mark Cuban, among other investors. “But match fixing is not an issue in League of Legends as a whole. This was just a strange situation and the punishment wasn’t even high enough. It should have been a lifetime suspension.”

Being a professional esports player has only recently become a truly lucrative profession. The average LCS (League Championship Series) salary is now above $300,000 before prize pools, according to Chris Greeley, commissioner of the LCS. With prizes for Fortnite and Dota 2 eclipsing $30 million for one event and teams reportedly paying upward of $40 million for spots in the Overwatch League, the money in esports has increased substantially. That includes player contracts, leaving less incentives to fix matches.

Moreover, the industry is better at monitoring suspicious bets. The scandals in 2015 in part led to the creation of the Esports Integrity Coalition in 2015, now the Esports Integrity Commission (ESIC). The commission oversees almost every major third-party esports tournament organizer.

“The ESIC proactively monitors the global betting on ESL matches and investigates any unusual or suspicious betting and has the power to prosecute alleged breaches of the anti-integrity code,” said Ian Smith, the commissioner of the ESIC.

For the Nevada GCB to approve esports bets, the agency must be comfortable with the degree of fair play. The ESIC and GCB have had an agreement in place since 2017 and the recent approval of Riot Games’s and Activision Blizzard’s esports leagues acknowledges solid integrity standards as well.