A Brief Look at Esports Gambling History and its Future
One of the biggest sensations right now is esports, a competitive video gaming industry with a vast network of professionals, tournaments, and viewership. In the early 2000s, large prizes for tournaments were valued in the low five figures and viewership, at its largest, was in the single thousands.[1] Now in 2018, the entire industry is valued at $900 million, single tournament payouts have been as large as $25 million, and viewership is in the hundreds of millions.[2] Esports revenue is projected to be valued at $1.5 billion by 2020.[3] However, an esports live-betting executive believes that a U.S. market for esports gambling could be worth $9 billion by 2020.[4]
Esports gambling in the United States is largely prohibited. Nevertheless, esports gambling has prominently existed since 2013, when Counter Strike: Global Offensive (“CS:GO”) revealed an update which allowed players to earn modifications to their weapons and appearances called ‘skins’ through gameplay.[5] Alternatively, players could use real money to buy and sell these skins and then transfer them to third-party sites. This has led to the creation of websites dedicated to skin wagering.[6] Since CS:GO made skin betting popular in 2013, the market for skin wagering has exploded. In one month, 38 million people visited the CS:GO Lounge, the most popular Counter Strike skin betting site—five times more visits than that of popular sports betting sites.[7] CS:GO is just one of many games where players can earn, buy, and wager skins online. CS:GO, League of Legends, and Dota 2 are the most popular esports, making up about 60% of the betting market.[8] These games and others have their own communities with its own fully contained skin markets.[9] Authorities are only recently coming to understand this type of wagering as gambling and cracking down on it.[10]
Skin betting poses some serious concerns. First, skin betting is particularly attractive to children who are not protected by any of the safeguards that protect legalized adult gambling.[11] Second, many people either doesn’t know this world exists, or dismiss it entirely.[12] Third, the sheer magnitude of skin wagering creates enormous incentives for these sites to work around anti-gambling laws or ignore them entirely.
Skin betting is a large unregulated market which makes it difficult to gather precise information.[13] However, this is still a relatively small fish in a large — but mostly untapped — pond. Like traditional sports betting, there are several ways and forums to make wagers in esports. For example, a gambler could bet on his/her own skill, bet on weekly NBA 2K events, or bet on larger yearly competitions, with low odds but high payouts.[14] Additionally, each game is totally independent from one another with its own betting market.[15]
Although esports gambling has existed for a long time, the future of esports gambling is anything but certain. The Supreme Court recently struck down a federal statute that prohibited states from authorizing sports gambling.[16] This holding does not explicitly mention permitting esports gambling, but given the connections between esports and conventional sports, there is a logical jump.[17] Despite this holding, which can be read to permit esports gambling, the federal government has more of a compelling interest in prohibiting esports gambling than it does in conventional gambling. In conventional gambling the primary concern is game integrity, but this does not outweigh the concerns of commandeering, federalism, and the Tenth Amendment.[18]
Esports gambling potentially poses more danger than conventional sports gambling. Esports inherently attracts a younger, more vulnerable, audience than traditional sports betting, and verifying a user’s age on these websites is notoriously difficult.[19] Although the Supreme Court has paved the way for sports gambling, it remains to be seen if the Court or Congress will use a different legal framework to decide the legality of esports gambling. If Congress elects not to act, individual state legislatures and regulators may be tasked to determine the fate of esports gambling. Either way, the industry and its gambling offshoot is becoming too lucrative for lawmakers to continue to ignore.
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