What is Keeping ESports From Taking Over Sports Betting?

October 8, 2020

In more than a few industries, the Covid-19 pandemic has served as the great accelerator. In some cases, the acceleration was evident when outdated practices had to be completely abandoned in the wake of new public safety measures. In others, it was visible through the hastened rise of a new sector within a certain business. For the sports betting industry, the global pandemic and the subsequent postponement of all major sports leagues led to a major rise in popularity in gambling on eSports. ESports is a relatively new market and with its growing popularity, questions surrounding the legality of placing wagers on eSports have arisen.

An article from members of the firm Dickinson Wright states that “since Nevada brought back wide-open licensed gaming in 1931, Nevada’s casinos ha[d] never been closed” until March of 2020, when all casinos in Nevada were temporarily shuttered due to concerns surrounding the spread of COVID-19. Following similar rationales, most professional and collegiate athletic seasons were either ended early or postponed. Although casinos had closed, there were many individuals who wanted to place bets. Legally, these people could do so, through apps that were permissible as long as the user of the app was within one of the fourteen states that had legalized sports betting, like Nevada. But even though modern technology had provided a pandemic-proof method to place a bet, without any sports to bet on, there would not be many wagers being placed. Technological advancements, in the form of eSports, again provided the solution for the dilemma all anxious gamblers were facing.

ESports is a term encompassing a broad range of activities but is largely concerned with organized video game tournaments and competitions. There are professional teams and players, who compete in these tournaments before fans, whose numbers are growing. The crowds at some of these tournaments, both virtual and in person, have been in the millions. The International 2019, a tournament involving 18 teams playing the game Dota 2, was being watched by 1.9 million people during the finals. It was also the biggest tournament ever in terms of prize money, with the total pool of potential winnings being over 34 million dollars. Even after the onset of the COVID-19 pandemic, there were predictions that revenue generated from eSports worldwide would pass one billion dollars in 2020.

The ability to have both competitors and fans participate while not raising any potential health concerns allowed eSports to continue while other professional leagues could not. And the sports betting industry was prepared to capitalize on this fact. In Nevada, sports books are able to take bets on both sporting events and events that fall under the term “other events”. Wagers had been allowed to be placed on eSports tournaments three times in Nevada from 2016 to 2020, with all of them legally qualifying as “other events”.  From March 2020 to June, more than a dozen eSports events were allowed to have wagers placed on them in Nevada. In September of 2020, New Jersey announced that it was allowing wagers to be placed on an eSports tournament for the first time. But like Nevada, eSports tournaments have to be approved on a case-by-case basis by the state Gaming Board. Despite the current formalities, there is still hope for widespread approval of eSports gambling and faith that the industry will continue to grow, even with the return of traditional sports.            

Many states that have legalized traditional sports betting have not legalized eSports betting, with the younger demographic being cited as a potential reason for the ‘caution’.

However, there is a major policy reason that may prevent the widespread legalization of eSports gambling. Although the decision in Murphy v. National Collegiate Athletic Association allowed states other than Nevada to govern themselves on the issue of sports betting, there has been little action in the realm of eSports. This may be because the entire demographic involved in eSports skews younger, particularly in the United States. Both the average professional and the average fan are younger than those involved in traditional sports. A significant portion of both the potential gamblers and the tournament participants are under eighteen, while the legal age to gamble in a casino in the vast majority of US states is 21. There is a policy across the country that athletic competitions involving minors, particularly high school sports, are not to be gambled on. And it appears that the policy has carried over to eSports as well.  Many states that have legalized traditional sports betting have not legalized eSports betting, with the younger demographic being cited as a potential reason for the “caution”. New Jersey has attempted to find a compromise by allowing eSports wagers to be placed by those of legal betting age only on competitions where every participant is above eighteen. This provides a temporary solution but it still leaves out those under 21 wanting to place bets, which cuts out a sizable piece of the potential pool of bettors, and the minimum betting age is unlikely to change any time soon. It also leaves out some of the professionals, who may be under 18 years old. With these players and fans alienated, it may leave eSports without the economic horsepower to get the attention of state legislators. 

The adaptability and potential earning power of eSports in gambling has been shown over the past few months. But the intersection of the industry’s young demographic and the policies behind gambling laws in this country form a hurdle that has to be confronted before eSports can attain the recognition of legitimacy that it needs to become a fixture in the sports betting world.

Drew Gustafson